Time in a capitalist economy

The American Economic Review has a fascinating article that inadvertently points to a relatively insecure, but significant negative consequence of capitalism. The authors find: “Specifically, households in their late forties pay, on average, 4 percent more for identical goods than households in their late sixties. This is consistent with the fact that market labor hours, earnings, and time demands from children all decline after middle age. Additionally, we document that higher-income households pay higher prices than lower-income households, and dualworker couples pay higher prices than singleworker couples.”

Aguiar, Mark and Erik Hurst. 2007. “Life-Cycle Prices and Production.” American Economic Review, 97: 5 (December): pp. 1533-59.

Normally, we hear that higher prices are a form of rationing scarce goods, but the scarcity here is a scarcity of customers. Stores try to draw customers in with low prices in order to make more profits, often using loss leaders, so they can charge more for less inelastic goods. Even assuming that the average price is somehow “fair” or “efficient,” this strategy costs people time, jumping back and forth to get the best deal.

This time cost falls outside of the typical economic measures, along with wait time on the telephone, standing around in a store until a clerk comes your way, long commutes, and interminable security checks before an uncomfortable and often late plane ride.

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