Time versus money

Without thinking about it too hard: would you say you prefer time or money?

When we teach labor supply models, our workhorse model is a stylized constrained maximization problem in which a decision maker has to decide how many hours to work. They don’t particularly like working, but they do like to buy things, and so they have to decide where the sweet spot of that trade-off is for them, given how much they’d get paid for working and what their outside option is.

Let’s leave aside that this is a cash-centered conception of work, and that it typically assumes a distaste for work (though it doesn’t have to, since it is just coded into preferences—a good exam problem is to brainstorm plausible labor supply models with a taste for work).

What I really want to talk about is the real version of that toy model’s objective function. As economists, we write down parameterized utility functions to see what happens if the relative preference for time versus consumption goods changes. We all want to enjoy leisure time and be able to afford nice things. But where on the spectrum do you lie?

I ask the question at the top—do you prefer time or money?—to my class whenever I start teaching labor supply models. In my experience there is a genuine difference of opinion, right down the middle, between the two options. I’m more of a time person, but reasonable people could well disagree, as they say.

It’s a real difference in worldview, though. A person might think I was crazy if I did something that left money on the table, just as I might think them crazy for counting every penny. Why wouldn’t you want to get rich? Why wouldn’t you want to relax?

I sometimes wonder if one’s preference here has something to do with political preference. That old trope where everyone to the right of you is greedy and everyone to the left of you is lazy—isn’t that just relative money preference and relative time preference in action? Maybe some part of talking past each other is just the usual story from chapter 1 of microeconomics: different preferences.

 

 

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