Economics in Relationship
Although we seem to follow our hearts when choosing our life-long partners or entering relationships, we still rely on a classical discipline to guide our choices, which is economics. It seems unbelievable at first, but it actually makes sense when you begin to ponder the motives behind our choices.
Pareto Efficiency in relationships: choosing the one that suits you best
In Economics, to achieve pareto efficiency is to reach a state of allocation of resources where it is impossible to reallocate so that one individual could be better off without making at least one individual worse off. The process of achieving pareto efficiency is called pareto improvement. Gary Becker, a Nobel Prize winner in Economic Sciences in 1992, once proposed an idea that people who are married expect to raise their utility level above what it would be were they to remain single, hence, they are trying to maximize their utility level. In other words, the pursuit of finding your ideal partner is actually a process of pursuing pareto optimality.
Suppose we adopt a model to rationalize the resource reallocation after a couple’s marriage, we define the man’s quality of life before marriage as X, and that of the woman as Y, and the total worth created by both of them after marriage as m. Since they share each other’s resource, both of them acquire (X+Y+m)/2.
Judging from this model, it is not hard to deduct that if you find a partner that has complementary advantage, you might experience hardships at first as you have to tolerate each other’s shortages, but you will find a larger room for pareto improvement as time passes. You would then attain more resource as both of you continue to gain a higher utility level. On the other hand, if you find a “matched” partner who shares equal social rank or skill sets with you, you might find your marriage to be smooth in the first few years. But the space for pareto efficiency is actually becoming narrower as both of you would lack complementary advantages as you both pursue uniformity.
Best timing to find true love: stopping rule
We might establish several relationships during our lifetime, but how do you know who is the best one and when to stop seeking the next one? The answer is to start hunting your Mr. Right after 37% of all the candidates. Suppose you starting dating at the age of x, and you want to get married before the age of y, on average you date a people each year, your Mr. Right will be whoever is better than the previous (y-x)/a*37% candidates.
This optimal 37% stopping theory was commonly utilized in statistics and decision making. In the famous secretary problem in Martin Gardner’s column of Scientific American in 1960, he raises the question of finding the strategy to hire the best secretary out of n comparable applicants for a position.
We can calculate the probability of Mr. Right by applying the function:
where n is the total amount of dating, and i is the timing of find the Mr. Right.
The answer to k = 1/e which is approximately 0.37, where e is the base of the natural logarithm.
There are also other economic concepts and models applied in relationships such as comparative advantage, opportunity cost and diminishing marginal utility. The application of economic rules to relationships might give guidance to make rational decisions, but as we all know, love and emotions instead of rationality are what make us “human”.
Reference
https://en.wikipedia.org/wiki/Secretary_problem
Bearden, J.N. (2006). "A new secretary problem with rank-based selection and cardinal payoffs". Journal of Mathematical Psychology 50: 58–9.
Dai, Laoban. “The economics in love”. The Reader. June 2019
