From the Book of Odds:
The True Cost of a Date
Let’s say you’re an average guy in the prime of his life (me). You’re single (not me) and gainfully employed (kind of me). According to the latest numbers from the CPS, you make just under $60k annually ($58,815 to be precise). Sounds nice, but you give back about ¼ of this in income tax, social security, medicare, and to the cushions of your IKEA sofa. So, in reality, you have about $44,111 of disposable income in your pocket. Since you’re Mr. Joe Average we also know (thanks to the nice people at the BEA) that you have a personal savings rate of about 4% of disposable income and, according to the BLS, you’re likely to spend another 33% combined on shelter and food. All said and done, you’re left with just under $28,000 big ones to spend on frivolous things (like dating). We’ll call this your adjusted disposable income.
Let’s say you’re the 1 in 33.33 adults who is actively dating. You’ve managed to snag a first date with that nice girl in accounting (who may appreciate this analysis, by the way). You’re feeling pretty good, right? Wrong. And here’s why.
Since we’re dealing with averages, we’ll assume the traditional dinner and a movie scenario. You’re looking to impress your new friend so, naturally, you’re paying. A nice meal and drinks for two at a decent restaurant, with tip, is likely to run you about $100 even. Two movie tickets, plus junior mints and drinks: 25 bucks, give or take a few. Throw in another $5 for cab fare, parking, gas, whatever, and you’re looking at a cool $130 for a shot at Ms. Right. Not bad you say. Ah-ha! But this is only half the story. As you’re taught in econ-101, every action in life comes with an opportunity cost—i.e. the value of what you’ve foregone in favor of whatever it is you’re doing. A simple way to think about opportunity cost is to think of it as time, and, as we learned from Benjamin Franklin (or was it Puff Daddy?), time is money.
So, how can we estimate the opportunity cost of a date? A common trick employed by economists is to use our hourly wage as a proxy for the value we place on time. The logic is pretty simple: Utility theory posits that if I’m a rational (we can debate this later) and self-interested consumer my goal in life is to maximize my utility (benefit, happiness, pleasure, smiles…) or, at least, to optimize it given certain constraints (the need to pay child support, for instance). I derive utility from leisure and disutility from labor—so, it follows that my opportunity cost of working (labor) is equal to the pleasure I derive from, you know, doing whatever the heck I want (leisure). When working, I am essentially selling my leisure time for whatever price my boss and I agree upon. Therefore, we can approximate the dollar-value that I put on an hour of my time by the amount at which I am willing to sell that hour to an employer. This is of course an imperfect measure. Among other things, it assumes that markets are efficient and I eventually find the equilibrium point where the wage I receive exactly cancels out the disutility of my work (and it doesn’t at all recognize the fact that I may derive more pleasure from work than leisure—how irrational that would be!)....MORE
HT: Simoleon Sense who writes "one of my favorite websites".
The headline quote comes after the jump.