For those with a keen eye, economics is not just confined to the textbooks; it’s practically woven into the fabric of our daily lives. Take Valentine’s Day, for instance. How does economics infiltrate this ostensibly romantic holiday? Here are a few less-than-sentimental perspectives:
Economists have often attempted to conceptualize “marriage” through the lens of joint production functions, treating marriage like a “firm” that “produces” valuable outputs such as “household services.”
For instance, in our household dynamic, I take on the task of mowing the lawn because I’m the one who can manage the heavy mower uphill. Meanwhile, my wife—being a surgeon with impeccable cleanliness standards—handles the tidying of our home. But can we accurately claim that we “trade” these “services” with one another? If we are indeed operating under such an agreement, I suspect we both might want to renegotiate the terms of that unwritten contract.
Other economists, including the renowned Lloyd Shapley (who shared the 2012 Nobel Prize in Economics), have viewed marriage as a matching game. Under certain assumptions, they demonstrated that a stable set of marriages will always exist. This theory forms the backbone of algorithms used by popular dating apps today. Yet, as anyone in a relationship can confirm, the challenge of finding a match is decidedly different from the task of maintaining one.
While these economic models aren’t entirely flawed, they often feel a bit too simplistic. “Hey love, how about we specialize in various household tasks and trade our services?” is not likely to ignite romance. Despite my best efforts, I have yet to win an argument with my wife by invoking the concept of comparative advantage.
Instead, I aim to present economic insights that can resonate with everyone, regardless of their relationship status, this Valentine’s Day. To that end, I’ll delve into the concepts of signaling and thinking at the margin.
Signaling 101
Imagine someone has captured your heart. You want to express this feeling, and your economist brain kicks in, leading you to think, “Money is the answer!”
Wrong again.
Cash is impersonal; it conveys nothing about your emotions because anyone could hand over cash. To illustrate your commitment, you need to provide something that bears a personal cost—something that reflects your time, attention, and effort in a way that can’t be fabricated.
High school students often resort to creative prom proposals, while pop culture brims with examples of boombox serenades and flash mob performances. These gestures can be tremendously costly in terms of time and effort, not to mention they come with no guarantees of success.
However, there’s a catch—the signal you send must not only be costly for you to produce, but it must also be valuable for the recipient. (Trust me, if I attempted to express my love through a public dance number, my wife would likely flee the scene.)
This is why gifting someone their favorite flowers (especially if they are hard to come by) is a more meaningful gesture than simply handing over cash. With each thoughtful and personalized choice, the gift communicates messages like, “I’ve been attentive, and I know what you enjoy,” or, “I went out of my way just for you!” Such signals are incredibly difficult to fake, which is what makes them so valuable.
People constantly express their desires through subtle cues. It requires effort to truly listen and discern what they’re hinting at. The most impactful gestures of love don’t necessarily have to be financially burdensome; they simply need to show genuine attentiveness.
Thinking at the Margin
So, what exactly do we mean by “the margin”? Despite its significance, economics often leaves this term somewhat ambiguous. Essentially, we’re talking about “the next unit” or, if we’re being precise, “the next decision.”
Let’s engage in a thought experiment. Imagine two individuals you’d like to date, both of whom are interested in you as well. We’ll call them Pat and Devin. Your expected marginal utility for dates with each of them is as follows:
(Just a reminder, this hypothetical scenario pertains to dating, not necessarily to committed relationships.)
Given the utility values outlined in the table, if you aim to maximize your utility, your decision-making should revolve around the next available date. Thus, you might go on three dates with Pat, followed by two dates with Devin, and then back to Pat for another two dates… you get the gist. When we think at the margin, assuming Pat and Devin are utility maximizers themselves, it becomes clear how someone might choose to “date around.”
However, when you meet someone who truly resonates with you, the perspective shifts. The margin transitions from “the next date” to a broader time frame. Eventually, it evolves into “the rest of your life.” You’re no longer pondering, “Should I go on one more date with this person?” but rather, “Do I want to build a life together?”
Revisiting the utility table from the perspective of a potential life partner, it’s evident that Pat emerges as the more favorable choice. The total utility of a life shared with Pat surpasses that of one with Devin. Yet, if you only consider one date at a time, that crucial insight might slip by.
Being Lovely
Economics often garners a reputation as “the dismal science.” Based on the initial, somewhat dry examples provided, this perception may hold some truth. Terms like “joint production function” and “expected marginal utility” certainly lack warmth in the context of Valentine’s Day. Yet, the economist who laid the groundwork for this field had profound insights about love.
Before penning his seminal work, Wealth of Nations, Adam Smith was already celebrated for his earlier exploration of moral philosophy in The Theory of Moral Sentiments. In that foundational text, Smith posited that our desire extends beyond merely wanting to be loved; we also aspire to be lovely. Moreover, we want to be worthy of love.
This distinction is crucial. Being loved is something that happens to us, while being lovely is an active endeavor. It demands effort, attention, and a sincere concern for the well-being of others—precisely the kind of costly and hard-to-duplicate investment that lends credibility to a signal.
This Valentine’s Day, whether you’re in a relationship, seeking to start one, or simply showing appreciation to those you care about, the economic wisdom is straightforward. Pay close attention to those you love—not in an abstract manner but in specific, meaningful ways. Demonstrate, through your efforts and attentiveness, that you’ve been listening. Commit not only to loving someone but also to being worthy of their love in return.
In summary: love, and strive to be lovely.
Happy Valentine’s Day.
