Economists Are Cheapskates

On the eve of the annual meeting of the American Economic Association, Justin Lahart writes in the Wall Street Journal about how economists are cheapskates.


M.M.

From the article:

' Economists long have studied "free riders," the sort of people who take more than their fair share of something when circumstances permit. ... University of Wisconsin sociologists Gerald Marwell and Ruth Ames, in a 1981 paper, found that in experiments, economics students showed a much higher propensity to free ride than other students. In questioning after the experiment, the sociologists found that for many of the economics students, the concept of investing fairly "was somewhat alien."

' Cornell University economist Robert Frank, working with a pair of psychologists, mailed questionnaires to college professors asking them to report the annual amount they gave to charity. Their 1993 paper reported that 9.1% of the economists gave no money at all -- more than twice as many holdouts as in any other field.

' The professors also ran an experiment in which participating Cornell undergraduate students could get a higher payoff if they agreed to have their partner get less. Economics majors were more likely to go for the higher payoff, they found.

' Some dispute the notion that economists tend to be skinflints. "They aren't cheap," but they are concerned with a loss of economic efficiency, says Betsey Stevenson, an economist at the University of Pennsylvania's Wharton School. "That means that they often fail to do the nice little social gifts that seem wasteful to economists." '

Betsey's right. It doesn't sound like economists are cheap. Cheap would mean that they try to save money. Instead, it sounds like they're just jerks! Don't these people have mothers? Are economists more likely to have lousy upbringings than non-economists?

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john

Tell me about it!
I once worked helping in the organisation of an economics conference and I couldn't believe how bad you guys were!

Brian

My exwife would agree completely! I would be interested to learn why economist rarely give to charities...

Jack

I've always thought this was a given.

DKfromA2

Not a very insightful blog header, Steven. I think this is an intuitive concept for most readers.

Marcia

I noticed that of all the examples listed in the article, only one involved a female economist (and that was a joint decision between her and her husband.) In fact, there was one example in which a female economist told her economist husband that he should not hire someone to decorate the Christmas tree.

I'd be interested to see if there was a gender difference in stinginess.

Snidely

Prof. Levitt - what wouold your kids say about you? Do you live the cheapskate principle in your house?

Cory

Economists need to learn the value of leisure and enjoyment. For example, the story talks about one economist spending 30 additional minutes to save less than $5.00. Unless that economist is willing to work a job that pays less than $10/hr., that economist is just bad at math.

Jonathon K.

It's not being cheap, it's being efficient.

Gary

#8- I don't think the economist is bad at math. I think the writer of the article is understating the cost savings. Have you shopped at Whole Foods Market? The $5 savings is practially per-item! The savings by going to Walmart vs Whole Foods is enormous.

gevin shaw

Economists understand the value of nothing but a dollar. Giving a gift is not an economic exchange; it is a social exchange. Economists can tell us the cost of something, but they can't tell us whether it should be done. Just because something cost money doesn't mean we shouldn't do it.

And just because you can always think of something else to spend your money on, doesn't mean you should never spend your money. To put it another way, not all opportunity costs are recoverable. The estimates of the cost of bringing a drug to market are inflated, in part, by the opportunity cost of spending money researching a drug. That's not a recoverable opportunity cost, that's being a pharmaceutical company.

"Do you live the cheapskate principle in your house?" He wants to, but sometimes he fails:
http://freakonomics.com/2008/01/29/a-hannah-montana-concert-as-seen-through-the-eyes-of-an-economist/

Eric

The linked article is a mess. It conflates rational self-interest (doing whatever maximizes my happiness) with anhedonia (not taking pleasure in things that others take pleasure in).

Also note the particularly flagrant internal contradiction: at one point the author takes an economist to task for sacrificing time for money (30 minutes for ~$5 savings going to the cheaper grocery store); later he criticizes others for preferring the opposite sacrifice of money for time (paying someone to trim a tree). It's a no-win situation for economists, apparently.

Mojo Bone

Teaching, like music or preaching, is not a career but a calling; if you're doing it right, it's a public service. As public servants, we tend to prefer donating time over money, when asked for further contributions, even though a substantial proportion of it is already devoted to the public good.