Relationship Economics 101

But while I loved all of these courses, there was an irresistible attraction of economics. ~Joseph E. Stiglitz

To understand the ins-and-outs of the economics of relationships, we have to begin with the driving force: scarcity.

Said to everybody post-break up, the immortal line “There are plenty of fish in the sea” springs immediately to mind when discussing the scarcity of acceptable romantic partners. It is the last vestige of the eternally optimistic, that hope that, among the billions of people on the Earth, there are many options for you to find happiness.

And while I cannot espouse that there are not multiple partners that can make a person happy (to do so would run contrary to my deep-seeded belief that there is no such thing as a soul mate), I have to be the voice of reason here that states the number of potential romantic partners for any given person is not terribly large. When you subtract the wrong gender, unattractive, too old, too young, wrong educational level, those outside a certain radius of your frequent haunts, etc… well, the number starts to plummet rapidly.

So, while 98% of us desire a relationship, there are only a limited number of available individuals for us to attempt to woo. And this scarcity of available individuals varies depending on your location.

That is scarcity from a macroeconomic perspective (i.e. looking at the romantic economy of the total congregation of players). From a microeconomic viewpoint (i.e. studying the individual players that make up the overall romantic economy), scarcity refers instead to the limited availability of psychological and interpersonal resources at an individual’s disposal.

Scarcity is what fuels the entire game of romantic economics. Based on scarcity, we then determine how to effectively allocate our emotional resources.

And this, dear galleons, is the heart of relationship economics.

The Relationship-Possibility Frontier (also known as the Relationship-Possibility Curve) is a graphical representation of the output of two relationship commodities and the relationship between their production. Simply, it shows the necessary decrease in production of one commodity that results from an increase in production of another due to scarcity of available romantic resources.

While applicable to any two relationship commodities, we most commonly see the RPF used to describe the relationship between sexual satisfaction and emotional attachment.

In the above graphic (obviously pilfered, as the lady blogger is too lazy to draw up her own), we’ll let the axis marked C denote sexual satisfaction, while the axis marked I will be emotional attachment. The curve is the RPF, with points F1 and F2 lying along it. As the RPF represents the most efficient method of producing commodities, point D, lying off the RPF curve, represents a point of inefficient commodity production. At point F1, for example, we see a higher degree of sexual satisfaction being produced. This must be outweighed by a lesser production of emotional attachment (noted at the early stages of a relationship). At F2, this is reversed (found in long-term, committed relationships). A point lying beyond this curve (for example, one that had us producing the same amount of sexual satisfaction as F1 while simultaneously producing the level of emotional attachment of F2) is unfeasible- there are not enough resources available for such a feat in the short run (we will be discussing how to change this in a minute).

Point D, while completely doable, isn’t utilizing all resources effectively. Allocating your resources in such a manner leads to a shaky relationship economy, leading to infidelity and unfulfilling relationships.

The RPF is in no way a fixed curve. Depending on the nature of the economy, this curve can shift. For example, an outward shift, which allows you more resources to spend at various points along the curve, can be achieved through multiple methods, one of which is maturity.

In order to determine how to balance our resources, we naturally have to take a look at opportunity cost. Opportunity cost is the value of what is lost to have something else. It is not the value of all options not selected, only the “second best” option. Sometimes, there are only two options, in which case, the opportunity cost is the road not taken. Say Jeff has met two girls, Sally and Margaret, and he has to choose which one to continue a relationship with. If Sally is chosen, Margaret is the opportunity cost. If Margaret is chosen, Sally is the opportunity cost. However, if we throw a third girl into the mix (Emma, let’s say), we can not have two girls be the opportunity cost. If Sally is chosen and the second-best option was Emma, Emma is the opportunity cost.

The opportunity cost is unique to each individual and is a crucial part of relationship economics. It expresses the basic relationship between scarcity and choice, and it is vital to ensure resources are used effectively. What’s really important about the opportunity cost is that it evaluates lost potential gain as opposed to straight statistical gain. As a result, it’s necessary to determine the true cost of any course of action. The potential relationship with Margaret that Jeff gave up when he chose Sally, while not an actual “cost” on paper, is the true cost of his choice.

Remember, everything has a price.

In the Jeff/Sally/Margaret/Emma example, if you were feeling a bit bad for Margaret because she wasn’t part of the opportunity cost (or were just confused about that bit), know that “the second-best option is the only one that counts” bit is only in relation to opportunity cost specifically. When doing a cost-benefit analysis of that particular situation, we would take into account the total expected benefits and the total expected costs. In that case, Margaret would be part of the equation again. Now, when weighing the total benefits against the total costs, we’ll be able to determine the best option.

But when it comes to allocation of resources, no discussion is complete without dealing with…

Supply and Demand

The laws of supply and demand (which we will get into further in a moment) can be applied to multiple aspects of the romantic relationship. Primarily, we see a strong supply and demand relationship inherent in the search for a partner (i.e. the dating world), and an equally strong relationship within the confines of a partnership (detailing the exchange of affection and services). Because it deals less with the abstractions that are emotions, we’ll only look at supply and demand in the dating world (just note that the same principles can be applied to life within a relationship).

There are two primary factors that influence supply and demand within the world of dating: contentment and availability of potential partners. All things being equal, demand for a mate will decrease as contentment increases. Namely, the happier one is with one’s life, the less one feels a burning desire for a partner.  More often than not, the contented individuals who aren’t searching for their other half are already in a relationship. This is because there is a direct correlation between contentment and being partnered up, though this correlation is by no means exclusive. Conversely, the higher the level of contentment, the higher the number of available, interested partners. This is a phenomenon noted by many- once you are in a relationship, you become almost irresistible to all those former potential partners.

Knowing our basic laws of supply and demand, we can now look at how they interact. We can overlay the graphic curves of our two laws to form the following (general) diagram of the supply/demand relationship:

In our (pilfered once again) graphic, we have our available potential mates represented by the Q axis and our level of contentment represented by the P axis. Where our red supply curve and blue demand curve intersect is the point of equilibrium. This is the point we shoot for in the world of relationship economics- where the supply of available mates matches the overarching demand for companionship. Of course, this is a point that only exists in theory. In the real world of dating, we can never hit the point of perfect equilibrium.

Alas.

Now, our supply and demand curves are not static. They can shift along either axis when either the supply or demand changes without a corresponding change in contentment. This is due to some other factor (such as a change of locale impacting the supply of available partners).

When contentment levels change, however, we see a reaction in our supply and demand curves. The degree to which these curves react to a contentment change is known as elasticity. The equation for determining elasticity is simple:

Elasticity (E) = (% change in available mates [Q])/(% change in contentment level [C])

If E > 1, the curve is elastic (it responds ‘a lot’ to contentment change). If E < 1, the curve is inelastic (it responds ‘very little’ to contentment change). On our diagram, an elastic curve would flatten along the Q axis, while an inelastic curve would be more vertically oriented.

We see such changes in our contentment levels due to a variety of factors. Let’s look at an example. Mary, a single woman, has a fairly stable contentment level. Her supply and demand curves, therefore, would look quite similar to our above graphic. However, let’s say she attends a wedding. For many people (particularly those of the female persuasion), being single at a wedding is a depressing affair. For Mary, this is the case. Her contentment level drops suddenly. We can now investigate the degree to which her supply and demand curves react to this contentment drop. If, for example, she doesn’t feel a much greater desire to seek out a companion, her demand curve would be inelastic. But, if she is suddenly driven to pursue a relationship with greater gusto, her demand curve would change drastically, resulting in an elastic reaction.

This would probably be better with diagrams, but I’m really too lazy to make some up (or hunt some down), so you’ll just have to use your ample imaginations, dear galleons.

As we just saw, a sudden spike in desperation (which causes a decrease in contentment) yields an increase in the demand for a relationship. The degree to which it increases is the elasticity of demand:

EDy = ((Q current – Q previous)/(Q previous))
____– ((Y current- Y previous)/(Y previous))

Where ED = elasticity of demand, Q = number of available mates, and Y = desperation level. If EDy > 1, there’s a high desperation elasticity. If EDy < 1, it’s desperation inelastic.

Now, we all know that the purpose of entering into a romantic relationship is to increase satisfaction or to benefit in some manner. To measure the aggregate sum of our gained satisfaction from entering into a romantic relationship, we have to explore the concept of utility. Utility is simply a measure of that satisfaction we’re in pursuit of, and it directly corresponds to the amount of intimacy in the relationship. Not just sex, ya pervs. We’re talking emotional and physical intimacy. Usually, the more intimate the relationship, the greater the amount of utility.

Marginal utility deals with the additional satisfaction gained from each extra bit of intimacy exercised in the relationship. Typically, the marginal utility decreases with increased intimacy- each increasing intimate moment yields a lower percentage of satisfaction.

Saying that the percentage of satisfaction gained from each additional bit of intimacy decreases does not mean that the overall satisfaction with the relationship is on the decline. Think if it more as a plateau being reached- after a time, you become super-saturated with relationship contentment. At this point, there is really nowhere higher to go, emotionally. You are completely satisfied with your relationship, and the piddling bits of superficial satisfaction gained from a kiss or a shared secret are no longer adding to the whole but are, instead, maintaining it.

This is the law of diminishing marginal utility within relationships which states that the less intimacy you have, the more satisfaction you will gain from each additional bit of intimacy expressed. As you gain greater and greater intimacy, you will gain less and less satisfaction from each additional bit of intimacy (remember the plateau).

Now, this was just an introductory course in relationship economics, and we’ve only covered the bare minimum. For more in-depth study, I suggest further courses in relationship micro- and macroeconomics, as well as Relationship Mathematics 204: Sexual Game Theory.

***

Okay, I’ve been working on this post off and on for the better part of the last two weeks. I felt compelled to finish it, since I’d invested so much time into it (sunk costs, yo), though I lost my real drive to write it after only a few days. This is, naturally, an imperfect caricature on the almost commercial nature of the romantic relationship (my examples break down occasionally, particularly at the equations, but it’s just for fun, so humor me). Being a bit of a romantic at heart, I cannot say I fully subscribe to this detached, clinical view of relationships (though, at times, it’s easier to deal with than muddying everything with feelings and such). Still, it’s fun to think about.

This was all inspired by a delightful lunch conversation between R.J. and myself regarding the lady of his affections. We were making jokes about the sunk costs he’d accrued over the course of pursuing this girl and the fact that an honest cost-benefit analysis of the situation might make him reconsider his course of action. It was in jest, naturally- matters of the heart tend to balk against the firm hand of logic. Still, we found the whole exercise terribly entertaining and proceeded to make jokes about relationship economics for the remainder of the night. For some reason, this inspired me to continue the endeavor in this blog.

Sorry?

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