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Gendernomics: The marginal utility

Black Label Logic
June 11, 2016

marginal-utility-curveWhen it comes to economics, marginal utility a good or service is the added benefit gained from an increase in consumption or loss experienced from a decrease in consumption of a good and service. The law of diminishing marginal utility states that as you consume more units of a good or a service the marginal utility will decrease with consumption. For instance, if you have enough money to consume 2 beers or 2 sandwiches, or 1 beer and 1 sandwich, the latter would be marginal utility maximizing. The marginal decision rule states that a good should be consumed at a quantity where marginal utility is equal to marginal cost. The final piece of the puzzle is subjective value theory, where the value of a good has a different value to each person, even though their valuations may overlap. In synthesizing these concepts, we can think of 2 men, a farmer and a tailor. The farmer has more food than he is able to consume, thus he would experience little marginal loss by consuming less, however he clothes are tattered and he could use a new set of clothes. The tailor on the other hand has more clothes than he could ever hope to wear, but has no food, thus he shares the marginal over-consumption of the farmer. Thus, the two could easily increase their marginal utility by trading food for clothes, at a rate acceptable to both men, up to the point where the law of diminishing utility kicks in and marginal utility equals marginal cost. Economists have long compared using varying metrics, but the most simple and straight forward, is the metric that no human can greatly affect, namely time.

Every good can be translated into time, and time is a central factor for both marginal utility and marginal cost. Marginal utility and cost are affected through the fact that the farmer in our analogy could learn some tailoring or the tailor could learn and maintain a small plot of land for farming however, their results would not change much. The marginal utility of clothing would go down for a farmer who could invest some time in learning tailoring, however the cost of learning tailoring, would mean that he has less time to devote to his farming. The tailor likewise would need to take time away from tailoring in order to farm, therefore, their gains in marginal utility would be counteracted by the increasing marginal cost faced in their total production. This is where specialization comes in.

Now, specialization has been central to the modern economy since Adam Smith, and has been the embodiment of the chase for scale economies. The concept of scale comes down to that many goods can be produced at a lower cost, as a result of the variable costs of production being a relatively small part of the total cost, in addition to being able to distribute the fixed costs of operations to more produced units. Recently, this thinking has also been applied to service industries where the companies attempt to gain some forms of scale benefits, through growing in size. For many mainly service based firms, they often get scale benefits in purchasing or administration through being able to cross-utilize the staff, or get bigger volume discounts.

The Red Pill perspective

An old and simple example of marginal utility is to compare two goods, using the formula for marginal utility.

marginal-utility-formula

 

 

 

 

We can discuss what “utility” is actually defined as, but usually it just represents a theoretical starting point. From there we put MU over P (price) to arrive at a marginal utility pr unit of price. This obviously works very well when you are comparing milkshakes and pizza, or guns and butter, but not so much when you are attempting to apply the theory to the concept of gendernomics, where most assets are intangible and the prices are hard to determine. From my perspective, as time is the only true currency, it would follow that the price should always be translated into the required hours to obtain the product. Furthermore, that the utility should be quantified equally for all calculations. To account for the law of marginal utility, one would have to determine the situational context of each individual in order to personalize calculations.

For instance, lets do a calculation of hooker vs dating. For this example, I will make the “3 dates before sex” assumption, and I’m assuming that the man pays, and that he earns $10 pr hour so lets math out the dates.

Coffee date: total cost in dollars, $20, total time spent on the date 2 hours. Average hourly pay $10 pr hour. Total time cost of the date 4 hours.

Second date: Dinner $50, total time spent on the date 3 hours. Average hourly pay of the man $10 pr hour. Total time cost of the date 8 hours.

Third date: The female cooks. Time spent on the date excluding overnight stay 3 hours. Total time cost of the date 3 hours.

The total time cost of sex in this case, would be 17 hours, or $170 assuming $10 pr hour.

The price of a prostitute varies quite a lot, and it was not something I put a lot of research into, but from Craigslist it looks to be about $150 in hour. So the total time cost in this case, 1 hour with the hooker, and 15 hours work in order to pay her.

This is where the mathematics become insufficient because many would argue “The man got to enjoy himself on the dates as well” or “He may be able to have sex with the woman he is dating more than once, thus being able to allocate the cost of the initial dates to more sexual encounters”.  The former is impossible to quantify, so it is not really relevant to this piece but the second one is a valid argument. If he can get 3 more short-term (1 – 2 hour) sexual encounters, that puts the cost pr encounter at $20, and one can allocate the $170 to 3, thus reducing the that to $57 pr encounter, plus $15 on average in time spent, thus a total of $72 pr encounter, which is a much more competitive rate than the professional.

From this, we can see that there are definite economies of scale to be found in the sexual market place if the assumptions hold. If you can date a woman at a lower cost than the initial investment, then it follows that the fixed cost is going to be distributed across more sexual encounters, thus reducing the cost of each encounter. However, this begs the question of whether this situation would also be affected by the law of dimishing marginal utility, to put it bluntly, does the marginal utility of sex with the same woman 3 times equal the marginal utility of sex 3 times with 3 different women?

Summary and conclusions

As I stated in my post on time, everything you want to do in your life depends on having the time to do it. Humans often want to have their cake and eat it too, however, time by the very nature humans perceive it as enforces mutually exclusive choices. The application of marginal utility and marginal cost to time and choices is the very basis of economics, and what lies behind the supply and demand curve. Economics as a field is concerned with how a person, group, or nation allocate and utilize resources and how to do so optimally.

The challenging thing in today’s world is the amount of options available to your average person and not being overwhelmed by the choices you have to make. The solution to this is to adopt an end oriented approach, wherein you figure out your goal and attempt to make it there with the least amount of effort and time expenditure. This is what the “Hookers vs Dating” problem illustrates, that unless you are able to reliably “same night close” and push it to a second date, you are raising your cost of sex, and much like the trader who is in a negative position, you are prone to finding yourself holding on to a losing prospect to avoid taking the loss.

A note:

I recently launched a Patreon page where I will be posting additional content every month for those who support me and I will do a Google Hangout for the highest tier Patrons (limited to 10 people).

I’ve also had some requests for consults, which I’ve declined up until now, but due to demand I’ve chosen to open up for doing some consults on request. For details please check out my Consulting and Patreon Page

As always you can buy my book Gendernomics at Amazon.com as both paperback and Kindle

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Post Information
Title Gendernomics: The marginal utility
Author Black Label Logic
Date June 11, 2016 4:18 PM UTC (6 years ago)
Blog Black Label Logic
Archive Link https://theredarchive.com/blog/Black-Label-Logic/gendernomics-the-marginalutility.24311
https://theredarchive.com/blog/24311
Original Link https://blacklabellogic.com/2016/06/11/gendernomics-the-marginal-utility/
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