The Economics of Love, Trade, and Opportunity Cost

Professor Jamie Wagner discusses the economics of love, trade, and opportunity cost. She is a Professor and Teaching Fellow with the Foundation for Teaching Economics, as well as an Associate Professor of Economics and Director of the Center for Economic Education at the University of Nebraska at Omaha. In this series, Dr. Wagner will discuss best practices for teaching economic principles, as well as current events and their economic implications.

Introducing Economics

Before getting into an idea about the economics of love, I often ask my students the typical econ question on the first day of class–is there such a thing as a free lunch? Or to rephrase it, is there anything that is free? My students like to try and stump me and they will say something like air is free because you can just breathe it in no problem.

[insert excited student who just stumped their professor]

Let’s assume you can just breathe no problem (because otherwise it’s very obvious that someone using oxygen to breathe cannot do it without a cost). So I ask my students to take a deep breath in and then release that. I ask anyone if they paid for that to which the answer seems to be no. However, let’s dive a little deeper into the conversation. When my students suggested air I then mention that they probably want breathable air; one that is not riddled with issues like pollution, smog, and other irritants. Because if we want clean and breathable air then we have to give up production because producing anything pollutes into the air. So I then tell my students that air is actually extremely costly and we have to give up a great deal to have the air you breathe. There are high opportunity costs to having clean air.

[Professor 1; students 0]

Introducing the Economics of Love, Trade and Opportunity Cost

Then the conversation usually goes towards something intangible like love or friendship. Again you do not have to (or shouldn’t) pay someone to be your friend or your partner but, lets take a look at the economics of love, trade and opportunity cost.

[again insert excited student for thinking they stumped me]

I am guessing you know where I’m about to go with this conversation but here is the gist of the discussion. I usually follow up by asking students what it means to be a good partner, significant other, friend, etc. They respond with things like they share common interests, they grew up together, or something along the lines of they like to spend time together. That is where I get them–time! Friendship and love could be argued to be one of the most costly goods/services because your opportunity cost or what you have to pay/give up to continue that friendship is your time which is valuable and extremely scarce.

To sum the initial question up–there is no such thing as a free lunch because of opportunity costs! You must always give something up in order to get more of something else.

Love is Expensive

As you celebrate Valentine’s day you should remember how costly this holiday really is! The National Retail Federation estimates that Valentine’s day spending this year will reach a record $27.5 billion. Which averages to about $188.81 on average. But this does not include the most costly item related to this day of love–your time. Your time on the day but also the time you spent in your entire relationship building that so-called immeasurable thing called love.

Now we’re getting into the economics of love and that you know just how expensive your love really is, FTE would like to help you lower the cost of showing that love to your students by providing you some econ themed Valentine’s Day cards that you can easily print and hand out to all of your students to show that you love having them in your class.

Trade and Marginal Analysis

The first one is simple, effective, and gets right to the point of marginal decision making when thinking about your partner. If the marginal benefit is greater than or equal to the cost–then it’s a good idea for them to be your Valentine!

Complements

Another great show of love is using the economic concept of complements. Not only should your significant other compliment you (i.e. That is a nice pair of shoes) but they should also be your complement (i.e. two goods or services that go together like peanut butter and jelly).

Marginal Benefit

While love is costly we hope that spending time with someone brings you increased marginal benefit!

Utility

And much like how beneficial trade is to increasing utility–the trade between your time and your student’s contributions in class is hopefully mutually beneficial and raising the level of utility in your classroom.

Happy Valentine’s Day from FTE! The MB of serving teachers like you is always greater than the MC!