Romantic Economist Applies Economic Terms To Relationships

On this Valentine's Day, Renee Montagne talks to a young economist about how he tried to apply the rules of the market to his love life. William Nicolson chronicles his journey to find a girlfriend in the memoir, The Romantic Economist.

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RENEE MONTAGNE, HOST:

And on this Valentine's Day, let's see how we can apply economic terms to relationships. Terms like sunk costs and opportunity costs.

STEVE INSKEEP, HOST:

Sunk costs would be all those happy times you've spent with your lover. How romantic. And opportunity costs would be missing out on friend time because you have plans with your significant other.

MONTAGNE: Our next guest was looking for a way to master the rules of dating when he stumbled on putting them in economic terms. Now, William Nicolson is ouyt with the book, "The Romantic Economist." Welcome to the program on this Valentine's Day.

WILLIAM NICOLSON: Thank you very much for having me.

MONTAGNE: Why don't we begin at the beginning - which is how did it happen that you hit on this idea of applying market principles to your dating life?

NICOLSON: Well, I think most actually is the product of a lot of daydreaming in lecture theaters. I was an undergraduate economics student. I didn't actually come to write the book until about four years after I left university. And the real trigger for that was I was dumped in quite heroic style by a girl who I basically fell in love with far too quickly.

MONTAGNE: Mm.

NICOLSON: And one day she just said, you know, well, this isn't really working for me. And I couldn't really understand because I'd been so nice to her. And in fact, the advice I then got was like I had been too nice. I thought how is that possible? Then I started thinking about supply and demand and restricting my supply and then the rest flowed from there.

MONTAGNE: Well, the supply in this particular case was your supply of affection. In fact, that is the beginning of everything in this book really, supply and demand. Explain that to us.

NICOLSON: Usually, when you try and make something more attractive to someone in a market scenario, you cut the price or increase supply. However, restricting your supply or playing hard to get, the exactly opposite, it actually increases your price. That was a bit of a paradox to me. I realized, in fact, I think what people look for in a potential partner is someone who is actually quite hard to obtain. This restricting of supply is very much like supplying yourself as a very exclusive or luxury brand - something which only very few people can obtain and therefore, making it more attractive.

MONTAGNE: You know, I'm wondering what economics theory helped you the most in the part of your romantic life here we you're trying to get the girl.

NICOLSON: The one that I would describe as something in which I think does work in the real world, is this idea of signaling. And the example I used in the book is how you distinguish between a guy who is really nice, has really fantastic intentions with a girl and someone who is, I think I would call a jerk. Where, in fact, to the girl, at least in the early stages, a jerk will look exactly the same as a really nice person, as a sweetheart, because will say exactly the same things. So the theory which I tried to, kind of, play on is this idea of signaling, which involved incurring costs which are the types of people wouldn't be willing to incur. And because jerks are relatively inpatient, they're not willing to wait around very long to get action - whereas, a nice guy is. And so you're actually a very clear signal you can send to a girl that you are serious about them is actually is to wait, for instance, rather than asking a girl out for dinner, you can ask her out for lunch. I think you're not going to be able to get from a lunch date to the bedroom as easy as you would from a dinner date to the bedroom.

MONTAGNE: How much, then, did putting your romantic life into economic terms help you? What did you discover?

NICOLSON: I think there is a limit to how far you can go when applying kind of rational economic theory to love, because it's so self-centered by its, kind of, very nature that sometimes is easy to forget the other values that we have is people like loyalty, trust. And they're actually at the end of the book, I guess I have a bit of an epiphany. Like I see, in fact, that all these theories do in fact, end up making me more isolated because they are so focused on the individual. And I realized that a lot of what love is about is exposing yourself to someone, and that could end in tears, you know, that could end up in you getting really hurt. But once you do open up and give more than you could actually rationally or expect to get back, which is something an economist would never do, that in fact that can sometimes create an upward spiral, which is where I end in the book, actually being very happy.

MONTAGNE: Well, that's a nice thought to leave us with on this Valentine's Day. William Nicolson is the author of "The Romantic Economist," a story of love and market forces. Thank you for joining us.

NICOLSON: Thank you very much.

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