When Love relationships explain economic relationships.
Opportunity Cost
Friedrich von Wieser was the first to talk about opportunity cost concept in his book, Theorie der gesellschaftlichen Wirtschaft, in 1914. An opportunity cost exists when the society forgoes the opportunity of getting the next best thing. Let’s assume you are currently in a romantic relationship, yes a romantic relationship has an opportunity cost! In this case the opportunity cost is everything you forgo when you are in a relationship: Going out with friends, spending time with your family, exercising, engaging in hobbies, going out with a better person and the like. There’s also another face to opportunity cost: The money you spend dating that person that could be spent elsewhere, a lower telephone bill, and the list goes on. However, since you are in a relationship, you have found that it is more beneficial, and have preferred the benefits of being in a relationship over the other things you are forgoing. When you weigh your opportunity cost, how does your relationship measure up? If spending time with your significant other makes you lament the lost friendship time, you are saying the opportunity cost of this relationship is high and perhaps, not worth the emotional investment!
Supply + Demand
A demand is how much you as a consumer would like from a product or service. Supply is how much the economy offers of whatever you are demanding. In relationship economics, supply and demand play an important role. In simple terms, many have commented on the ratio of guys to girls in Lebanon. If a guy is considering going out with a girl, he has a choice of at least 7 available girls (if this statistic is correct). The supply of guys on the Lebanese market is scarce and the demand of guys in Lebanon is high. This is one of the reasons so many women are single and so many men refuse to commit. Last issue, we had an essay entitled, “Golden Boys: Where Have All the Good Men Gone?”, and the reader feedback was enormous. It seems that women in Lebanon are facing an acute supply problem as a result of many things – like poor employment opportunities forcing men to go abroad for work (brain drain), sectarian thinking and plain old boring men. The male case (men, listen up) works to your advantage. If you are a man in Lebanon, you are literally surrounded by women and can have your pick of the litter, so to speak. This means supply is high and demand is low so you can be a subpar individual and still score a great date! As funny as this may sound, it creates havoc, which leads us to our next point.
Pareto Efficiency
The Italian economist, Vilfredo Pareto, used the concept of economic efficiency and income distribution in his studies. A situation is Pareto efficient when the situation of one person cannot be improved unless the situation of another is made worse. Pareto efficient situations allow an efficient allocation of resources within the economy where everyone will be happy and satisfied. Now how does this fit relationships, you ask? Well think about it. You and your buddies go to a bar. Your buddy Mohammed is talking to 2 girls (and he likes them both) and Tarek is interested in the girl across the bar. Pareto efficiency here means everyone gets the dates they want, Mohammed gets the 2 girls and Tarek gets the girl across the bar. It is not Pareto efficient if you end up with Tarek’s girl and Tarek ends up with one of Mohammed’s girls. Just because everyone’s got someone, doesn’t mean it works as it should! This too is the case in Lebanon, Pareto efficiency and supply and demand are inexorably linked- you get proof all the time by watching the dating disasters you and others are experiencing.
Now that you know how to apply these tested economic theories to your relationships, how does your dating game measure up? By doing your cost benefit analysis, determining if it is Pareto efficient and finally, analyzing why you are dating that loser in the context of supply and demand, make 2012 your relationship year. Use your skills to find the right partner- not the available one.
In RAGMAG, Issue 20, January 2012
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