Notes on Spousonomics by Paula Szuchman and Jenny Anderson

Intro

Interviewed lots of economists for advice on marriage and ways to apply economics principles

Marginal cost/benefit analysis

Splitting up chores based on who's good at what

Ch 1

Division of labor

Adam smith wealth of nations

Ricardo comparative advantage

Not your absolute ability but that where can produce one good better than another

Trade between countries

Both better off

Household division of labor

Not based on what seems fair

But based on who does what best

Can change over time

Inefficiencies and market failures are not due to market but due to a lack of market

Nagging and spousal tension is evidence of market failure and missing market

Pareto efficient: no one can be made better off without someone being made worse off

Trade one night out with friends for doing household chores for a week and other needs to watch kids all day

Can learn and develop new specializations

Ch 2 loss aversion Or the upside of going to bed angry

Huge trading losses from fear of losing

People prefer sure wins but prefer uncertain losses

People notice price increases a lot more than price decreases

Keep Arguing at night because you don't want to lose face submitting you lost

Behavioral economics

We change our mind on a whim

Sunk cost fallacy

Compounding losses

Solution: just sleep on it

24 hour rule: see how feel next day after have emotions and if still same then broach subject

Rules for timeouts

Anybody can call a timeout Unilaterally

The person calling a timeout must set a time limit of no more than one day

Both people have to spend the time out thinking about what led to the anger in the disagreement

Not about blaming your partner

Think about why you each responded the way you did

When you come together talk calmly without making accusations

Endowment effect: value things we own more than things we don't

Solution: reframing

Reframe the loss into a win

Are you losing something sentimental or winning a happy home

Reframe loss or change as Refreshing and renewal

Status quo bias: prefer familiar vs new and uncertain

Change is scary

Happiness isn't about where we are at but where we are at compared to yesterday

Solution: stop trying to recreate the past and get real

The past is the past and can't bring it up unless ties to the present

Stop hanging on to old reference points from the past

When life changes we need to change with it

Active decision making; exercise judgment rationally and proactively rather than just choosing default option or status quo

Need to decide to change your perspective and status quo to see the goodness of current state

Write down list comparing youth activities and goodness to current ones to reset yourself

Ch 3 supply and demand or how to have more s

Negative sloping demand curve

When price of s gets too high in opportunity cost of what giving up like sleep or email then won't do it

Opt for quickies when kids go to sleep and tell other when in mood instead of being coy

Lower the costs of doing it

Be transparent

Say when in mood

Makes market more efficient

Reset your habits

Send informative signals to partner about what you want and when you want it

Opaque marriage market makes it hard to know what other wants

Solution: transparency

Heart of intimacy is self disclosure

Rational addiction: addict decides that drug better off for him than not

Best way to kick habit is cold turkey

Resetting habits

Set goal to force doing it 3x/wk to break habit of just talking about it

Do before dinner when motivated by hunger to get it done

Quantity matters more than quality for happiness

Coordination failure

Coordination game

Solution: signaling

Have one person initiate so its on their terms

Bringing teacup back to bed on Saturday morning

Ch 4 moral hazard or the too big to fail marriage

The principle part 1

Take more risks when have insurance

Bet the house then get bailed out

The principle part 2

Insurance policy of being married and promised to be taken care of in sickness and in health

Spouses who stop pulling their weight

Solution 1: give spouse a stake and make them like an investor or employee with stock options

Solution 2: regulation and setting limits

Solution 3: creating the right incentives, copayments and deductible

Problem: one bailout too many

People with property rights invest way more into their homes and take better care

Solution: get invested

Cut off support

Make them responsible for own stuff and specific duties around house

Safe harbor not safety net

Bring back some accountability

Make a contract so partner has something to lose to temper moral hazard

Write down list of 4 requests each from partner

Share lists and agree to 3 out of 4 and specific punishments

Every week check your progress

Perverse incentives

Solution: smart incentives

Charge insurance holders so they share some of the costs

Copays and deductibles

Share some of the costs with your spouse

Ch 5 incentives or getting your spouse to do what you want

Wall Street bonuses

Profit sharing

Incentive becomes the goal

Paying volunteers can dissuade action

Telling people they're doing a great job, acknowledging hard work, and trusting your partner/employee to not let you down can be the most effective

What works

Giving praise

Offering to do something in exchange

What doesn't

Anger

Guilt trips

Punishment

Trust someone will do something and likely will do it

Praise twice as effective as nagging

When u threaten to punish it makes people get mad at you

When you have option to punish but don't, it sends powerful positive signal

Tit for tat incentives

Any mistake echoes back and forth

Solution: get out of jail free card

Forgive and teach lesson

Resets tit for tat but with explicit agreement now

Coercive incentives

Punishments

Use wisely

Gifts as incentives create fleeting response

Can wear off over time

Pay raise initially increases productivity but then wears off

Solution: keep it fresh

Thoughtful gestures not material ones

Help other person out with tasks

Use attention as incentive

Ch 6 trade offs or the art of getting over it

Marginal benefit over marginal cost

Opportunity costs

Decision making biases

Problem is thinking of giant solutions

Solution: think at the margin

Think small and try little changes and ideas

Solution: ignore sunk costs

Only look at future ones

Inequity aversion

Don't like when things unfair and makes us act irrationally and not in self interest

Fairness irrelevant in a free market

Get miserable when worry someone else has more even when ur better off that way than otherwise

Ultimatum game

Solution: get over it

Trade off between equity and efficiency

Think more of long term benefits and make small changes at the margin

Ch 7 asymmetric information or why you Should tell your partner stuff

Too good to be true or lemon problem

If so great then why single

Solutions: certified preowned cars, credit checks, insurers checking medical history, employee reference checks

Always call When running late, Say when your feelings are hurt

Invisible hand: only when we are pursuing our self-interest do we do the best for society

Pooling equilibrium

Can't know how to act when partner acts same happy and unhappy

Need to share feelings and info

Not mind reading

When mortgage lenders can't tell who will be reliable and who won't

Forced to charge everyone high rate and alienate good ppl

Most ppl prefer separating equilibrium where can tell difference between good and bad

Need information

Solution: signaling

Revealed vs stated preferences

Behavior says different thing than words

Solution: truth telling mechanism

What principals impose when want agents to tell truth

Like IRS threatening audit

Background checks

Showing spouse that ok to speak mind

Avoid getting defensive

High information processing costs

Tmi

More ppl buy when fewer choices of flavors

Flooding

Solution: optimal reporting

Computer widdles down all info to key info

Decide what's most important to communicate to spouse instead of just saying all

Sometimes pays to not be honest and spill everything

Ch 8 inter temporal choice or being a good person when you get around to it

We plan on being good but life gets in the way

Intertemperal choice is one made today with consequences tomorrow

Rich countries take the long view

Can save only when can exercise self restraint

Hyperbolic discounting

Don't value things in the future nearly as much as today

Takes patience

Exercise

Hot cold empathy gap

When in different emotional states plan on doing one thing but then when in another state do different than planned

When one is not hungry or in pain it is difficult to imagine that experience for another

Solution: commitment device

Something that forces us to do right thing even in hot state

Prepay for catering, sitter, date night activities so harder to cancel and flake

Flags and points to redeem for what want or if mess up have to do undesirable things

Intimacy: Decide on a frequency and stick to it

Ch 9 making the good times last

Economic cycle

Bubbles

We suck at valuing and predicting

Confirmation bias

Herd behavior

Overconfidence

See full picture of each other and relationship instead of just assuming all perfect like in beginning

Solution: creative destruction

Innovation requires busts

To avoid the herd look in the mirror and ask what you want and think, not others

Solution to overconfidence: couples confidence index

Develop indicators to help you gauge what's in store

Answer following questions in some baseline period and 6 months later and see if total changes or not

Scale 1-5

How happy r u with ur marriage

How much quality time spending together

How much s having

What's the tenor of most recent argument

How many nice things done for partner this week

When lie in bed at night and think of spouse what thoughts do u have

Ch 10 game theory or how strategizing and manipulating can make for a blissful marriage

Cuban missile crisis

Game of chicken

Minimax

Think ahead

Learn from the past

Put self in other's shoes

Art of finding ways to cooperate

Slight differences create deadlock and then even more polarization

Solution: Communication compromise and collusion

Prisoners dilemma

When two people aren't cooperating their first best move is kill or be killed

Solution; commitment device

Binding incentive that eliminates the option of cheating

Agree ok punishment for snitching

Free riding

One partner always picking up the slack

Solution: mixed strategy

Think of ideal versus acceptable outcome for you

Make your strategy unpredictable

Battle of the sexes game

Want two different activities but more so want to do something together

So one keeps caving in and staying home

Solution: toss a coin to decide who wins

Solution: first mover advantage

Announce plans to other and don't allow change

Buy season tickets to theaters to force other to go along to not waste money

Change the rules of the game

Come up with new activity that combines both interests

Book recommendations:

How to love your wife