The Economics of Love

In my last article I focussed on the economics of dating. Here, we are going to go deeper, into the economics of love. Because that is what we are aiming for, people! What happens once you have agreed upon sticking it out with one person? Well, things tend to get a whole lot more serious. It is time now to decide whether what you have been looking for in a partner, will also make it in the long run.

6. Zone of Possible Agreement Once you have established that you as a couple are serious, it is probably a good time for some serious talk. The zone of possible agreement (ZOPA), will determine whether you two can stick it out or not. So, what is ZOPA? Say, you have a certain level of expectations, and so does your partner. Do they overlap? Or do they not overlap at all? You need to have a conversation about what type of behaviour you expect (and accept!) and what you do not.

Unsurprisingly, this looks a lot like Willingness To Pay and Willingness To Accept, but here, there is actual room for negotiation: cut-off points can move, and all parties need to be open to talk. This might sound complicated, but really it isn’t. This “serious” talk, can be about how often you expect to see your significant other, how exclusive you are as of now, and also, longer down the line: are you open to having children, moving abroad, do you believe in marriage and so on. This is not the time for “turtling,” this is the time for honesty. What do you expect/want/need from this relationship? What does your partner expect/want/need from this relationship? When there is no overlap, negotiate. Give and take. Keep it honest, keep it polite, until a compromise is reached that BOTH of you can live with. There’s no point in agreeing to something you really don’t want, because it will bite you in the ass later.

It is possible that negotiations break down: your boundaries are too far apart and a ZOPA is not found. What then? Take some time apart. Re-think your stance, try to understand their perspective. If it is too important to the both of you, it might be a breaking point for the relationship. It would be a breaking point for any business negotiations.

Unlike a business negotiation, however, there is no physical contract. No “sign and forget” type of approach. The finding of a ZOPA is a continuous process. You don’t do this once and it’s all done. This talk is something you’ll have over and over again, when you move through different stages: from dating to moving in, to marriage, to children, to different jobs, moving country etc. (not necessarily in that order, if at all). As your situation changes, you might find yourself needing different things from your relationship. And that might simply be because your resources are becoming more or less scarce:

7. Scarcity: resource division The most precious resource in the world is time. It cannot be earned, it can only be foregone. So back to WTP: how much time are you willing to “pay” for your relationship? When it is time to invest in one person, how much time are you willing to invest?

This is probably something you have already discussed within the ZOPA negotiations: how many nights do you have off to see each other? How much time do you need to work/study and socialise with others? How many other obligations do you have? And what about your partner? Where do you fit into each other’s lives? Maybe most importantly timewise: are you in it for the long run? Because if one or both of you aren’t, that might change your level of investment.

There are of course other resources to be considered when getting serious. One such resource is money: who pays for what? When you are still living on your own these things can be rather trivial: one time you pay for a date, the second time your partner does etc.

But what happens when things get a bit more complicated; when you are shared owners? When living together, who pays how much for shared things? Who does the groceries, who pays for them? When it comes to rent or mortgages, who pays how much? If you earn three times as much as your partner, does it make sense to split everything 50/50? Given that scenario, assuming you both work 40-hour weeks, if you were to pay 75% of all costs, does that mean your partner should do more of the housework? Again, find a ZOPA, figure it out together.

Let’s dive even deeper: suppose children are involved, they cost time too (and money!). Who is investing time to earn money and progress their career, at the expense of family time? And who is investing time in child rearing, very likely at the expensive of their career progression? Both of you? Neither of you? This is serious stuff, and you need to be able to count on yourself and your partner to be able to fulfil one of these roles properly, which ever that is.

Do make sure that what you are agreeing upon at the end is what you both want as a couple, and not what society deems appropriate, as often seen with heterosexual couples. At the end of the day, your household and relationship mainly happen behind closed doors, and not out there in society.

8. Reciprocity and cooperation Reciprocity is a very easy concept in economics: I’ll scratch your back if you scratch mine. In game theory people can choose to cooperate, or to “betray” their partner, often with the opportunity for the betrayed partner to retaliate. You can even cooperatively invest, to reach goals higher than you could have met on your own. One issue though: you have to be able to trust the person you are doing this with.

Relationships function the same way, although betrayal and retaliation aren’t exactly indications of a healthy relationship, but they can happen. Let’s assume something positive first: your partner often does nice things for you. Great. But after a while they stop, or it becomes less and less frequent. Why? Well, of course there is the normal arguments to make: you’re out of the honeymoon phase, they got comfortable etc. etc. Quick question first though: what nice things were you doing for them? We are quite quick to place the blame with others, but look at yourself first. If your partner constantly does nice things for you, but you never really return the favour, well, would you continue? It sounds a bit petty, and it is. But this goes both ways: if you want to be given nice, romantic, thoughtful gestures, you should give the same gestures. Simple as that. Don’t expect something from others you are not willing to give yourself.

Now this action-reaction approach can backfire. You can end up doing nice things for your partner, and your partner may still not return the favour and just profit. Firstly, make them aware of this. Don’t turn it into a blame game with a long list of all the things YOU do for THEM. Just mention that there are some things you would like from them. And be specific: for behaviour to properly change, people need to not only know what they are doing wrong (as perceived by you), but also what would be the right mode of action. If your partner is still not catching on, you might want to reconsider your level of investment.

This might sound extreme, until you consider your relationship as a shared investment of your most scarce commodity: time. We make shared investments for mutual benefit, but if the returns are one-sided, there’s no motive for the other partner to invest. You have to decide whether the return on your investment is worth the cost of entry, and that of continuation.

Within a relationship you should be a team. Cooperative and reciprocal. There is a lot of trust involved there, and that can massively backfire. It is important that you are transparent and honest with your partner before you make any rash decisions and changes. But if you are with someone who doesn’t reciprocate, are you really a team?

9. Breach of Contract You have your ZOPA, your resource division, your common investments etc. But reciprocity and a lack of cooperation can get the better of you. It can happen that through reciprocity, you’re both doing less and less in response to the other doing less and less. Frustrations seem to pile up and fights are inevitable. Even if you are non-confrontational, this can lead to a massive outburst.

Breaches of contract can be a lot quicker and less subtle than this. For example: most monogamous couples would consider infidelity as an instant breach of the ZOPA you have agreed upon. Now what?

Time to get back to the negotiation table. Now, the longer you are in a relationship, the more difficult this may be. It might be that because emotions are running high this is more likely to turn into a shouting match rather than anything constructive. If so, I’d suggest therapy, if that is something both parties are willing to agree to. For the issue of doing less and less for your partner, this might still be a viable option. For other issues such as inequal divisions in household labour, inequal emotional support, sex-life in need of reincarnation, this can be a great option. But maybe cheating is a breach too far. This depends on you as a team, which is unfortunate, as you probably don’t feel like a team when going through this. If you feel like the breach is too much, it works the same as breaching a business contract: you are no longer under any obligations. You are no longer a team.

At such times, the sunken cost fallacy often arises: whatever you decide to do as a couple, do not fall into this trap:

10. Sunken Cost Fallacy This fallacy is an interesting one in investment literature. It is also known as “throwing good money after bad.”

What does it mean in relationships? It means staying together, because you have the house (mortgage), shared friends (social network) and other shared obligations. But mainly, you are staying together because you have already invested so much time in your partner. You let the past influence your decision and as such forego making the optimal choice. In this way, your past can ruin your future. Because honestly, if you want out, and you truly feel that tomorrow you’d be happier without your partner (and you have felt this way for a long time), it doesn’t matter how long you have been together. Tomorrow doesn’t have to be miserable just because yesterday was.

I’m sorry to have ended on such a depressing note. But, if you are lucky, put in a lot of hard work, and your partner puts in a lot of hard work, you might ever to go through stages 9 and 10. Luck and hard work seem to be the solution to a lot of things. I’m emphasizing luck here, because even if you both put in a lot of hard work into a relationship and you are both great people, not all relationships last forever. And that’s okay: just as businesses can continue to prosper after parting with a long-term partner, so too can you.