An Exercise in Microwaveconomics
An Exercise in Microwaveconomics
Feb. 20 1998 3:30 AM

An Exercise in Microwaveconomics

Quicker cooking: What's it really worth to you?

(Continued from Page 1)

Value per hour of time spent in the kitchen: Y.


Value of the satisfaction of having given a $100 gift to charity: Z.

Annual value of the satisfaction of owning and operating this amazing instrument: W.

Monetary cost of keeping the microwave for a year: $6.50.

Number of hours per year of release from the kitchen as a result of using the microwave: 14.

The question is whether X minus Y times 14 plus W exceeds $6.50 plus Z. Of course, I can't answer this question, because I can't measure W, X, Y, or Z in dollars or any other quantity that is common to them all.

(I leave out the further complication of the cost of electricity for the microwave compared with the cost of gas for the oven. I live in an apartment building where most of these costs are borne by about 200 other families, just as I share in their costs. That is what economists call an "externality.")

Nevertheless, despite all these imponderables, I do make a decision. I decide to keep and use the microwave. In the end, if you ask me why I bought a microwave, why I keep it and why I use it, I can't give a better answer than "I like it."

This is, of course, an exceedingly trivial case of decision-making. But much of life is like that--personal life, business life, government life. Perhaps it is most like that in government. We cannot compare the incomparables and weigh the imponderables. We do what we like, and when we stop liking it, we change.

As an economist I am bound to insist that economics has its value. There are cases, especially in business, where costs and benefits can be measured in the same units--dollars--and directly compared. Even where that is not true, the differences between costs and benefits may be so large that fine calculations are unnecessary. Anyway, the habit of trying to compare costs and benefits is useful, if one does not insist on trying to apply it where it doesn't work. After all, it was an economist (J.M. Clark) who warned against an irrational passion for dispassionate rationality.

Herbert Stein, a senior fellow at the American Enterprise Institute, was chairman of the Council of Economic Advisers under Presidents Nixon and Ford. He is a member of the board of contributors at the Wall Street Journal.