An Exercise in Microwaveconomics
After I started living
alone, many people recommended that I get a microwave oven. That, I was told,
would make it easy for me to prepare a meal for myself, and save me a lot of
time. So, earlier this year, during the post-Christmas sales, I bought one.
Ever since I have been wondering how to figure out what it does for me--how to
do a cost-benefit analysis.
The
timesaving business is very tricky. For example, a frozen chicken potpie would
require 60 minutes to thaw and heat in a conventional oven but can be fixed up
in 12 minutes in the microwave. There's a saving of 48 minutes. But the saving
is for my kitchen appliances, not for me. If I use the conventional oven, I am
not going to spend 60 minutes of my time over it--standing next to the oven and
waiting for it to finish its job. I might spend a few minutes--say
five--putting the potpie in the oven. Then, while waiting for the cooking to
finish, I have 55 minutes for myself--to read the paper, write the Great
American Novel, or do whatever it is I do with my time.
Paradoxically, the timesaving is more real the smaller the
amount of time to be saved. For example, it takes 12 minutes to heat a frozen
pizza in the conventional oven and only four minutes to do it in the microwave.
The eight extra minutes that I spend waiting for the conventional oven to
finish are too few for me to use outside the kitchen. If I use the conventional
method, I am likely to spend eight more minutes in the kitchen than if I use
the microwave. So, by using the microwave, I gain eight minutes outside the
kitchen.
What is
the value to me of those eight minutes? I suppose the conventional answer is to
divide my annual earned income by the number of minutes I spend working and so
arrive at the income I could gain by having another minute at my disposal. In
my case this would be a difficult calculation. The time I spend "working" is
not only the time I spend sitting at my word processor and writing these
essays. It also includes all the time I spend musing about these essays, while
in the shower, or on the bus, or trying to fall asleep, and I have no idea how
much time that is in a year. Anyway, the eight minutes I don't spend in the
kitchen will probably not be used to earn more income. It will probably be used
to lie down listening to music.
On the other hand, the eight minutes I would
have had to spend in the kitchen if I didn't have a microwave need not have
been entirely valueless. I could have listened to music, or simply mused--about
an essay like this one or about something else. The basic fact is that at my
advanced age, the best use of time is staying alive. Still, the time spent
outside the kitchen is probably more valuable than the time spent in the
kitchen.
Thus, one
benefit of the microwave is the excess of the value of the time spent outside
the kitchen over the value of the time spent in the kitchen. If I bake two
pizzas a week and "save" eight minutes per pizza, that adds up to an excess
value of almost 14 hours a year spent outside the kitchen.
There is, for me at least, another benefit. That is the
pleasure of owning, operating, and observing a high-tech instrument. That
pleasure is independent of any service delivered; it is the pure enjoyment of
the miracle of technology. I first observed this with television. It fascinated
me, like it did many others of my generation, even though almost everything we
saw on it was terrible. We were fascinated by the fact that it worked at all.
To a large extent, the Internet is like that. We enjoy surfing the Net just
because it is so amazing, not because what we learn on it is so valuable. There
is some of the same satisfaction in watching a microwave at work.
What is
the cost of acquiring these benefits? My microwave cost $150. If it lasts for
10 years, and the interest I could earn on my money is 5 percent, when I bought
it I was facing a cost of about $19 a year. But once I have bought the
microwave, the cost of keeping it is much less. One of the basic lessons of
economics is "Bygones are forever bygones." What I paid for it is a bygone. Now
the cost of keeping it depends on what I could sell it for. The nuisance of
trying to sell it would probably make that not worth my while. The best
alternative would be to give it to some charitable organization, such as the
Salvation Army. Suppose I give it to them and can take a charitable deduction
of $100. That might reduce my taxes by around $50. The cost of keeping my
microwave rather than giving it away is the sacrifice of about $6.50 a year
plus the sacrifice of the good feeling of having performed a charitable act.
(This costs me $6.50 a year rather than $5 because by not giving away the
microwave I am foregoing not only the $50 but also the interest I would have
earned on the $50 for 10 years.)
Then, as this calculation might be summarized
in the microeconomics textbook:
Value per hour of time spent
outside the kitchen: X .
Value per hour of time spent
in the kitchen: Y .
Value of the satisfaction of
having given a $100 gift to charity: Z .
Annual value of the
satisfaction of owning and operating this amazing instrument: W .
Monetary cost of keeping the
microwave for a year: $6.50.
Number of hours per year of
release from the kitchen as a result of using the microwave: 14.
The question is whether
X minus Y times 14 plus W exceeds $6.50 plus Z . Of
course, I can't answer this question, because I can't measure W ,
X , Y , or Z in dollars or any other quantity that is common
to them all.
(I leave out the further
complication of the cost of electricity for the microwave compared with the
cost of gas for the oven. I live in an apartment building where most of these
costs are borne by about 200 other families, just as I share in their costs.
That is what economists call an "externality.")
Nevertheless, despite all these imponderables, I do make a decision. I decide
to keep and use the microwave. In the end, if you ask me why I bought a
microwave, why I keep it and why I use it, I can't give a better answer than "I
like it."
This is, of course, an exceedingly trivial case of
decision-making. But much of life is like that--personal life, business life,
government life. Perhaps it is most like that in government. We cannot compare
the incomparables and weigh the imponderables. We do what we like, and when we
stop liking it, we change.
As an economist I am bound to
insist that economics has its value. There are cases, especially in business,
where costs and benefits can be measured in the same units--dollars--and
directly compared. Even where that is not true, the differences between costs
and benefits may be so large that fine calculations are unnecessary. Anyway,
the habit of trying to compare costs and benefits is useful, if one does not
insist on trying to apply it where it doesn't work. After all, it was an
economist (J.M. Clark) who warned against an irrational passion for
dispassionate rationality.
