Spousonomics: Valentine's Day Lessons for Your Marriage from Econ 101

How economics can improve your romantic relationships

How understanding supply, demand and comparative advantage can improve your romantic relationships -- really!

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Many people think of economics as dull, wonky, and irrelevant to their daily lives. And those people are not entirely wrong. It's called "the dismal science" for a reason. Economists, it is true, have been known to write papers riddled with impenetrable equations, Greek letters, and words like autarky, satisficing, and monopsony. But that's just so no one else can understand what they're saying.

At its core, economics is way simpler than all that. It's the study of how people, companies, and societies allocate scarce resources. Which happens to be the same puzzle you and your spouse are perpetually trying to solve: how to spend your limited time, energy, money, and libido in ways that keep your marriage thriving.

Spousonomics isn't squishy. It works. It's for anybody who wants a stronger, happier, more fun marriage and, while they're at it, wouldn't mind learning a few things about negative sloping demand curves and nerdy guys named Adam Smith and Joseph Schumpeter. Here are a few basic concepts to get you started:

Loss aversion

Remember Jerome Kerviel, the French trader who lost billions? Well, good old loss aversion did him in. In a nutshell: loss aversion means that we hate losing and act irrationally and emotionally when the chips are down. For traders, that means stupidly betting the house when your portfolio is screaming red. (Studies show that losing hurts precisely twice as much as winning thrills. Meaning: you'd have to wing $200 to make up for the pain of losing $100.) For gamblers, that means borrowing against your wife's life insurance and doubling down on a bad hand.

For couples, that means continuing to argue, even when you know you're wrong. When a fight becomes more about winning and not so much about resolving, it's time to take a time out. Sleep on it and, yes, go to bed angry if you need to (men love this advice, by the way, and are always telling us to explain it to their wives).

Moral Hazard

Think your marriage is too big to fail? Do you assume you can take risks because you know your spouse will always be there to bail you out? It's a beautiful concept, but what happens if you end up being Lehman Brothers (no bailout) instead of Citi (big fat bailout)? It's a risky gamble.

In our interviews with couples, we met with people who told us they had gained weight, gotten lazy about sex, stopped trying to look their best, and generally took their spouses for granted after they got married. (Actually, a new study that was written up recently in the New York Times said that married people tend to stop staying fit sooner than single people.) How to prevent it? Turn your spouse into an investor (meaning: find ways to show him or her that, when it comes to marriage, you get out what you put in); practice some gentle regulation (i.e., setting limits); and create the right incentives - because, after all, in the absence of consequences, we humans have an incentive to behave irresponsibly.

Sex, and Supply & Demand

It's no secret that the more something costs, the less you will want of it. (And vice versa.) The number one reason couples say they don't have sex more often is that they're too tired. So, to up the frequency, you have to lower the "costs" - i.e., make it easy to have sex and you'll be glad you did. Don't insist on candles and hot oils and the proper interplanetary alignment, which are time-consuming ... and, thus, costly. You have to be more transparent (don't make the other person guess if you're in the mood); you have to reset your habits (once you get into the no-sex habit, it's hard to break out of that; to do so merely requires firm commitment); and work on your signaling. One woman told us that when she brought a cup of tea to bed on weekend mornings - no joke - that meant it was time to get it on. She also said it worked.

Thinking at the Margin

Here's how it works: Imagine you're deciding between taking out a $10,000 loan at a 5% interest rate or an $11,000 loan at a 6% interest rate. The two loans sound kind of similar, right? Not really. Five percent interest on a $10,000 loan is $500. 6% interest on a $11,000 loan is $660. The marginal cost of the bigger loan is an additional $1,000 in your pocket. Evaluating the costs and benefits of that extra $1,000 is thinking at the margin.

So, is your spouse clamoring for more family time together? What if you came home 20 minutes earlier from work every day? Over a week, that's more than an hour and a half of extra time with the family and, really, it barely makes a dent in your workday. What if you made the kids' school lunches once a week instead of...never? In other words, small stuff can have a big impact on the bottom line.

Comparative Advantage

The theory of comparative advantage is the foundation of free trade--it means that if each country specializes in what it makes best relative to other products, and then trades, every country is better off in the end. It's why China exports flat-screen TVs around the globe, and the U.S. specializes in trashy reality shows. In your house, maybe you're relatively better at folding laundry and cleaning the hamster cage, and he can mow the lawn and program the TiVo in the time it takes you to brush your teeth. That's okay. Stop obsessing about what's fair and what's not: 50/50 is rarely the best path to efficiency. Specialize and you're both better off.

So sure, your spouse could fry an egg if someone had a gun to his head, but in terms of skill and efficiency, he's way better at changing light bulbs. He has what an economist might call the comparative advantage in light-bulb changing, and you have the comparative advantage in cooking. Specialization can be dynamic. China didn't always dominate the flat-screen TV market. It set a goal and it went after it (or, we can assume it did, since we really have no idea what goes on at the Communist Party HQ). Similarly, your husband doesn't always have to be a dimwit in the kitchen--he can develop a specialization and dominate it.

Adapted from Spousonomics, published by Random House.