Constraints and Lifestyles

My cyber-friend Karsten of CurryBlog recently e-mailed me. He's been out of blogging for about 3 months - new job, promotion, move, and so on.

What he said got me thinking about the constraints that utility maximizers face in the U.S. and Germany. Specifically, he made the offhand comments "come visit - we have a spare room", "I was on vacation in Thailand", and "I have broadband Internet access as of today".

Karsten is in finance, and works in business. I am in economics and work in academia. By both counts, he probably makes a ton more money than I do.

Yet, I've had a spare room since my first apartment. We have a bunch of them now, and in large measure we moved to southwestern Utah to get even more cheap space. But most of those spare rooms are now filled to the brim with crap from Wal-Mart. Absolutely essential crap, of course ... nothing but the best ... er ... um ... cheapest.

Alternatively, I always thought I'd vacation in places like Thailand. What we do in fact do is take 3-5 day road trips. And not very often.

And we just got broadband at home too. I could and would have invested in that earlier if I didn't live so close to the office. Getting it was more out of annoyance than anything else.

This example is rich with illustrations of how individuals maximize utility subject to the constraints they face.

For Karsten, real estate is expensive, so he doesn't have much. For me it's cheap, and I have a great deal of it. In Germany, goods are quite expensive, and shopping isn't nearly as convenient as in the U.S. So, we have spare rooms full of spare stuff. Just in case we need a few minutes of facile amusement.

But, Karsten can afford a nicer vacation. What's cool about this example is that the vacation is probably the same (absolute) price for both of us. But for him, Thailand is a relatively cheap destination. Not because it doesn't cost much, but because most other things that Karsten might buy are more expensive. So Thailand is relatively cheap for him. To me, vacations are relatively expensive. We've chosen to live in a place that other people take vacations to come to. Is most of my life one big vacation, punctuated by 7 hour days in the office? Maybe that's why "real" vacations seem kind of expensive to me.

Lastly, I can't go to deeply into the speed of internet access - since it is so often beyond the control of an individual decision maker. But, I can point out that the choice between dial-up and broadband wasn't really pressing for me. How critical can broadband be at your house when you live 3 minutes from work? That feature makes me a lot richer in free time than my income would otherwise suggest.

There's no value judgement involved here, just different choices under different circumstances. And good examples of constrained optimization and opportunity costs.

Comments

[Scott McGerik]

I consider vacations to be relatively expensive for the reason that what I most want from exotic-to-me locales are new dining experiences, yet, I have more local restaurants, on my to-visit list, featuring inventive or "exotic" cuisine than I have time to visit.

For example, the other day, while driving through a part of St Paul, MN called Frogtown, I counted no less than twenty restaurants featuring Southeast Asian cuisine, many of which I want to dine at, at least once.

Why travel to Southeast Asia when Southeast Asia comes to me? Maybe the authenticity of the food in Southeast Asia is higher but I doubt it is much higher. Can I justify the travel costs to experience the higher authenticity? I don't think so. Especially considering how inexpensive the food is at these local restaurants.

[Guojing]

Actually, a visit to SE Asia would make more Americans realize that "fortune cookies" are as much a novelty in Asia as it is in US.

We will not get awkward incidents like Seattle Supersonics distributing fortune cookies to the audience for Yao Ming's first game there. =)

[Dave Tufte]

Oops. Is it OK to say "it's the thought that counts" when our fellow travelers do something like this?

P.S. I heard a few years back that the vast majority of fortune cookies (a U.S. invention) are made in Houston by Hispanic workers.

P.P.S. Reminds me of the Italian restaurant a group of us ate at in London in 1983. My roommate ordered garlic bread, and then when told they had no such thing, insisted that all Italian restaurants have garlic bread. Of course ... others in that group also pronounced Thames phonetically.