Dear Economist

Dear Economist,
I am 22 years old with a younger sister. My parents were pretty strict, so I made sure I was a sensible teenager. I didn’t sleep around, didn’t take drugs, never seriously smoked and went on to a good graduate job. But now my 17-year-old sister is getting away with murder: my parents know she smokes, let her boyfriends stay overnight and turn a blind eye to other misdemeanours. It’s just not fair. Did I make a mistake in being such a square as a teenager?
Georgie H, Hertfordshire

Dear Georgie,

The latest Economic Journal presents a simple game-theory model of the problem. All teenagers wish to misbehave but fear parental sanctions. Parents wish to threaten punishment for transgressions, but only some parents are strict enough to do so. Your younger sister’s mere existence skewed the game to your disadvantage. Your parents are evidently soft-hearted, but had a clear incentive to pretend to be strict because every time they punished you, they knew they were also deterring your sister.

Now that you have flown the nest, the gains from “acting strict” are much smaller and discipline has slipped. Your sister pushed and discovered that they did not push back; you would not have found it so easy. But sunk costs are sunk costs, so be content with your graduate job. And if you really want to take drugs and sleep around, I can assure you it is not too late.

Also published at ft.com, subscription free.

Dear Economist,
The law of comparative advantage suggests people should use their talent, but we’re also told “do what you love”. What if I have no talent for what I love? Is it worth time and effort pursuing a dream career I’m no good at?
Joy

Dear Joy,

Your letter is intelligent, but it is also opaque: you do not reveal what your dream career is. Still, a lack of facts has never been an obstacle to economic analysis, so this is no time for methodological scruples. The principle of comparative advantage states that you should focus on what you do best, relative to the standard set by everybody else. You can do accounts and use the money to hire a cook, or do cooking and use the money to hire an accountant; the correct choice depends not just on whether you are a good bean-sheller and a poor bean-counter, but on whether the world is full of better cooks and worse accountants.

There is no conflict between this principle and the idea that you should “do what you love”. Being good at a job means you will earn more; enjoying a job means you will not mind earning less. Decide whether you prefer money or fun.

But what if you are incapable of doing any job you enjoy? Well, your career is not the be all and end all. Economist Andrew Oswald believes we work too hard and under-invest in friendships. So if my career advice is depressing, ignore it and talk to your friends instead.

Also published at ft.com, subscription free.

Dear Economist,
I have fallen in love with a wonderful man, and on Valentine’s Day he proposed to me. We’re planning to marry next summer. The question is: should we live together over the next year, or wait until we’re married? The financial impact is relatively small either way, and I am not afraid of scandal. I am just trying to work out whether some time living together is likely to make our marriage stronger or not.
Elspeth
Boston MA

Dear Elspeth,

For many years, theory pointed in one direction and evidence in the other. The theory – going back to Nobel laureate Gary Becker’s work in the 1970s – is that a period of cohabitation lets you learn more about one another and thus avoid a bad match. Your man may be charming on a date, but if he leaves his underpants lying around or eats toast over the sink to save washing up, forget it.

The overwhelming evidence, on the other hand, used to be that marriages preceded by cohabitation were more likely to break down – in the US, at least. The question is whether this was a causal relationship, or whether the cohabitation and the marital breakdown were caused by a third factor, such as social class or a lack of religious belief.

Fortunately, new empirical research from economist Steffen Reinhold suggests both that the relationship between cohabitation and divorce is not causal, and also that it has faded over time as more educated, middle-class couples choose to live together before marriage.

I recommend following Becker’s theory: learn about the marriage before it is too late by moving in together now. Keep an eye out for discarded underpants.

Also published at ft.com.

Dear Economist,
I subscribe to the FT and enjoy it with my morning coffee. Yet whenever there are school holidays, the paper is delivered late in the day, sometimes the next day or not at all. I expend valuable time calling FT circulation, which always promises this will never happen again. This has been going on for years. Should I be pragmatic and do nothing, saving my valuable time, or should I be quixotic, persisting in an effort to force the FT to live up to its timely delivery obligation in the hope that others may also benefit?
Conflicted Subscriber
Paris, France

Dear Conflicted Subscriber,

I am delighted to hear you love the FT and can vouch for the fact that, from newsroom to delivery team, its managers hand-pick elite workers. How, then, are we to explain this manifest underperformance of the organisation as a whole?

Economic investigation of sport offers a clue. Economists such as Mark Walker, John Wooders and Ignacio Palacios-Huerta, have studied professional tennis and football players. When deciding where to serve or place a penalty kick, they behave in rough accordance with economic theory. David Beckham, it seems, is an intuitive economist.

Yet in a team, the story gets worse. Economist V. Bhaskar studied the declarations of cricket teams, David Romer the fourth-down decisions of American football teams. Neither matched optimal strategy, perhaps because of internal team tensions.

This helps to explain your troubles but offers no solution. All I can suggest is that you make a fuss and write indiscriminately to complain. Evidently, you did not need me to tell you that.

Also published at ft.com.

Dear Economist,
When invited to dinner, I am often unsure whether to bring good wine. If I take an expensive bottle, it may go unappreciated – either through lack of appreciation or people not seeing what I’ve brought. Taking plonk means I can get a free ride on others’ largesse, but my tightfistedness could get rumbled – what do you recommend?
Alex, Geneva

Dear Alex,

A simple bit of game theory will produce the optimal strategy. If this is a repeated interaction with people who know their wine, it’s best to produce a good bottle. Reciprocity for your generosity will make this a good approach in the long run.

You will need to work out whether your dining partners do indeed understand wine. That is easy enough. Bring them something decent and see if they remark upon it. Then observe what they bring the next time you dine together. If your dinners are isolated invitations, or your hosts know nothing about wine, you may cheat with impunity. In short, vary your actions according to circumstance.

There is a deeper point here, though. You need to establish what is giving your fellow diners their utility – good wine, or the pleasure of one-upmanship? My fellow columnist, the economist John Kay, points out that economists “win” gift exchanges by spending less than everyone else, but most people “win” gift exchanges by spending more.

If your fellow diners are economists, then my analysis will apply. Otherwise, as the sole economically minded diner, make sure your wine is a little less assuming than everyone else’s. Everyone is happy, you save money and they feel smug. The moral: never forget to look for gains from trade.

Also published at ft.com.

Dear Economist,
I’m an American. As you know, the primary elections are heating up here, and in a few months we’ll have the real thing. Eight years ago I caught flak from my wife for not voting; I tried pointing out the minuscule impact of a single vote (mine). She responded that if everyone thought as I did, no one would vote. However, I don’t make decisions for everyone, just myself. Is it rational for me to vote, considering only the effect of my vote on the outcome of the election, and leaving out (for once) my wife’s lowered opinion of me?
P.B.

Dear P.B.,

I accept that your vote has almost no chance of deciding the outcome. Even in the infamous Bush-Gore contest in Florida in 2000, the chance that a single Florida voter could have changed the outcome seemed minuscule at the time. With hindsight it was zero, since the official margin of victory was more than one vote.

For this reason, nobody votes hoping that his vote will change the outcome. We vote instead because we like to feel involved, out of a sense of duty, or – importantly – to avoid being criticised by our friends and loved ones. These motives are enough to get about half of us out to the polls, but not enough to persuade us to engage in pointless research into the details of each candidate’s policy platform. All of which explains why many people vote, but few do so in an informed fashion.

None of this changes the fact that democracy is useless without a decent number of voters. That is why your wife is right to put you under pressure. It should go without saying that ignoring her would be highly irrational.

Also published at ft.com.

Dear Economist,
My fiancee is moving in with me. We’ve lived together before, and we hate housework. Before, we didn’t do work in retaliation for housework not done by the other. This led to a suboptimal equilibrium of dirty floors and resentful cohabitants. This time I want to create an incentive scheme to keep our house clean and us happy. I am reluctant to assign monetary value to chores, as this can backfire. Weekly rewards, such as choosing a Friday night restaurant, seem gimmicky. But I can’t think of a better idea. I have racked my brain and time is running out! Help me, Undercover Economist, you are my only hope.
Home Alone

Dear Home Alone,

If this were a holiday fling, the outcome would be clear: each of you would prefer the other to wash the champagne flutes and make the bed in the mornings, but lacking any mechanism to enforce co-operation you might both slack off and feel resentful. It is often the case that brief encounters can be mutually exploitative.

Yet economic theory, experiment and practical experience all suggest that in the most unpromising situations, the bitterest adversaries find a way to get along when they are stuck with each other. Reciprocity seems to be the key. Soldiers in the trenches of Flanders practised “live and let live” when the generals were not looking. The cold war did not end in mutual annihilation.

I venture to say that if this time you and your fiancee can’t even match the grudging co-operation of Khrushchev and Kennedy, you will at least be warned before the wedding day that housework is the least of your worries.

Also published at ft.com.

Dear Economist,
A single Milky Way costs 20p in my local corner shop. A twin pack costs 47p. I’ve made a habit of checking the prices in other shops and a twin pack invariably costs more than two singles. What could be the cause of this apparent madness?
The madness in pricing, that is, not the madness of a twenty-something compulsively checking the price of children’s sweets.
Kendrick Curtis, via e-mail

Dear Kendrick,

I am composing this reply overseas, far from the British corner shops where I can check your story, but what you say rings true. In my own travels around shops with a clipboard – a sure way to make the staff twitchy – I have often discovered products with an unexpected mark-up. One example was the medium-sized pack of washing powder priced at rather more per 100g than the small or the large.

All shops want to offer competitive prices to customers who demand them, while charging more to customers who do not much care. Random mark-ups will do the trick: they are easily avoided by bargain hunters but will often snare the unwary.

You are right that it does feel mad for a twenty-something to check the price of children’s sweets; that is why the pricing you describe is clever. I am confident that many adults do not consider the price of confectionery, and that most children do. If I am right, the mark-up on a twin pack is likely to be aimed with pinpoint accuracy at greedy, careless grownups. The children will find the cheaper deal – if they want two Milky Ways, they can buy two singles. Adults, their wallets overstuffed and the days of saving for penny chews long forgotten, will grab for a twin pack and pay more. It seems to me like sweet justice.

Also published at ft.com.

Dear Economist,
My extended family is very important to me, and I try to make the time to visit them. Unfortunately my husband doesn’t see things the same way. He works very long hours, and says he is tired after work and prefers to stay at home with me. (Actually, he usually watches television.)
Recently, he has been invited to apply for a job that will mean shorter working hours. Should I encourage this? Will he join in more with the social activities that are important to me?
Worried Wife, Cirencester

Dear Worried Wife,

What you seem to be asking is whether shorter working hours encourage social interaction outside the home. It’s a hard question to answer; some studies suggest that people who work long hours spend more time socialising and joining societies or clubs: work hard, play hard, that kind of thing. But that may just be because they are ambitious people with lots of energy and little need for sleep.

There is one study, by economists Henry Saffer and Karine Lamiraud, that might throw some light on your question. They looked at what happened when France reduced the working week from 39 hours to 35. The law came into force in 2000 for companies with more than 20 employees, and in 2002 for smaller businesses and for the civil service, creating a natural experiment for the researchers to study.

Their conclusion: hours of work did indeed fall, but few people used their extra free time either to visit relatives or to join a book club. I am sorry to disappoint you, but my guess is that if your husband wanted to hang out with your mother, he would already be doing so.

Also published at ft.com.

Dear Economist,
I am amazed by people who stand outside in front of the opening doors of trains and lifts knowing full well that the people inside will have to exit before they can enter. Obstructing the Exiters will only delay them, and the Enterers seem to be in such a rush that this is surely not in their best interests. What is astonishing is that this is a universal phenomenon. Explain!
Nazir Kazi

Dear Nazir,

I, too, have observed this phenomenon with trains but more rarely with lifts, and I think that suggests an explanation.

It is true that by obstructing people who are leaving the train, people may delay it by a few seconds.

A few seconds delay to everyone on the train is an appreciable social loss, but scarcely matters to the selfish individual in question.

True, a delay is a delay.

But you have misinterpreted what such people are aiming to do. They are not trying to hasten the departure of the train; they are trying to get a seat. That means being the first into the carriage just as seats are being vacated, which in turn means standing in front of the opening doors and generally getting in everybody’s way.

It is a classic prisoner’s dilemma: everyone would be better off if everyone hung back, but each individual does better for himself by pushing forward.

It is not surprising that this behaviour is more unusual when it comes to lifts. Lifts do not have seats, and usually have room to accommodate everyone who is waiting.

The behaviour you describe is selfish, but it is not irrational.

Also published at ft.com.