Tuesday, November 27, 2012

Basically the Best Economics Article of All Time

Do read past the jump, it just builds and builds, sort of the Boléro of  illustrated econ.
From What If? xkcd:
Cost of Pennies

“If you carry a penny in your coin tray, how long would it take for that penny to cost you more than a cent in extra gas?”  
—Rob B

At current prices, 140,000 miles, close to the average car’s lifetime mileage:

1 cent×2.73 grams50 pounds×0.5%×$3.50gallon30milesgallon140,000 miles
That means that as long as you go through pennies faster than you go through cars, you’re coming out ahead. (The equation assumes, for a 30 mpg car, 50 lbs of cargo means a 0.5% hit in fuel economy.)
But gas money isn’t the only cost attached to a penny. Let’s consider some of the others.

Suppose you found it on the ground on the way to your car. How much did it cost you to pick it up in the first place?

How much is your time worth? This obviously depends on a lot of things and varies from time to time and person to person. But for a broad estimate, I sometimes use a ballpark value of $10/hour—which is somewhere between the US minimum wage and the average wage—but you can adjust up or down to fit your preference.

If your time is worth $10 an hour, a penny is worth 3.6 seconds. If spotting and picking up a penny takes you more than 3.6 seconds, it’s a loss.
actually, wait, is that a wheat penny?
Of course, picking it up isn’t the only time cost. Having a penny in your pocket makes it harder to find other things there, so you might spend more time looking for stuff in the future.

And then there’s the future time spent dealing with the penny. You may spend time figuring out if it helps you make change, putting it in a roll, donating them, or doing countless other hard-to-predict things.
(You may argue that dropping them in a donation jar is noble enough that it makes picking them up worthwhile. That may be true; it’s what I do with pennies. But this isn’t an argument against donating money—it’s just an argument that picking up pennies may not be an efficient way to use your time to acquire money to donate.)

There’s another cost (and benefit) to picking up a penny—the calories burned. When you crouch to pick up a penny, you expend energy. A 70-kilogram person who lowers their center of mass by half a meter will burn about half a calorie of energy standing back up...MUCH MORE
HT: Counterparties