Dear Economist

Economic enlightenment

Dear Economist,

How do economists view things that can’t be valued in money, such as love or peace of mind?

I suspect that many (confused) people strive for these invaluable things through external means, for example by spending money. Please enlighten me.

— Angelique Tsang, by e-mail

Dear Angelique,

You may be wise about the world, but you are not so wise about economics. Money can easily measure peace of mind. Think about it: would you rather have an hour’s peace of mind or $1m?

I asked around and most of my friends would rather have $5,000 than an hour’s peace of mind but, offered just $5, would prefer the inner calm.

In fact, you don’t need to measure value in monetary terms. You could measure it using camels or hot fudge sundaes. How many hot fudge sundaes are worth a summer’s day feeling head-over-heels in love? The answer will be different for different people, but that doesn’t mean there isn’t one.

So let’s not confuse the statement that money can’t measure love with the statement that money can’t buy love. I would agree that you can’t buy an hour’s peace of mind for $5,000, but even if you could, it wouldn’t be great value for money.

As for your claim that many people strive for love or peace by spending money, and that they are confused when they do so, you may be right. Economists can only judge people by their actions. If I see a man working a hundred hours a week in a stressful banking job and spending the money on a Ferrari, I can only speculate that he preferred the Ferrari and the stress to relaxation and spare time.

You and I may prefer our bicycles, but I am not sure whether this shows that we are enlightened, or that we are merely different.

First published at ft.com.

28th of May, 2005Dear Economist • Comments off