August 31, 2004
People More Unhappy From Wasted Money Than Wasted Time?
People do not know how to value their time and are less upset by wasted time than by wasted money.
"Our research shows that the concept of time is easier to write off than is money," said Erica Okada, a University of Washington assistant professor of marketing who co-authored the study with Stephen Hoch, professor of marketing at the University of Pennsylvania's Wharton School. "People are relatively certain about how much their money is worth, but when it comes to their time, people are less certain about its value."
Unlike previous research that focused almost exclusively on money-based transactions, this study used time as a form of currency. Researchers conducted five experiments to determine how the inherently ambiguous value of time influences consumer purchasing behavior.
Three hundred sixty undergraduate students completed a questionnaire that presented two scenarios in which they were told they had already consumed a product that they had acquired in exchange for either four hours of work or $50. In one scenario, the students were told their experience with the product was good, in the other negative.
Okada and Hoch noted a greater difference in reaction between a good experience and a bad experience among those who paid in money. The difference between the levels of satisfaction following a good experience and dissatisfaction following a bad experience was significantly less among those who paid in time.
As suspected, said Okada, the experiments revealed that consumers have an easier time rationalizing a bad outcome after paying with time than hard-earned cash. The ambiguity in the value of time allows people to do this, whereas it is more difficult to do so with money, she added.
I wonder whether older people and higher income people would react in the same way as these students. My guess is that students accustomed to treatment by educational institutions that place a low value on their time.
At least judging by the abstract and Randall's summary, this is an example of why I don't like the soft sciences - no attempt at the obvious falsification and creation of evidence, however flawed, that only supports the hypothesis.
In undergrad $50 was hard to come by, but I always had four hours to blow (senior year: played star craft every day, attended only one class a week). As it's fairly easy to adjust one's schedule to make up for lost time (perhaps by staying up four hours later than normal), and for most ugrad occupations (assuming you have one and are not living off of daddy or summer earnings), it's not so easy to adjust your work schedule to add extra money (i.e., it may take a couple of weeks of saving to recover $50).
Particularly in light of the characteristics of their study group (poor with rigid or irregular sources of income, but with a lot of free time), I'm uncertain that the students were misvaluing their money/time. Rather I think the students were correctly valuing their time/money substitution costs and suspect the researchers messed up in their assessments as to how much $50 and four hours were worth to a student.
I fully expect that if they had used a group with a flexible controllable work schedule making better than $12.50/hr, the group would value their time in a way that the researchers deemed appropriate.
Putting it abstractly, the studied group has a lot of commodity A and a large steady income of A, and just a little of B and an small irregular income of B. Of course they chose to spend 1/6 of their daily income of A and not one day to a week's worth of their income of B. Change the relations between A and B, and the choice will change too.
I completely agree with your assessment that students are probably not the right data set to conclude a general tendency. I, for one, would MUCH rather spend $50 on an item than expend four hours of work to attain it. Even in college, I considered my time to be more valuable than $12.50 per hour. It wasn't until much, much later that I actually earned more than that, but my time has long been the most valuable commodity, for one simple reason: money is a renewable resource, and time is not.
If you pay with time, it is easier to chalk up a bad outcome to experience.
In computing the value of time implicit in the experiment to be $12.50, Jody fails to take into account the fact that one would pay in post-tax money, and so one would have to do another hour or so worth of work to satisfy the various levels of government if he chose to pay in cash. By bartering time for the experience, it is not clear that the taxman would become involved. This doesn't necessarily invalidate the study, but it does complicate the issue somewhat.
The man is keeping me down.
By that I mean the Taxman is complicating my otherwise elegant (yeah, right) arguments.
I curse you TaxMan and curse your partner in crime, RegulationMan, for obfuscating the value of an hour of work.