The Australian Financial Review was good enough to publish an extract from my new book 'The Economics of Just About Everything', which you can read here.
If you like what you see, why not support your local independent bookstore by buying a copy?
AN ECONOMIST'S GUIDE TO ONLINE DATING
What’s a desperate and dateless economist to do? The economics of dating comes down to three simple rules:
1. There is no perfect match, but some matches are definitely better than others.
2. You won’t know how well suited you are to someone until you get to know them.
3. Time is scarce, so a decision based on limited information is probably better than no decision at all.
The challenge of dating is that you don’t have enough information and you don’t have enough time to get it. To give you an idea of just how severe the problem is, let’s imagine that you’re aged 18 to 25, and you’re trying to find the person you’re best suited to in that age range.
To begin, there are about 1.5 million men and 1.5 million women to choose from in Australia. If you picked a sex, and spent only three minutes with each of those people, then it would take 25 years of speed dating to find the person you liked the most. Things are harder still if you want more than three minutes to assess each person, if you’re bisexual, if you want someone older or if you think true love resides overseas.
Fortunately, economic theories are rarely deterred by problems involving large numbers. Better yet, economists are familiar with precisely this kind of problem. It’s called an “optimal-stopping problem”.
The idea of an optimal-stopping problem is simple: you must choose a time to stop in order to get the best outcome. You can choose when to stop. Information is produced by a random process, and each day you get some new information. If you never stop, you get an outcome that isn’t particularly attractive, so at some point, you probably want to stop.
Data for daters
How should you carry out your search? One insight is that just as when buying a house, you should gather as much information as possible. My unscientific poll of economists suggests that most like the idea of speed dating and online dating, since these search techniques offer the potential to garner more information about potential matches.
Because online dating generates large data sets, and economists enjoy analysing large data sets, the two are a natural fit. In general, the research throws up few surprises: men and women have a preference for people who are of similar age, income and education, and of the same race. Among heterosexual couples, women have a stronger preference for high income, while men have a stronger preference for good looks.
Things get more interesting when economists study the behaviour of people who use online dating. About four-fifths of the time, it is men who make the initial contact. Of 100 emails sent by men to women, fewer than four end up in a first date. While some couples agree to meet after just a few emails, it takes on average six emails to get to a first date. Online daters are surprisingly choosy.
Online dating is already changing relationships, with one study finding that a fifth of those who use dating site RSVP ended up getting married. The internet is also making it possible for people who might never have met otherwise to get together. On a flight to the United States a few years ago, I sat next to a Brisbane woman who had worked as a retail assistant. She had met her boyfriend, a helicopter pilot from Houston, on eHarmony. He had earlier flown out to spend a week with her in Australia, and she was now moving to Texas to live with him. A computer algorithm had brought them together.
Internet dating is particularly important for people who are looking for something different. For a young gay man in a small country town, online dating provides a way of meeting potential partners that’s probably safer than the offline alternatives. The same goes for people who are looking for a partner of an unusual race, ethnicity, religion or body size. This helps explain Australian sites such as Two of a Kind (for Jewish couples), Aussie Men (for gay couples) and Mature Match Maker (for older couples).
Online dating isn’t without its risks, since anyone can pretend to be someone they aren’t (as a famous New Yorker cartoon put it: “On the internet, nobody knows you’re a dog”). Anyone using online dating is advised to follow basic rules such as googling the person they are chatting with, not sending money to a person they haven’t met and arranging the first meeting in a public place. But the technology does offer the potential to help join up couples who might never have found one another without the web.
Other studies have analysed speed-dating events, in which groups of men and women meet in a structured setting, and take it in turns to have short conversations. Each person then records whether they would like to exchange contact details (a “proposal”). If both say yes, the organiser provides them with each other’s contact details.
Brains v beauty
One research team analysed the data from a British speed-dating company, whose events attracted an average of 22 men and 22 women. The typical male participant made five proposals while the typical female participant made three proposals. Because women were more selective, one-third of male participants ended the night with no matches, as compared to just one-tenth of female participants. On average, taller men, slimmer women and non-smokers received more proposals. Having children did not affect the number of proposals (though it’s quite possible the topic didn’t arise in most three-minute conversations).
In another study, US economists set up their own speed-dating program, using students at Columbia University in New York. This allowed them to collect data on intelligence (university entrance scores) and attractiveness (based on having independent raters assess photographs).
Not surprisingly, they found that women placed more importance on intelligence, while men placed more importance on beauty. More curiously, they observed that women had a strong preference for partners of their own race, while men did not. (Other studies have found strong racial preferences among both men and women.)
When the sessions had 10 men and 10 women, both men and women proposed to half of those present. When the number of participants was doubled to 20 men and 20 women, men still proposed to half the women, while women became more selective, proposing to around one-third of the men. They explained the finding by quoting a New Yorker cartoon that depicts a group of men and women at opposite ends of a bar. The thought bubble above the men reads “select all”, while the one above the women reads “select none”.
While online dating and speed dating can tell you a bit more about your romantic options, there’s only so much you can learn from emails and a three-minute conversation. To solve the optimal-stopping problem that is modern love, you’ll have to get to know your potential match a little better.
Here’s where things get tricky. In some optimal-stopping problems, information comes along in an instant. For example, if you’re selling a house, you know immediately whether a bid is larger or smaller than the one before it. If you’re fishing, you know the size of each fish as you pull it over the edge of the boat. In other optimal-stopping problems, it’s not immediately obvious whether you’ve found a great match. If you’re job hunting, you won’t really know whether a firm is a good fit until you’ve worked there for a while. And if you’re looking for love, then as singer Tim Minchin has noted, love is not “destined perfection” but an “affection” that “grows over time”.
So here’s the problem when you meet someone: you need to work out whether you like them and they need to work out whether they like you. Then, the longer you spend together, the stronger a bond you’ll form.
Sounds tough, doesn’t it? But the economics of relationships isn’t too dismal. In fact, theory and empirical evidence suggest that love matches may be on the rise. It’s a result that comes from my friends Betsey Stevenson and Justin Wolfers of the University of Michigan – an economics couple who collaborate on research on a variety of topics, including the economics of the family. Stevenson and Wolfers pointed out that a century ago, the norm was for fathers to be the breadwinner, and mothers to be the home-maker. Because both partners specialised, the incentive was to look for someone based on their ability to do something you couldn’t do. That meant young men were looking for a great home-maker, while young women were looking for a great breadwinner.
Today, things have changed considerably. Although remnants of traditional gender roles persist, most mothers these days do some paid work, and most fathers help out around the home. More than ever before, both parents are a combination of breadwinner and home-maker. So today’s 20-somethings are less likely than their grandparents to be looking for someone who has different skills and abilities. Instead, they’re more likely to be looking for someone who can do similar things to them. More than ever before, young people have the freedom to look for a soul mate.
Indeed, the evidence seems to suggest that as incomes rise, people are more likely to be in love.
Gallup survey data for 113 nations asked people whether they experienced love during the previous day. In the poorest nations, about six in 10 people say yes. In the richest countries, the share rises to seven out of 10. While some respondents could have in mind non-romantic affection (for example to a parent or child), it’s possible that the Beatles were wrong: money can buy you love.
This is an edited extract from 'The Economics of Just About Everything', published by Allen & Unwin 2014.