Harley Hahn - Economics Explained

Summary: When applied properly, the fundamental principles of economics can significantly enhance the quality of an intimate relationship, especially on Valentine's Day.

From time to time, you will have conversations with your wife or girlfriend regarding what is expected of you on special days like Valentine's Day, her birthday, and your anniversary. Such discussions can be confusing, as women often express themselves in ways that can be difficult for a man to understand. What makes this so important is that, on such occasions, the penalty for missing your cues can be severe.

For this reason, I am going to show you how to deconstruct a typical Valentine's Day conversation, and turn it into a set of rational, straightforward, unambiguous ideas that are easy to understand. What I am about to teach you is based on well-established economic principles, as well as years of trial and error, careful observation, and scientific testing.

We all know how confusing it can be when the special woman in your life seems to be speaking a foreign tongue. After all, women live in a world of social connections and nuances which are modified continually by emotional overtones. For this reason, they speak a subtle, metaphor-laden language that men can find confusing and frustrating. Nevertheless, I assure you, this is a language you can master — as long as you are willing to put in a bit of time and effort to learn how to apply basic economic principles to your personal communication skills.

To show you what I mean, consider the following male/female conversation, which takes place a week before Valentine's Day. A young couple is eating dinner at their favorite restaurant. As we join them, they are relaxing over dessert.

Woman: "So what do you think about Valentine's Day?"

Man: "I think it's awful how the market is manipulated. A week before, you can buy roses for next to nothing. Then, for two days, they force you to pay through the nose for a bunch of overpriced flowers that barely last a few days."

Woman: "You're right, it doesn't make any sense at all."

Man: "And what about all that unhealthy candy? Does that make any sense?"

Woman: "Personally, I'm on a diet, so the last thing I want is anything fattening, especially if it's full of sugar."

Man: "What I really want to know is, why do we have to send cards, when it is so much easier to tell someone you love them in person?"

Woman: "I see what you mean. Actually, I've always found Valentine cards a bit childish and silly. Please don't go to any extra trouble for me."

Man: "That's what I like about you. You are so practical."

Woman: "Thank you. It's nice to be appreciated."

So far, so good. A short, simple conversation. Nevertheless, as a man, it is possible that you may have missed one or two of the minor nuances. So you can respond appropriately in such situations, I'd like to take a moment to help you understand what your wife or girlfriend really means during such conversations.

Before I can do so, however, we need to consider several important economic principles: maximal utility, opportunity cost, marginal analysis, and game theory. Indeed, careful testing has revealed that most women have an instinctive understanding for such principles.

Maximal utility: The total satisfaction we derive from consuming a good or a service is referred to as "utility". Economics teaches us that a rational consumer will always use his money in such as way as to maximize utility.

In the example above, the man must decide whether buying expensive flowers that will not last long is the best use of his money. The woman's reply indicates that she understands the principle of maximal utility and supports the man in making a reasonable decision.

Opportunity Cost: Whenever goals are mutually exclusive, we are forced to make choices. The "opportunity cost" is the price we pay when we choose one option over another.

In the example above, the man points out that consuming candy is an unhealthy habit. The woman's comment indicates that she understands the idea of opportunity cost. In this case, eating candy would bring her enjoyment, but it would be counterproductive to her goal of losing weight.

Marginal Analysis: It is often useful to analyze the costs and benefits of making small changes. This type of thinking supports a rational decision-making process based on incremental changes.

In the example above, the man agrees that it is important to relay a personal greeting of affection on Valentine's Day. However, in considering the extra expense of a printed card compared to a simple oral notification, he comes to the conclusion that the incremental cost is not worth the perceived increase in benefit. The woman's response shows that she too has a firm grasp of the principle of marginal analysis.

Game Theory: Imagine a situation in which two participants are faced with various courses of action, all of which might lead to a gain or loss depending on what the other person chooses to do. The overall outcome depends jointly on the strategies chosen by the two people. Since each person does not know what the other will decide, such situations often involve a significant amount of uncertainly. The part of economics that deals with this type of uncertainty is called "game theory".

In the example above, the woman, who does not know what the man will do, must choose from a variety of responses. Applying the principles of game theory, she makes choices that, given the uncertainty, are most likely to result in the outcomes she desires.

Now that you understand these basic ideas, let me show you how you can apply the principles of maximal utility, opportunity cost, marginal analysis, and game theory to interpret the latent meanings within an intimate conversation. To do so, I will repeat the exact same conversation. This time, however, I will show you (in italics) what the woman really means.

Woman: "So what do you think about Valentine's Day?"

Man: "I think it's awful how the market is manipulated deliberately. A week before, you can buy roses for next to nothing. Then, for two days, they force you to pay through the nose for a bunch of overpriced flowers that barely last a few days."

Woman: "You're right, it doesn't make any sense at all."

(You need to send me flowers, preferably roses.)

Man: "And what about all that unhealthy candy? Does that make any sense?"

Woman: "Personally, I'm on a diet, so the last thing I want is anything fattening, especially if it's full of sugar."

(You must give me candy, preferably chocolate.)

Man: "What I really want to know is, why do we have to send cards, when it is so much easier to tell someone you love them in person?"

Woman: "I see what you mean. Actually, I've always found Valentine cards a bit childish and silly. Please don't go to any extra trouble for me."

(If I don't get a card, you are in big trouble.)

Man: "That's what I like about you. You are so practical."

Woman: "Thank you. It's nice to be appreciated."

(You had better come through, or this relationship is toast.)

By now, I am sure you appreciate how important economics is to sustaining a healthy intimate relationship. All it takes is a firm grasp of a few fundamental principles and the willingness to practice.