OP-EDS

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March 9, 2004

The economics of meat markets: addressing the question of efficiency

This column was inspired by two women, one of whom I know well, the other, well, not so well. Starting with the latter, Viewpoints columnist Persis Elavia has enlightened us on the "ethics" of dating for the past year or so. This is all very fine and good, but I realized that I'd be remiss in my duty as a U of C student if I didn't say, "But wait, isn't there any way we can look at relationships from a market perspective?" Of course we can! This is Chicago, for Friedman's sake, where it is our moral obligation to believe in the efficiency and warm and fuzzy goodness of free markets for everything, including relationships.

Which is what brings me to my other source of inspiration, and the topic of our discussion. This first girl, well, she's a great girl. She's strikingly attractive, dresses well, is articulate, intelligent, opinionated, out-going—the list goes on. In short, she's what your mom would call "a real catch." Problem was, or more accurately is, she had been dating the same guy for the last year-and-half. She broke up with him about three weeks ago. She's then with a new guy faster than you can say "Slutsky equation" four times fast. And she's just one example. Ever notice how the most overall attractive (the max of some utility function mapping the trade-off between physical attributes and personality) girls on campus all either already have boyfriends here or are in some long-distance relationship with a high school sweetheart? Yeah you have! So what's going on here?

I'd be willing to make what economists might call an "efficient markets" argument, specifically in the case that the meat markets are efficient. In its crudest form, the argument for market efficiency claims that "there ain't no such thing as a free lunch," or that if markets are truly efficient, assuming agents are behaving rationally, then arbitrage opportunities are nonexistent. In other words, efficient markets imply that every good on the market is fairly priced, i.e. that its true value perfectly reflects the actual price at which it's being traded. This, in turn, means that there tends to be very little opportunity for agents to exploit and profit on discrepancies between price and value. If it's still unclear or you desire more intricacies of market efficiency, ask your friendly neighborhood econ major. But how does this relate to the craziness described above?

Well, I'm inclined to say that said craziness just shows how efficient the markets for relationship-eligible women are (at least on this campus). Think of that hot U of C girl (an oxymoron, perhaps?) in your Hum class as a potential, er, profit opportunity, as in by being with her you could derive some sort of benefit, be it intangible or otherwise. Let's say she has a decent personality, too. But before you read Maxim for tips on how to pick up hotties, consider this: 1) Is this girl "available," or, in the terms of our argument, is she on the market? Or would she even go for a guy like you—are you "in her league"? In market efficiency terms, what are the "transaction costs" associated with asking her out? Dating her? 2) Assuming that she's on the market and transaction costs are not sufficiently high, why doesn't she have a boyfriend? Does she have STDs? A criminal or psychological record? The questions can go on, but the point is: what sorts of risks are associated with this girl? How does her "risk/return profile" look? Maybe she's really, really hot, but maybe she's completely out of her mind and a cokehead that will steal all your money. Maybe you like that sort of thing, but since we're assuming you're rational, you probably don't. Suffice it to say, dating a girl like that could be considered risky business.

Ultimately, the catch is that the catches will be caught, thereby driving up their "price" so as to reflect their catchiness (or "value"). The price is, of course, a function of the amount of time that when single, she will remain single, all other things equal (in essence, the "demand" for her will determine the time she'll stay single). Another way to think of it is to imagine it as the marginal cost over the period during which she is single for any guy to end up dating her. The more guys that want to date her, the greater the cost will be for each of those guys to potentially end up with her. In short, her price will accurately reflect some information about her desirability. For instance, how do you explain: the token hot, Max P first-year that's with a different guy every weekend? High potential return, but compensated by high risk. There's no "deal" to be made there. She's fairly priced. The quiet but very pretty girl in your Civ class? She's not on the market, and you can't profit on something you can't invest in. And that super-cute but kinda snobby sorority girl you see in Bartlett? High potential return, but she only goes for the GSB second-years. Translation: she's on a market, but not any markets you can afford to trade in! It sounds like crazy-speak, I know, but it works!

In sum, here at the good freemarket-wheelin' U of C, even the meat markets are efficient. And as a rational agent just trying to find a buyer for my slab, that brings a tear to my eye and a blush to my cheek.