Unwitting mental time accountants
Are we better at making good use of our time than at making good use of our money?
What is an hour worth to you? If you are in work, a reasonable approximation would be your equivalent hourly wage. After all, that is what you are willing to go to work for. Failing that, let’s take the median hourly wage — just under £14.50 before tax (about $18 or €15) in the UK.
If I asked you to take part in an experiment, which would need one hour of your time, would you do it if I paid you that amount of money? Perhaps. But what if my experiment would require you to spend this time at a moment of my choosing? It could be in the middle of the night, during a day out with the family, or 59 minutes before you have to catch a train (so you will be 1 minute late and miss it). You would probably want more than the standard rate, in those cases.
The value of your time (and that of everyone else) is clearly not uniform. Overtime (as well as work during weekends and nights) tends to be paid at a higher rate than comparable work during ‘normal’ hours. Extra hours come out of your spare time, and that carries a higher price tag. Likewise, people demand more money if they have to work when they could be socializing or sleeping.
A play with money
Time is money, they say, but in this respect, they are quite different. Money is entirely fungible: a pound, a euro or a dollar has the same value, irrespective of where it comes from, or in which bank account it sits. There is, as we saw, a good case for mental accounting with time — treating a minute of work time differently from a minute of leisure time, or a minute of sleep. Yet with money, we do just as much mental accounting — we put it in imaginary jars, and are reluctant to move it from one to the other.
In one of their famous papers, Daniel Kahneman and Amos Tversky describe an experiment in which they give the subjects one of the following two vignettes:
- Imagine that you have decided to see a play and paid the admission price of $10 per ticket. As you enter the theatre, you discover that you have lost the ticket. The seat was not marked, and the ticket cannot be recovered. Would you pay $10 for another ticket?