Ever wonder if it might just be advantageous to think differently from those around you? Sure there are lots of cons: maybe you tend to get bored by what you consider inane talk about mindless sporting events, celebrity gossip or international news. While everybody else dreams of four bedroom mansions with fully chrome kitchen appliances and expensive German cars parked out in the driveway, perhaps your thoughts are on growing cacti, or brushing up on 19th century Russian literature, or whether RomeoVoid might ever come out with a new album?
Well, the good news is: being different is actually economically good for you! I propose to expound this (novel??) theory here in this blog: the Nobel prize jury for economics knows where to find me, and I am fully prepared to wait a few years.
Let’s explain the basic idea with a simple model. In the Land of Pi, people like to eat apples and bananas. For various reasons ostensibly connected with supply and demand, bananas are more expensive than apples: in fact one banana costs the same as four apples. Everywhere in the land of Pi, where the citizens are placidly uniform and all more or less think the same pleasant thoughts, everyone agrees that B=4A.
Want to trade your two bananas for my eight apples? Sure, that’s only fair. But your two bananas for my nine apples? You’ve got to be kidding! I know the true value of things.
In the far distant Land of E however, where apples and bananas are also the two main fruits, a different agricultural rhythm prevails. Perhaps the place is more tropical, and bananas grow more easily, or perhaps the United Apple Consortium has better political and marketting savvy: in any case apples and bananas in this land have equal value: one apple and one banana are worth more or less the same. Young people, old people, rich or poor all realize that B=A is the state of affairs here.
Now let’s suppose that you, a happy citizen of the Land of Pi, take a long and perilous journey to the Land of E. The Lands are far apart, so essentially no trade takes place between them–a fact that we can deduce from the marked differentials between the values of apples and bananas. You’ve scraped up some Land of E money doing some casual labour, and head off to the store to buy food.
You are going to be in for a bit of a surprise in the fruit section. Instead of bananas being four times as expensive as apples, which all reasonable people know to be the true value, here they are actually equal in price! Let’s make the assumption that for an hours worth of work, you can get roughly the same amount of food as you can in Pi. It means that bananas are much cheaper here than you are used to, while apples are more expensive. Naturally you are going to buy lots of bananas, and you are going to think—this is great, I am getting a lot more food for my hour of labour here! Of course you might get a hankering for apples now and then, but every time you buy one the exorbitant price will annoy you.
Of course this example involves two products that are more or less interchangeable as a food source—you don’t actually need to buy both of them. There are no doubt other qualifications to add before undergrads starting learning Wildberger’s Theory of Relative Values. The Nobel committee will want me to quantify the theory, but I think the basic idea doesn’t really need much mathematical underpinning. If you have a different value system from those around you, some things appear cheaper to you while others are more expensive, so if you can choose you are better off.
Here is a way of turning the situation around to see the argument in a different light: suppose someone opened a new store where all the prices were as usual in the first week, but then in the second week they were all marked up or down in a random fashion. When would you prefer to go shopping? If you didn’t actually have to buy any one particular item, I bet you’d go during the second week.
Here is another example: here in Australia at the beginning of the twenty-first century, I can go to a movie for $10, a play for $50, a symphony concert for $60, an opera for $200, or a Barbra Streisand show for $1200. My estimations of the “true value” of these things? Something like: movie $15, play $30, concert $20, opera $50, and Barbra’s show I won’t say, in case you are a fan.
You can deduce that I rarely see plays, go to concerts, attend operas or pay money to hear famous people sing. Because I am a cultural slob? No, simply because they are worth a lot less to me than the market wants. Movies, on the other hand, are worth more to me than I can get them for. Naturally I see lots of movies, and am happy.
So an interesting psychological ploy now manifests itself. Instead of working harder to make more money to spend on stuff, why don’t you just judiciously re-orient your thinking so that you value things differently than the market? The direction of re-orientation is not really important, the main principle is that the more widely your value lists differ from those of the majority, the better off you are in real terms. Non-conformity is the new economic black!
Suppose that I could hypnotise myself into thinking that movies are much more interesting and worthwhile than I think they already are—each experience worth hundreds of dollars: say on a par with a helicopter ride over the Grand Canyon, or those early morning balloon flights over the Hunter Valley Vineyards. Wouldn’t I be a lucky chap then, managing to snare such bargains for the ridiculously low price of $10 a shot! You get the idea; I’d end up with thousands of dollars of value each month for next to nothing.
On a related note, I would be interested in knowing what people think about how much things are “really worth”. How much are different kinds of cars worth? How much are holidays to various places worth? How much are dates with different types of women worth? How much is early retirement worth? (One of these questions seems a lot more interesting than the others, don’t you think??)
And of course, how much are apples and bananas really worth?