I am not an economist, but I live with one. Before I lived with someone who studies and practices economics, the word terrified and mystified me. I had a vague idea that it had something to do with money or mutual funds, or something influenced by the world of politics. And while these things are all part of it, the truth is something much broader than that. What I’ve learned from the economist who shares my home is this classic definition:
Economics is the study of choice under conditions of scarcity.
Choice under conditions of scarcity? I’m not sure I’ve seen a single client who, in one way or another, isn’t dealing with precisely that! Most of the people who show up in my office are dealing with feelings of “not enough-ness.” They tell me they don’t have enough:
- love
- money
- success
- worthiness
- time
- self-esteem
- friends
- sex
- patience
- direction
…or something else, and given these circumstances, they have to make some decisions about where to go in life. In other words, they’re managing questions of economics which – I’ve come to find out – is actually a social science! Who knew?
As with any field, economics has its own language, and some of its jargon (Gross National Product, for example) has very little relevance to the daily lives of most people. But several of them are salient and relevant for most people. These principles can be applied to many different kinds of decisions: career, parenting, household management… but in this article, I’m going to explore how they can be applied to relationships.
3 Economics Terms You Should Know
1. Loss Aversion
What it means:
A person feels worse from giving up something they already have than missing an opportunity to gain that same thing if they don’t yet have it.
For example, if you are a person who gets around by walking and taking public transportation, you might wish you had a car. However, it’s much easier for you to not have a car than it would be for a person who is accustomed to driving to give up their car and become a pedestrian. The end result – getting around on foot or by bus – is exactly the same, but already having “the thing” (in this case, a car) makes it much harder to live without “the thing”.
Another example is that if you received a signing bonus at a new job contingent on your staying for two years, you are much more likely to stay for that period of time than if you are promised a bonus at the end of the two years.
I think loss aversion stems from a fear of the unknown. If you stick with the thing you know, you have a pretty stable idea of what to expect. If you give something up, even something that isn’t serving you well, it may have an unpredictable ripple effect.
What this looks like in relationships:
Have you ever stayed in a relationship even though it was no longer making you happy? You may recognize that if you met your partner today, you wouldn’t be interested in them. You may even notice that you don’t like your significant other very much. But for some reason, you stay with them. This may be because you feel you have so much invested in the relationship (see “sunk costs” below), or it may be because you’ve grown accustomed to their face. But regardless of the reason, you just can’t imagine your life without them.
It may also mean the opposite – that you’re having a hard time giving up “the single life” once you’ve met someone. If you’re used to the freedom and autonomy of being unattached, you may not want to give those things up. This can make it hard to make a commitment to just one person. (Also see “opportunity costs” below.)
This can also manifest in smaller ways. Maybe you have a great relationship, but you’re reluctant to give up something that may influence it. For example, having a child, changing jobs, or even just getting a dog can dramatically impact the dynamic you have with your partner! You may find that it’s hard to make life changes because you fear losing a piece of your relationship you really enjoy.
2. Sunk Costs
What it Means
You can’t get back what you’ve already invested, so it’s best to make decisions based solely on how they will influence your present and future.
Let’s say I spend $150 on a ticket to a play starring my favorite actor. When the reviews come out, they’re quite mediocre, and then I find out that the lead role will be played by an understudy. Should I still go to the play? Most people would because of the monetary investment, but based on the economic principles of sunk costs, I shouldn’t. I probably won’t enjoy myself, and I won’t get back my $150 regardless.
What this looks like in relationships:
There’s a joke about a psychologist and an economist who are in a relationship with each other. The economist tells the psychologist she wants to end the relationship, and the psychologist says, “but I’ve given you the best years of my life!” The economist shrugs and says, “sunk costs!”
Much of the time, when I ask clients what keeps them in their problematic, painful, or even abusive relationships, people will respond with a reference to the past:
- I have so much invested in this relationship!
- I’ve been with her for 12 years – I can’t just throw that away!
- He’s known me since I was 23, and things were so good back then!
The thing is, if you are in a relationship that was once good but has been bad for 8 years, and it continues as it is for another 8 years, you will have been in a bad relationship for 16 years. Try as you might, you can’t change the past. All you can do is make choices to create a better future.
Of course, relationships are emotionally entangled and it’s hard to lean into the cold conclusion of sunk costs. If you’re unhappy with your partner, this doesn’t mean you have to leave them – but it means that something’s gotta give. You can take active steps to improve your relationship, check on its health regularly, and work hard together to create something you’re excited to be a part of, or you can end the relationship. But I promise you that if you do nothing and stay where you are, citing how much you’ve invested as a reason for this, you will remain just as unhappy as you already are.
Plus, you’re depriving yourself of the opportunity to experience something better:
3. Opportunity Costs
What it means:
When you make a choice, you miss out on the other options you didn’t pursue instead.
If you’re shopping for an apartment, you may look at several options before making a decision. When you finally put down a deposit, you are effectively saying, “I like this place enough that I’m willing to give up the possibility that I may find something better.” When you see something available that meets your standards, you may feel like it’s yours and be driven by loss aversion to make a decision quickly; alternately, you may struggle to make a choice because you are hyperaware of the opportunity costs involved.
When I was still in private practice part-time, I found the time spent at my agency job to be ungratifying. Not only was I dissatisfied with the work environment, but I was increasingly aware of the time I could be spending on marketing, writing, networking, speaking in the community, and managing the operations of my practice. When I took the leap to work for myself full-time, these opportunity costs were a driving factor in the decision.
What this looks like in relationships:
A friend once told me that she would never give up having the freedom to date a lot of different people unless someone was “the most awesome person [she] had ever met”.
On the one hand, I thought this was wise. If you choose to be in a (monogamous) relationship, you are sacrificing the opportunity to be in a relationship with anyone else. For this reason, you probably don’t want your standard to be some combination of “this person isn’t completely horrible” and “this person seems to be attracted to me”. (Even if you are polyamorous and have multiple relationships, there are still only a finite number of hours in the day!)
Opportunity costs can also influence decisions you make within a relationship. You may decide not to take a job in another country because it would make it challenging to maintain closeness. You may choose to take a weekly acting class, but then feel the impact of having less time with your significant other.
On the other hand, a lot of people get stagnated by holding partners to an impossible standard. If you define “the most awesome person I’ve ever met” too narrowly, you may find that you miss out on someone great. People can easily get stuck from anxiety about opportunity costs. (This is what some people are now calling “FOMO” or “Fear of Missing Out”.) If you’re afraid of what you’ll miss out on, you may never let yourself experience anything… so it’s important to weigh opportunity costs carefully without letting them stagnate you.
In conclusion, I hope this article has been worth the opportunity cost!
(If not, oh well, it’s a sunk cost now!)