Wednesday, January 20, 2010

The Rationale, and Should You Really Fly at Noon?

"Well I can't pass up a much needed refresher in Greg's application of econ to everyday life. Let's talk about the game theory of gift giving this time."

So wrote a friend in a reply to a recent evite.

It's no secret that I like to make economics analogies in casual conversations. I'm working on my master's degree at George Mason University, so I often have econ on the brain. In an effort to spare my friends, I'm now attempting to channel some of this ranting into the wild abyss that is the Internet.

I am a disciple of the "Freakonomics" movement. I tell people it's the most expensive book I've ever read, as it partially inspired me to get into an out-of-state graduate program (approximate tuition cost=$30k, not including the time required). Hopefully something will come of it, besides arming me with annoying conversation topics and teaching me the inner workings of exchange rates.

This blog, like "Freakonomics," will focus on the economics of everyday life. You won't find analyses of credit default swaps or the dynamic stochastic general equilibrium model.

I'm going to begin with a series of comments on a pretty entertaining book called "Buy Ketchup in May and Fly at Noon," by Mark Di Vincenzo. Some of the book's themes are:

(1) Buy stuff when other people aren't. This is the classic "buy a winter coat in June" philosophy, or buying seasonal products right after their appropriate seasons.

(2) Do stuff when other people don't want to. The titular example of flying at noon is a case in point. People want to fly either early to get to their destinations as soon as possible or after they get off work.

(3) Think like a retailer. By exploiting supply-side effects, you can get a cheap piece of furniture right before the new models come, for example. The author also says to get to garage sales and swap meets at the end of the day, when the vendors likely will want to get rid of merchandise instead of packing it around for another day.
Buy Ketchup in May and Fly at Noon: A Guide to the Best Time to Buy This, Do That and Go There
The advice is amusing, but it's important to remember the old economist adage: "There's no such thing as a free lunch." While a lot of these tips will save you money, you may be "paying" more on other margins. For instance, it's a huge pain to buy Christmas decorations the day after Christmas and then store them for a year. It's a drag to waste half your morning waiting for your flight when you could have gotten to your destination sooner. It's a risk to get to the swap meet at the end of the day, as many items might no longer be available, and food items won't be as fresh. The book duly notes many of these concerns.

This reminds me of the ongoing debate at my apartment. I like the instant access and convenience of Kindle books (I can read a few pages on my phone while riding the subway, even) and don't mind paying the $8 or whatever per book. My fiancee, in contrast, will always try to get books from the library, even if it means adding half an hour to her commute, having to walk in the cold, checking with the library several times over the phone to make sure that the books she requested are really there (the e-mail notices have lied to her more than once), and making a note on the calendar to renew the books on a certain date. So, while the books are "free" in terms of money, they are more expensive in the aggregate (at least to me) when you factor in the time and the hassle required to get them.

As a side note: I've been on a bit of a blog kick the past few weeks. I have recently been exposed to Google Reader, a product I highly recommend. It's like a custom newspaper, based on RSS feeds, of items you're interested in from various sources. I've also started a blog of a very different nature with my fiancee.


Adam Gurri said...

You're not going to talk about the dynamic stochastic general equilibrium model? You just lost yourself a reader, sir! :p