Hello everyone,
I just wanted to share these thoughts because I feel like this is a common fallacy people have when it comes to frugality - forgetting opportunity costs, which to me, as an economist, are as important as actual costs. Now I know this doesn't apply to everyone, especially if you have a low income. If you can't afford something, you just can't! But it certainly applies if you have higher incomes and becomes more and more so the higher your income since your time becomes more valuable.
An example of this is those who drive further to save a few cents on gas. Sure there is the cost of driving there (gas, maintenance, etc.) but there is also the time you lose. And that time has a real cost. Same for queuing up for Black Friday, going further to another supermarket or or spending hours to use coupons/get refunds etc.. Is it worth your time? Is it worth extra-bother? Have you consider all the opportunity costs?
Talking of coupons, I want to stress also the importance of social costs. Making 20 people wait to use coupons is very bad for your social capital, especially if you're in a small town where people know you. (Removed because it was a poor example) Bringing cheap wine for dinner, for example. Bothering others out of frugality is bad for your social capital. And social capital is a crucial thing to maintain, we are social animals after all - is it worth the cost?
I am not saying that none of these make sense all the time, I'm just saying that judgement is required. Being frugal because you actually save money, considering every costs, makes sense. Being frugal because you feel you are saving but really aren't, is just stupid. And can become a disease if pushed to an extreme.
November 14, 2018 at 10:16AM
