The Economics of Love:
From Courtship to
the Courtroom
or
From Dating to
Death / Divorce
Why
ME
on the topic of LOVE??
Why
!!?? ECONOMICS ??!!
on the topic of LOVE??
Why me…?
Married:
19 years
3 months
15 days
0 minutes (+/-)
Four children
Why me…?
Bregenz, Austria
KIIS Study Abroad Program
Summer 2000
What does
ECONOMICS
have to say about LOVE??
Dating and dollars?
Finances and the family?
Retiring rich?
Divorce decisions?
ECONOMICS
has a lot to say about LOVE,
but you may not be terribly interested…
For example,
Love Dynamics between Secure
Individuals: A Modeling Approach
A mathematical model composed of two
differential equations, which qualitatively describe
the dynamics of love between secure individuals, is
presented in this paper with two goals. The general
goal is to show how dynamic phenomena … can be
analyzed following the modeling approach
traditionally used in all other fields of sciences. The
specific goal is to derive, from very general
assumptions on the behavior of secure individuals,
a series of rather detailed properties of the
dynamics of their feelings. The analysis shows, in
particular: why couples can be partitioned into
fragile and robust couples, how romantic
relationships are influenced by behavioral
parameters and in which sense individual appeal
creates order in a community.
You might ask (incredulously?),
“Is this how economists
think about
LOVE…?”
No.
(I lied…)
This article was actually published in
Nonlinear Dynamics, Psychology, and Life Sciences
(Volume 2, Number 4, October 1998: pp. 283-301)
by Sergio Rinaldi and Alessandra Gragnani
But it sure sounds (to me!) like what
economists might have to say about LOVE!!
So what does ECONOMICS have to
say about
LOVE?
We have a lot to say about marriage
and family…
Marriage: 1658 articles
Family:
5038 articles
We have a lot to say about death and
divorce…
Death:
672 articles
Divorce: 327 articles
We have a lot to say about gender roles…
Gender: 6796 articles
We even have a lot to say about
cohabitation,
human sexuality,
abortion…
Cohabitation: 61 articles
Sexuality:
42 articles
Abortion:
166 articles
But as a profession
we don’t have much to say about LOVE.
Some further excerpts:
This paper provides the first econometric analysis of
rationalizations of virginity loss in terms of love. Data from
the UK National Survey of Sexual Attitudes and Lifestyles are
used to estimate logit equations to predict the claim that
virginity loss was occasioned by being in love. The sample
consists of 2,269 males and 1,476 females between the ages
of 16 and 59.
In economic terms, a dichotomy is found in terms of male
and female virginity loss, such that to a degree it is possible
to infer that sex is for males more of a consumption good,
whilst for females it is more of a capital good.
Alan Collins, Surrender Value of Capital Assets: The
Economics of Strategic Virginity Loss, Journal of
Bioeconomics v2, n3 (2000): 193-201.
…at times the conscious pursuit of self-interest is not
compatible with its attainment. This contradiction arises
because people face significant problems that cannot be
solved by rational action. These problems sometimes require
behavior that may later be contrary to their [self-] interest in
order to solve them. Discusses behavior beyond selfinterest; the altruism paradox; a theory of moral sentiments;
signaling; telltale clues; reputation; predicting cooperation;
becoming moral; fairness; love; and human decency.
Concludes that people often do not act as predicted by the
self-interest model. The reason for irrational behavior is not
always that people miscalculate. Emotion is often an
important motive for irrational behavior, and being motivated
by emotion is often an advantage.
Robert H. Frank, Passions Within Reason: The Strategic Role
of the Emotions. New York : Norton, 1988.
Gary Becker (U. Chicago) writes “An efficient marriage
market develop ‘shadow’ prices to guide participants to
marriages that will maximize their expected well-being.”
from Gary Becker, A Treatise on the Family, Cambridge, MA
(Harvard University Press): 1981, page 39.
Frank on Becker: “People with well-defined preferences
act in purposeful ways to choose mates that best
promote their material interests.” (op. cit., p. 185)
A simple benefit-cost calculation…!
i.e., the Market works!
So, economists do have something
to say about LOVE.
What do I, as an economist, have to say about
LOVE?
First, I want to look at LOVE as
-- a process (not unlike lifelong learning)
-- a dynamic (ever changing)
-- a product of personal growth and maturation
LOVE IS A PERPETUAL GROWTH PROCESS!!
(in economic terms, learning over a long time horizon…)
Let’s consider LOVE in three stages:
1. Dating
2. Marriage (perpetual commitment)
3. Termination of Marriage / Relationship
-- By Death
-- By Divorce
We undertake a similar analysis in economics,
known as the “theory of the firm”. We look at
the progress of a firm in three stages:
1. Start-Up
2. Optimization
3. Shut-Down
-- Sold
-- Folded
We can expand the three stages to seven:
1. Product Conceptualization
2. Preliminary Market Analysis
3. Start-Up
4. Production (in Three Stages)
5. Profit Maximization
6. Long Run Dynamics
7. Shut-Down
Now let’s extend this theory of the firm
to an analysis of LOVE.
Our product / enterprise will be a
“happy, successful, long-term relationship”.
Theory of the firm:
1. Product Conceptualization
Theory of the firm:
1. Product Conceptualization
LOVE corollary:
1. “I Dream of Genie”
Theory of the firm:
2. Preliminary Market Analysis
Theory of the firm:
2. Preliminary Market Analysis
LOVE corollary:
2. The Hunt: “The Fox(es?) and the Hound”
Theory of the firm:
3. Start-Up
Theory of the firm:
3. Start-Up
LOVE corollary:
3. Courtship
Theory of the firm:
4. Production (in Three Stages):
-- Increasing Returns to Scale
-- Constant Returns to Scale
-- Decreasing Returns to Scale
Theory of the firm:
4. Production (in Three Stages)
-- Increasing Returns to Scale
-- Constant Returns to Scale
-- Decreasing Returns to Scale
LOVE corollary:
4. Marriage (in Three Stages)
-- Engagement and Honeymoon
-- Marriage
-- Children
Theory of the firm:
5. Profit Maximization
Theory of the firm:
5. Profit Maximization
LOVE corollary:
5. “As good as it gets”
Theory of the firm:
6. Long Run Dynamics
-- Diversification into new products
-- Competition: “New firms enter...”
LOVE corollary:
6. Over the Long Haul
-- “The grass is always greener...”
-- “What goes around (^) comes around...”
Theory of the firm:
7. Shut-Down
-- The Company is sold
-- The Company folds
LOVE corollary:
7. Termination of Marriage / Relationship
-- Death
-- Divorce
Let’s go back to the earlier stages
in the building of our “love product”:
1. Product Conceptualization
“I Dream of Genie”
2. Preliminary Market Analysis
The Hunt
3. Start-Up
Courtship
1. Product Conceptualization (product = LOVE)
When first thinking about producing a product, a firm
or individual must consider short term and long term
goals. These goals must be compatible: short term
achievements must fit into the long term strategy.
If you are looking at LOVE over the long haul…,
What are your long-term goals?
What are your short term goals?
Are your “desired” short-term achievements
consistent with your long-term goals?
Product Conceptualization (product = LOVE)
Sub-topic: Product Development
• How are you developing your “love potential”?
• Have you studied successful relationships?
– Have you had successful short-term relationships?
– How have those short-term relationships ended?
• What values are you bringing (or developing) to
insure success?
1. Product Conceptualization (product = LOVE)
Sub-topic: Product Development
Sub-topic: Product Marketing
• Have you planned an overall marketing strategy?
• What are you doing to make yourself more marketable?
• Do you have a “consultant” to guide your progress?
• Are you advertising yourself as
Generic?
High quality!
**!!!One of a kind!!!**
…a cheap imitation?
2. Preliminary Market Analysis (product = LOVE)
• Have you studied the competition (looked at products
being produced by your “competitors”)?
• Have you looked at strategies that launched other
successful products?
…or strategies where products failed?
• Have you considered where you might best launch your
product (have you thought about test markets…)?
• Have you been to the markets personally to see who’s
buying and what they’re buying?
3. Start-Up (product = LOVE)
Startup costs are significant. One of the major questions
facing an individual (or firm) is “Am I (are we) willing
to sustain short term losses for long term gain?”
• How much are you willing to ask of yourself in the short
run to achieve your long term goals?
• What are you willing to sacrifice today..., for tomorrow?
• How much are you willing to invest, knowing that there
are outcomes that include “total loss”?
• If you know that you have only shot at getting a product
to market, is this the right product and the right time?
So, what did I tell the students in Bregenz?
-- In its early stages, LOVE is a game.
-- You make up the rules as you go along.
-- You ENFORCE the rules as you go along.
-- Your best strategy is “selective information disclosure”.
> You “reveal” yourself little by little.
> You remain somewhat mysterious.
> You’re not playing “hard to get”,
you’re simply playing safe!!
Is this Economics…?
You bet it is!
In business, product development
(content AND process) is a closely-guarded secret.
General knowledge (BS, BA, BBA)
vs. firm-specific knowledge
Information is power: SEC and “insider trading”!
USDA lock-ups
MLB signs and NFL playbooks
And what happens when your
RIVAL becomes your PARTNER?
In business, the books are open…
In football/baseball, “Here’s the playbook.”
In LOVE, it’s the same:
Complete disclosure!
No more secrets…
No more games…
Dare I go a bit further?
(get a bit more personal…)
Application to the physical side of LOVE…?
What costs might today’s students be paying
by engaging in excessively permissive behavior?
What value might you placing on yourself…
if you give yourself so freely…
or sell yourself so cheaply?
I am not being a moralist here,
I’m being an economist.
It’s what this economist has to say
about
LOVE!
(thank you)
Questions?
Comments?
Especially from STUDENTS…