• Twinkle Joshi

Decoding Love, Economist Style

Love, the precious human feeling, the will of the universe and the destiny of your soul. Well, it sounds amazing, only if it were true. The concept of love and relationships depends on a variety of choices and constraints. Having majored in economics, I see high correlations on how the concepts of economics can be applied to the commodity “love” like any other product. With the right techniques, we can figure the correct path to your perfect match.

Before diving into the analysis part, it is important to address why do we require to do it in the first place. Economics is often used to allocate scarce resources to achieve maximum efficiency and productivity. And, what could be more scarce than the feeling of love. Therefore, it is highly necessary to take into the picture the possible trade-offs and opportunity cost. While one is with their partner, they are losing the opportunity of being with someone else which might have resulted in a more productive relationship. Or else, they would have been single and had time to advance in their career. Hence, it is very important to make an informed decision based on the trade-offs to select the most efficient partner.

Let us begin to understand the market of love and how it operates. Every individual is a stake-holder. They are buyers and sellers at the same time. The best way to describe the exchange is to compare it with the barter system. Individuals offer their “products” like loyalty, caring, money, attractiveness, leisure times, personality, etc, and search for suitable candidates offering their products that match their value of the exchange. Therefore, the play of demand and supply comes in. The better your product offering, the more will be the demand and hence better deal you can get for exchange. Sounds complicated, let us understand by the example of Tinder. It operates on the same principle, by giving a market place for barter exchanges to take place. You put yourself (the product) up there and wait for consumers to showcase the demand for you. Then, after figuring out the best bid, the transaction takes place.

The way to increase your prospectus pool i.e. demand for you lies in the understanding of the market. Asymmetric information is an inherent feature of this market. According to Quartz India, “Over 85% of Indian women find a man’s education as the biggest turn-on while looking for a match on the dating app Tinder. 86% of Indian men believe a good profile picture does it for them.” This misinformation can lead to inefficient practices. Research more on what is the priority of your target audience and work better to upgrade your product offering.

Coming next to how to evaluate your prospective partners. Like in financial markets, every individual has different goals on how much reward they seek based on the risks they are willing to take. The relationship can be seen as a bond where you get returns in every fixed amount of interval. To invest right, it is very necessary to understand your goals in advance and how much you are willing to invest. Randomly approaching people without set definitions of requirements in your mind, leads you to disappointments. With these goals in your mind, you will find the value of your partner. For hookups, great looks and occasional chocolates might suffice. Though for long term relations, different market values come into picture like personality, compatibility, family, etc. When you factor down those future returns into present value and compare it with your offerings, the informed decision can be made.

While evaluating your relationship, it is most efficient to be in the monopoly of your partner’s heart. In the different kind of markets, monopolist makes the most profit. This is also true for the market of love. If the situation is such that you compete with someone else for your partner’s attention, your profits are going to decrease substantially. The market will be saturated. In this situation, it is better to exit and find a new partner (market) to keep making supernormal profits.

Being in a relationship is a constant costs-benefits analysis. Even when you don’t realise it, you keep a tab in the back of your mind. The right balance of sacrifices and achievements goes a long way. Moreover, it is essential to know when to exit. Often, every trader faces a situation when he buys the stock of a certain company, and in future prices are stashed beyond expectations. Yet, he cannot sell the shares for a very long duration of the time, hoping the prices will rise someday. The same things happen in a relationship, even when you know that there is nil possibility of improvement, you cannot let it go because of how much you have been through together and hope that someday things will be okay. That is a sign of bad investment.

Putting your self-interest at the back seat for too long leads to inefficiency and toxic relationships. But, what about the stories of Romeo & Juliet, Heer & Ranjha, aren’t they supposed to be a great love. I will address them to you by reminding you of the first assumption of every economics model, all individuals are rational in nature. That we know is not true, hence, we have inefficient markets and incompatible relationships. We are driven by biases, hopes, misinformation and get easily manipulated by external factors. Therefore, I will leave to you to decide how rational you want to be from the scale of Romeo & Juliet to Barack & Michelle Obama by applying the economics techniques mentioned in your love life.

Now that you've reached the end of this article, if you want to read out my other articles, check them out here.

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