Author’s note: This article was updated on 22/June/2020.
Recently, we have been talking a lot about price like price of a cup of latte and price of a plate of Nasi Lemak. In previous articles, we attached those prices to distinct economic concepts like price rigidity (sticky price), keynes’ fiscal solution to economic recession, and volume of transaction as a variable of economic growth. The implications of each of our simple observation are numerous and the applications widespread.
Serious businesses aside, economics can be quite amusing. The concept of subjective price illustrated in the previous post, in particular, can be used to refute one of the (probably) most annoying, overly-used, outdated, overrated and boring phrases of all time: “Love is Priceless.” Come on people. I’m seriously tired of it, and today, it is my honor to debunk this false notion once and for all.
Before engaging in the heated discussion, it is best that we get one of the most common fallacies of all time out of the way. The misconception that Economics, as a discipline, is immoral, that it has no compassion, no altruistic nature, is plain wrong. Economics is neither moral nor immoral. In other words, economics is “amoral“. Economics per se does not provide answers to philosophical or ideological questions like: Should everyone pay more tax to provide social benefits to more poor people? How should public transfers be redistributed amongst the populace? or, how do we address income inequality?
NOTE: Allow me to digress for a bit since income inequality tends to be mistaken. Many who talk about income inequality fails to clearly define it. This is the problem with those ignorant of economics. Let me ask you. When we are talking about income inequality, are we referring to inequality of current income, expected income (e.g., think about a student who is working a part-time job but whose education ensures her higher income in the future), or are we talking about income by experience/seniority/amount of work? If you go further to talk about wealth inequality, then it gets even more complicated. People accumulate wealth over their lifetime, and you can thus expect older people to be more asset rich than younger ones (which should not be surprising). Furthermore, you have to understand the difference between illiquid assets and liquid assets. A rich person might be asset rich (e.g., he/she invests a lot in various businesses which promotes growth and is a good thing) but cash poor. For anyone – e.g., a politician – to claim that one aspires to achieve equality of income/wealth without understanding what these inequalities really mean – is outright irresponsible and shows a clear lack of comprehension of basic economics.
Such questions demand philosophical/ideological answers, not economics. That is why people (especially economists) often get into argument when facing those questions because not every person shares the same philosophical understanding regarding a particular matter. It is entirely possible that there is not a single correct answer. What economics does best is, however, laying out a concrete and sound framework for analysis, for thinking, for answering those questions.
Thus, in our case, economics provides a logical ground from which a conclusion can be drawn.
To talk about love, we should begin by discussing life – which is (or should be) equally valued if not more. What is the value of life? Invaluable, you may respond. But, there have been attempts to measure the price/value of life by many economists and non-economists, individuals and organizations alike. For instance, There have been research studies that assigned monetary value to a person based on the estimated aggregate worth of goods, services and social well-being that he/she can contribute to his/her society over the course of his/her lifetime. This is logical, though unethical you may argue. The flaw in this sort of thinking is that it implies that we should assign lower value to the lives of the retired, the unemployed and the disabled since these people contribute relatively less to the society in addition to absorbing public transfer benefits via various financial supports they receive over the course/remaining of their lifetime (there is also statistical valuation of life based on risk aversion, and you can search for it on google if you are interested). This is morally revolting, and to many people, a clear NO. Yet, it does not stop economists from developing new methods for computing such values. Why? Because we need to be able to objectively estimate the value of things that matter in order to be able to make due comparison and thus well-informed optimal decision about the future. For instance, should we take up a development project that saves 100 lives in the present with 100% success rate, or should we implement the one that can potentially save with 70% success rate 200 lives in 50 years into the future? Upon hearing such questions, you might take recourse to philosophical/ideological arguments that we should leave no man behind, that all lives are equal. While this is soul soothing to some, it rarely or never leads to a proper answers/solutions to the challenges we humans face. You see, we have limited resources, and almost always, choices and trade-offs have to be made. Why?
*Here is my own answer to the question. It is based on my philosophical take on the issue and it should not be taken as a sole representative of the way of thinking within the economic discipline*
Because we have yet to become technologically advanced enough to ensure utopia for everyone. The best we can do is thus to choose an optimal path that sacrifices the least and gains the most. As hard as it is to swallow, it is undeniable that it is a recurring theme in life. This is reality and economics does not shy from it. Every time you hear about a project intended to save the environment, it is really our own effort to save ourselves and our kinds from the pitfall of environmental catastrophe. In actuality, such environmental projects are present-and-future-lives trade-off projects in disguise that sacrifice our current well-being, the jobs and livelihood, the present benefits to our workforce in order to assure a better future for the older version of ourselves, for our children and grand-children. Think about it this way. The poor wants cheap energy, the rich wants clean air. The old wants warmer home, the young wants greener future. In that sense, it is simply an intra-generational or inter-generational transfer of wealth/well-being. It is thus extremely arrogant to even think that we, who have yet to save ourselves effectively, exist to or have the obligation to save the planet. We have always been making trade-offs, ever since the conception of the first genus Homo that evolved through hundreds of thousands of years to become modern human today. It is our conceit to think that we are central to everything, and it is within our ego, our desire to console ourselves, that we keep thinking that everyone can be as well off as everyone else given the harsh natural constraints.
Note that, to some people, this is an immoral way of thinking (the economics remains amoral though), but yet, the understanding and acceptance of this inconvenient truth is crucial in evaluating or researching about certain development projects to determine the economic return of the lives it saved. For instance, what is the economic return of saving a malnourished child? Of course, a cruel thought, not to mention having to write and research on such topics, but with limited resources (that can be used for other good causes or on other people who are equally unfortunate), we need some figures, some data to justify our action on top of our own sense of morality. It helps answering the question “How should we help those children? What is the most cost-effective way? Who should we channel the fund towards first? The unfortunate children or the war refugees? How should the support be split amongst different vulnerable groups? Why should we prioritize the disabled and not the homeless or the unemployed?”
Nonetheless, there is a hidden message here. You see, what the discussion reveals is that your life is priceless to you, but probably not to other people. There is a price for everyone’s life, but the only difference from the price of goods and services is that it is not universal. Person A might value your life at *** QuickLaTeX cannot compile formula:
1 million, person B might not give a penny for it. This is what subjective price really means.</span>
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<span style="font-size:15px;">Likewise (and for the above reason), love can be priced... maybe not by you, but by someone else. Let's say your friend views your love as somehow irritating to him. He wants you and your sweetheart to break up (for whatever devilish reason). If he is willing to pay up to
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100 (and no more than that) to break you two up, then as stupid as it may sound, $100 is the price of your love to your friend. Of course, to you it is priceless, but not to your good friend. Your parents as well might be willing to pay you a good sum of money if you are willing to spend more time away from live and more on your study. On the contrary, a dating agency will charge you a fee to connect you to your potential lover, and my friend, they make a profit out of your one-sided love. This means that for your love to come true, it costs them some effort/resources, and they simply charge you more than the cost. Hence, to them, your love comes at a price.
Last but not least, price varies across time. When you break up, that love of yours, to you, is probably no longer priceless. You can basically factor in all the gifts, all the time spent, all the mental stress and physical strain, and all the work you skipped, aggregate them and convert them into dollar amount (or your preferred currency), and there you go, you have priced your ex-love.
Our final conclusion is that price (or generally speaking, value you affix to something) is inherently subjective, and this subjectiveness becomes one of the bases in explaining and understanding prices of all things, love and life included. Remember, it is a truism that subjectiveness is all about personal taste, personal opinion. So, since opinions vary from person to person, everything can be priced. In other words, whatever is priceless to you might not be worth as much as even a penny to somebody else.
And that’s a wrap.
Economind