How Economists Do Valentines : The Indicator from Planet Money It's an Economic Valentine! Economics isn't known as a language of love. But economists Betsey Stevenson and Justin Wolfers say it's central to their relationship and to their decisions as a couple.
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It's Valentine's Day.


Yes, it is - the day that celebrates love and relationships and feelings.

GARCIA: Not things you would typically associate with economics.

VANEK SMITH: No. Economics is definitely tied to the small fortune a lot of people spend on Valentine's Day, but not to the substance of it.

GARCIA: And yet, economics actually does have a lot to do with love and relationships and feelings. That is according to one of our favorite economist couples.

VANEK SMITH: Betsey Stevenson and Justin Wolfers - they're both very accomplished economists at the University of Michigan. They work together a lot and have just co-authored a new economics textbook, "Principles Of Economics." And in it, they argue that economics is everywhere.

GARCIA: Including in love and relationships. In fact, they say they've used economics to make their most personal and important life decisions.


VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, economists in love.


GARCIA: Betsey Stevenson, Justin Wolfers, happy Valentine's Day, and welcome to the show.

VANEK SMITH: Yes, happy Valentine's Day. OK, so speaking of which, you know, economists tend to look at the world a little differently than most people. Like, how do you guys approach Valentine's Day? Do you approach it differently than your non-economist couple friends?

BETSEY STEVENSON: I can't stand going out for dinner on Valentine's Day.


STEVENSON: The food is worse. It's more expensive. The costs for, essentially, the exact same experience skyrocket. And so it's very easy for Justin and I to talk about that. So, you know, for us...

VANEK SMITH: Do you feel bad that - like, would you not want to get roses on Valentine's Day?

STEVENSON: Roses on Valentine's Day - are you kidding? They're so expensive. Have you seen how the price changes? I mean, yeah.

JUSTIN WOLFERS: So your choice is one dozen roses today or a dozen roses on each of the next four weekends. What would you choose, Stacey?

VANEK SMITH: I don't know.

STEVENSON: You should think about that.

WOLFERS: Wouldn't it be good to have an economist partner so you could say, this is what I want?

STEVENSON: So your standard non-economist couple, the wife might say, did you not buy me roses today because they're ridiculously expensive, or is it because you're not thinking of me? That's why she wants that sort of costly signal of the flowers on Valentine's Day. I think the fact that we have a clear language for that means that I can look for some other signal.

Just to circle it all the way back, there are definitely some ways in which non-economists roll their eyes at the decisions we make, and perhaps the most notorious one was our choice not to get married.

VANEK SMITH: But you have two children. You're committed partners. Why did you decide not to get married?

WOLFERS: It comes back to the question, what is marriage? Think about it. For richer, for poorer, for better, for worse, in sickness and in health, till death do us part - that's an insurance contract.

VANEK SMITH: (Laughter).

WOLFERS: For richer, for poorer - that's basically unemployment insurance. In sickness and in health - that's health insurance.

STEVENSON: Or wife insurance.

WOLFERS: Till death do us part - that's basically an annuity. It's Social Security. I'm going to keep looking after you no matter how long you live. So what is marriage? Marriage is a commitment. There are other ways of being committed.

Betsey and I have two kids. I really like my kids. I like them so much it would be really hard to spend time away from them. So even if Betsey and I are going through a hard time, I will be committed to her, partly 'cause I like Oliver and Matilda. So we're no less committed than a formally married couple. We just used a different commitment device.

If that all sounded a little bit deep, I just want you to know that this was the first research paper that Betsey and I ever wrote together.


WOLFERS: And it was really early on in our relationship.

STEVENSON: On a date, we started discussing this issue. Justin said, well, I think if you make it easier to get divorced, you might see men become more violent as they try to prevent their spouses from leaving. And I said, no, I think if you make it easier to get divorced, I think you'll see women pick up and go faster. And I'm pleased...

WOLFERS: Does that sound like a romantic date or what?


WOLFERS: Our second or third date. And I want to say, you know, when you get to the end of a meal and you hope things are going well, I knew they were when Betsey said, well, let's get the data.


GARCIA: I'll be honest.


GARCIA: I thought you guys were just going to say there's a marriage tax penalty.


WOLFERS: (Unintelligible).

STEVENSON: I feel like Justin stopped before we got to the important punchline, which is, you know, it did take us several years of research that we finally published in one of the leading economics journals, but I was right.

WOLFERS: Hey, you go where the data takes you.

VANEK SMITH: I mean, do you deal with other questions this way? Like if...


WOLFERS: Of course.

STEVENSON: Yes. I mean...

WOLFERS: There was a certain point where Betsey said to me, given my age, Justin, we have to figure out whether to have kids or not. And so we did what any sensible person would do. We downloaded the General Social Survey and ran regressions.

VANEK SMITH: (Laughter) Really?

STEVENSON: Oh, for sure. We looked at the happiness of people with kids, without kids. And I'll tell you the sad thing is every regression I ran, no matter how much I tried to say, well, what if you're highly educated, what if you have a lot of income, people with kids are less happy than equivalent people without kids.

And so we looked at the data, and we still chose to have kids. The reason I like this particular story is you don't have to do exactly what the data says, but you do want to look at the data so you're walking in making a really informed choice.

GARCIA: And in this new book that the two of you wrote together, did you apply economic thinking to relationships?

WOLFERS: We use applications of economics that resonate with students. The classic example of the sunk cost fallacy is we all have that friend who's been in a relationship with someone for two or three years, and it's not working out, and they say, but I can't bear to break up with him or her because I've been with them for so long. That's sunk cost thinking. My students all have that friend.

VANEK SMITH: That makes me sad (laughter).


VANEK SMITH: But I - yeah, of course.


WOLFERS: But once you've learned - no, once you've learned the sunk cost fallacy, you dump that guy or girl and go and form a great, new, healthy relationship. It's a beautiful story.

STEVENSON: Well, this is where, actually, the opportunity cost principle comes in because you're sitting there. You think, this relationship's not working out, but I've put two years into it. I want to be absolutely certain that it's not going to work before I leave. But you're forgetting that every day you spend in that, you're giving up the chance to be out there trying to meet somebody new.

GARCIA: It does make me wonder if there's room in your model, if that's the right word, for a certain amount of healthy irrationality. What I'm thinking specifically of is a certain amount of self-deception that seems to be necessary sometimes in a relationship, especially when, like, things are tough. And it's healthy, it seems to me, for somebody to think, well, look; things suck right now, but this is the love of my life. We're definitely going to get through it.

STEVENSON: Economists have learned about thinking in hot states versus cool states. And in hot states, people do tend to make mistakes in terms of long-run thinking, overweighting today versus that long run. It is absolutely a technique that I use when I'm angry at Justin...

WOLFERS: Which never happens.

STEVENSON: ...Is to think about who will want to talk to me about that goofy thing that my kid did when he was 5 in 15 years? Or special occasions we've had, all those memories - those are going to be there in 15 years. So that's the return from the investment I've made. And so I have to counter that with, well, what would it be like if I didn't have that return and was out there looking for something new.

GARCIA: Opportunity cost principle, sunk cost fallacy, cost-benefit - the variable that matters in all of those is time. And I think maybe that's why people don't think of applying economics to relationships more as they associate economics with money. But time is the thing that matters in everything you just said.

STEVENSON: Economics isn't about money. Money is just the measuring stick that economists tend to use. What we really care about is, you know, what you're giving up.

WOLFERS: There's different kinds of opportunity costs. If I'm thinking about buying a shirt, I need to think about the money that'll cost me. If I'm thinking about eating a doughnut, I need to think about the number of calories that'll cost me, right? And the question really is, you know, what is it that's scarce for you? When I'm on a diet, often it's calories in this case.

GARCIA: And for people who are seeking a romantic relationship, the thing that's missing is love.

WOLFERS: Absolutely.

GARCIA: And so by doing other things, that's what you're giving up.


GARCIA: Thanks so much to Betsey Stevenson and Justin Wolfers for participating. This episode of THE INDICATOR was produced by Leena Sanzgiri. It was edited by Alex Goldmark. It was fact-checked by Brittany Cronin. And THE INDICATOR is a production of NPR.

VANEK SMITH: By the way, Justin and Betsey ended up spending Valentine's Day taking a painting class together. If you'd like to see a photo of them and their paintings, you can see it on our Twitter feed. That is @theindicator.


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