"YOU’LL never do better than me,’’ was the polite but firm response of a former boyfriend to my suggestion we break up. Sensing cupid’s arrow had missed the mark, he quickly added ‘‘and I’ll never do better than you’’, softening my heart somewhat, but not enough to dissuade me from my intended course of action.
How do you know when you’ve met ‘‘the one’’?
As an economics journalist, I make a living reporting the advice of economists. From climate change to interest rates to traffic congestion, economists are never shy about sharing their answers to the thorniest issues of the day. Why shouldn’t their hard-headed approach extend to matters of the heart? How do economists know they’ve met their match?
‘‘Economically, the answer to this is easy,’’ says Andrew Leigh, a federal Labor MP awarded the Economic Society of Australia’s young economist of the year award last year. ‘‘You’re solving an ‘optimal stopping’ problem. You know you’ve found ‘the one’ when you determine that the expected quality of all future matches is lower than the value of your current partner. In my case, I knew I wanted to pop the question to Gweneth [Leigh’s wife] because she made my heart beat faster each time she entered the room.’’
A similarly sweet, but matter-of-fact, assessment is offered by Rory Robertson, a leading financial markets economist, of his wife. ‘‘In the process of choosing, my assessment was that my wife had the highest weighted-average of all the things I felt were important: looks, 'compatibility', kindness, inherent optimism, competence, diligence, and general enthusiasm for a happy life and family.’’
When I ask if he considers it fortunate his wife also assessed him as having the highest weighted-average of her preferences, Robertson replies: ‘‘Something like that, I’d like to think!’’
Could it really be that simple? Does the secret to long lasting love lie in the mutual decision that ‘‘you’ll never do better than me’’?
Admittedly, both my sources here are not only economists, but men. Female economists are still rather thin on the ground these days. But the success of clear-headed dating advice books like ‘‘He’s just not that into you’’ suggest women, too, are interested in applying a more rational approach to the search for love.
Enter ‘‘dateonomics’’ - the economics of dating. What lessons from the dismal science can be applied to maximise our potential for love?
At heart, the study of economics is all about maximising utility or ‘‘happiness’’. It is based around the premise that left to their own devices, individuals will come together to make mutually beneficial trades.
It was an American free-market economist, Gary Becker, who in the 1970s first began extending these principles from markets for goods and services to market for potential partners.
He argued that the market for marriage was like any other, with individuals coming together to make mutually beneficial trades and to sign a contract ensuring future beneficial transactions. And because individuals compete for mates, a truly competitive market for marriage partners exists.
Assuming there are benefits from marriage - a stable relationship in which to care for children for example - there are risks from leaving marriage too late. As more people couple-up, the pool of potential partners diminishes. There are also transaction costs involved in searching for a partner – all those flowers, dinner dates and hold-you-in-granny-pants.
Economist and author of ‘‘Parentonomics’’, Joshua Gans, says that in looking for that perfect parent for your unborn child, it doesn’t make sense to wait around for Mr or Ms Perfect.
‘‘In the search for the right [partner], economics tells us that you would almost always settle. You search and there are search costs. A rational person should have an optimal stopping rule and if that rule is to find the perfect match out of 7 billion living people, mathematics tells us you will never stop. Except, of course, in my case where settling turned out to be indistinguishable from optimising! For everyone else, they have settled and so if your spouse isn't perfect you can at least take comfort in the fact that you saved the costs of shopping around.’’
University of NSW economist and author of ‘‘The Airport Economist’’, Tim Harcourt, says many women find themselves dropping their standards in the search for love.
‘‘The economics of love or marriage is like search theory in the labour market. You start out with preferences about what you may like in a partner, but over time you may, if searching unsuccessfully, drop your ‘‘reservation wage’’ - ie lower your standards - to settle on a job or love match. I have a lot of great, smart, good-looking female friends in Sydney who seemed to have had to reduce their reservation wage over time.”
Leigh is also keen to point out that the marriage market is different to other markets, in that participants often lack knowledge of their true preferences.
‘‘The marriage market is different from product markets, in the sense that you don’t quite know what you’re looking for at the outset,’’ says Leigh. ‘‘When you walk into a supermarket for a box of cereal, you know exactly what you’re searching for: your favourite box of cereal. But in marriage markets, you’re looking for the person that’s most compatible with you.’’
The advent of internet dating, says Leigh, greatly increased the efficiency of the marriage market.
‘‘On a flight to the US recently, I was seated next to a sales assistant from Brisbane who was flying to Houston to meet her fiancée, a helicopter pilot. They had met on eHarmony, and are due to marry later this year. It’s mindblowing to think about the kinds of matches occurring now that would never have happened in past days. As an aside, I expect internet dating is particularly important for gay and lesbian people in small towns, where it’s harder meet someone with similar preferences.’’
Economist and chief executive of economic consultancy Lateral Economics, Nicholas Gruen, agrees internet dating has increased the efficiency of the market for love, but hints at a harsher reality for love-seekers.
‘‘One obvious point is that online dating generates vastly more hard data about dating - so we're getting much better information than we used to have. It's showing that dating is very like a market with strong ‘objective’ values around which assortative mating takes place.’’ Assortative mating is the idea that people with highly valued attributes, such as good looks or intelligence, tend to pair up with similarly endowed partners. Most people think they are ranking people according to their own subjective values, says Gruen.
“But if you look at the evidence, there is a very strong assortative mating going on, so the best footballers typically have the best looking girlfriends and all that sort of stuff.
‘‘You mightn’t think it’s counter intuitive, but it’s certainly counter to the narrative of love - depressing for those of us who would like to buy into the idea of love as sui generis, but not so surprising if we look around.’’
FOR those lucky enough to have found a willing partner with the highest weighted-average of their preferences - that’s ‘‘falling in love’’ to you and me - economists are also full of helpful relationship advice.
Economists and marriage researchers, Betsey Stevenson and Justin Wolfers, have made a name for themselves not only for their research, but also for dishing out advice on the secrets to their successful partnership, what has been termed ‘‘loveonomics’’
Stevenson and Wolfers have a three year old daughter but have decided not to marry. ‘‘When our accountant ran the numbers for us a few years back we discovered marriage would cost us substantially more,’’ the US-based but Australian-born Wolfers told the authors of ‘‘Spousonomics’’ in an interview last year.
Wolfers and Stevenson also reject the marriage contract because of its one-size-fits-all nature. Instead, they have forged an individual contract based on always telling the truth (to overcome ‘‘information asymmetries’’) and involving the ‘‘out-sourcing’’ of domestic duties to create harmony at home. Their research has lead them to conclude that as women have entered the workforce, the opportunity cost of their time has risen, diminishing their comparative advantage in home duties. Marriages today are less marriages of convenience and more partnerships based on true affection.
Leigh explains: ‘‘In the 1950s, marriages involved much more specialisation. Most married men did what economists call ‘market work’, and most married women did what economists call ‘household production’. Now, there’s less specialisation, because partners tend to work in more similar jobs (think lawyers marrying lawyers). This means modern marriages are increasingly about love and companionship, and less about maximising economic efficiency than in the past.’’
But for couples where outsourcing of household chores is not an option, the authors of ‘‘Spousonomics: or how to maximise returns on the biggest investment of your life’’, Wall Street Journal and New York Times reporters Paula Szuchman & Jenny Anderson have their own economic recipes for success. Szuchman & Anderson say the secret to marital bliss still lies in couples pursuing their comparative advantage in the household. If the man is quicker at doing the dishes, he should. If the woman better at laundry, she should do it. ‘‘Life need not be a fifty/fifty split for each person to be happy,’’ write Szuchman and Anderson.
Leigh also sees marriage in terms of an investment, not just day to day problem solving: ‘‘There may be a short way of solving a conflict, but if it leaves the other person feeling bruised, the long-term cost may not be worthwhile. If things go wrong, try not to dwell on sunk costs - remember that the past cannot be undone.”
Having employed the principles of economics to find his life partner, Robertson also recommends taking business-like approach to married life. ‘‘Apart from all the obvious things, make sure you choose someone you think would be good as a partner in running a small business.’’
After that, the secret to a happy marriage is, according to Robertson, surprisingly simple. ‘‘Try to figure out the stuff that really annoys your partner, and then try not to do it. Simultaneously, negotiate a deal with your other half so that they also try to steer clear of doing the things that really annoy you.’’
Maybe this love business really is that simple, after all.
As for me, I did eventually find my Mr I’ll Never Do Better Than You (I had to throw a few back in the sea). He scores very highly on a weighted average of my preferences for good looks, kindness and intelligence. Luckily he feels the same about me.
Jessica Irvine is the economics writer for Fairfax Media. Her book Zombies, bananas and why there are no economists in heaven: The economics of real life (Fairfax Books) is out now.
LOVE 101: the economists guide to dating
*Don’t shop around for a mate forever as there will only be a diminishing pool to choose from. Go with someone with the “highest weighted average” of the qualities you are looking for.
*You’ll never find Mr Perfect so settle for the best partner you can get. It’s called “optimal stopping”.
*Be realistic. We are all most likely to end up with someone with a similar level of attractiveness or intelligence as ourselves. It’s called “assortative mating”.
*Marriage a long-term investment. Choose someone who you think would make a good business partner.
From: Sunday Life