The Economics of Time
Time: The Ultimate Scarce Resource
Why time is the scarcest resource of all, how Gary Becker brought time into economics, and why every choice has a time cost.
Everyone gets exactly 24 hours a day. You can earn more money, but you cannot make more time.
Time as a cost
Every activity uses time that could be spent elsewhere. The opportunity cost of an hour is the value of the best alternative use.
Becker’s insight
Economist Gary Becker, in a 1965 paper “A Theory of the Allocation of Time”, argued that households produce things like meals, clean homes and childcare using both goods and time.
- A home-cooked meal uses groceries and hours of cooking.
- A restaurant meal uses more money but less time.
Why it matters
- As wages rise, time becomes more valuable, since each hour could earn more.
- People with higher incomes often buy time-saving goods and services.
Time and prices
The full price of something includes its money price plus the value of time spent getting and using it. A cheap product that requires long travel or waiting may be costlier overall.
Rice at a wholesale market costs 5 rupees less per kilo, but getting there takes three hours. For a worker whose time is worth 200 rupees an hour, the "cheap" rice is actually expensive.
The full price includes the value of time spent.
- Time is limited to 24 hours a day for everyone.
- Every activity has a time opportunity cost.
- Becker showed households produce using goods and time.
- Rising wages make time more valuable.
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