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Cash Does Not Rule Everything Around Me! The Wu Was Wrong!

It's finally time for finals, and I have a belated confession to make: Cash does not rule everything around me. Or you, for that matter. Money rules our lives in that we need enough of it to buy food, shelter, clothing and tickets to the new "Star Wars," but beyond that we can make choices about how much cash we want to try to obtain. For example, if all of us were intent solely on adding digits to our bank account balances, this campus would not have a Department of English.

The fact that we're not entirely about the cash is often cited by people who oppose economic analysis. "There are things more important in this world than making another dollar," they repeat stridently. Well, economics isn't entirely about the cash either; it's about how to distribute scarce resources in such a way that everyone's happiness is maximized.

We don't often measure our happiness in dollars, but economists have figured out a way to. Let's say you've taken a part-time job bagging groceries to ensure that you have time to work on the Great American Novel. Let's say also that you could be working at some more highly paid job, like mind-numbing data entry, that would cut into your novel-writing time.

The difference between your incomes as a grocery bagger and as a data enterer is about how much you value your adventures as an author. You can't put a price directly on your scribbling time, which is why an economist would refer to it as a "non-monetary benefit." But its value to you has to be greater than or equal to the amount of money you're willing to give up to get it. Measuring things by how much you give up to get them allows economists to express non-monetary benefits in dollar terms, so the rest of us can see how valuable they really are.

We can probably understand the case above without the benefit of the awesome theoretical economic apparatus. But it illustrates one important point: While a dollar has more or less the same value for everyone, the non-monetary benefits people get from things like extra time in the day vary wildly. Someone for whom labors at novel-writing have virtually no value, like the grocery bagger's parents who hector him to get a better job, will evaluate the same situation differently. English majors should patiently explain this to their parents until they understand or throw something, whichever comes first.

In between hurling things at their offspring, a grocery bagger's parents may well accuse their offspring of not even having fully considered other occupations. This points to another problem: Economics proceeds on the assumption that we all have perfect information - complete, accurate, and timely - on which to base our decisions. If we don't have that perfect information, we may end up making an irrational decision, simply because we don't know any better. And we grapple with imperfect information almost constantly, especially when trying to evaluate non-monetary value.

For example, the government of the District of Columbia has repeatedly announced its willingness to build a new baseball stadium, at a cost of $300 million or so, to further entice a group of billionaires to put a team in the seventh-largest television market in the nation. Those in favor of municipalities paying the cost of billionaires' stadiums invariably point to all the jobs such stadiums create.

Andrew Zimbalist, an economist at Smith College, has published numerous studies showing that the economic benefits of a stadium are way less than its costs for cities, which conclusion you could probably come to yourself when you think that in the best case the stadium would be active for about a third of the year and employ people mainly in low-paying food service jobs. (Most of the time, cities cede concessions and parking fees to the teams, to get further on their good side.)

It seems pretty obvious that the cities that have decided to build these stadiums have concluded not that the cash benefits outweigh the cost, but that the non-monetary benefits of having a real live major league team and being mentioned regularly on SportsCenter run to the hundreds of millions of dollars.

I have a friend [it can now be revealed that this friend is Gregorio Villalobos] who teaches English as a second language in D.C.'s public school system. He has been told that there is no more money in the budget for substitute teachers, so either teachers will come to school sick or classes will go untaught. When he objected to being put on a rotation from class to class that meant he only spent an hour with thirty or so youngsters, on the grounds that there was no way to actually teach thirty kids to read in an hour, he was told essentially to buck up and deal with it.

Could hundreds of million of dollars make a difference here? Obviously. Do inadequacies in the D.C. public schools get much attention from people who support building a stadium? I suspect not. Would the decision to spend an enormous sum to build a stadium be different if those people had better information? I fervently hope so.

Still, non-monetary benefits have a lot of explanatory power. The Diamondback pays me $20 to write this column, which mainly involves me trying desperately for hours to make economics concepts comprehensible. The Diamondback also paid me $30 to see the new "Star Wars" two weeks before it came out and write up my thoughts. Since there is an obvious gap between the two activities in terms of compensation and fun, I must be deriving some non-monetary benefit from the idea that people may be learning to think about the world around them in a little different way and see things they might not have before because of what I write. And so I thank you, my readers, for providing me with that benefit. I will think of you fondly as I bag groceries, just as my English major has prepared me to do.

 

All this tasty writing ©2002-11 by Andrew Lindemann Malone. All rights reserved.