In “Measuring the Values for Time,” a new paper that’s been released by the NBER, Ray­mond Palmquist, Daniel Pha­neuf, and Kerry Smith argue, pace Ben Franklin, that time is not money, at least not in the neat way econ­o­mists like to assume.

In stan­dard eco­nomic accounts, leisure (i.e. non-​work) time is described in terms of oppor­tu­nity cost: the value of some chunk of time is simply equal to the money you would have received had you worked during that time. Under this model, you can, should you care to, figure out the mon­e­tary value of an hour with a simple for­mula used by Ian Walker at War­wick University:

V=(W((100-t)/100))/C

(In the equa­tion V is the value of an hour, W is your hourly wage, t is your income tax rate, and C is a coef­fi­cient of cost of living, which is only impor­tant if you want to com­pare people from dif­fer­ent areas.)

But Palmquist, et al. argue that the value of non-​work time is not so simply fig­ured. They argue that the qual­ity, and not just the quan­tity, of the time mat­ters: specif­i­cally, valu­ing time requires that we con­sider how we divide up our time between house­hold main­te­nance tasks and leisure. In their words:

the shadow value of dif­fer­ent blocks of leisure time will depend on their size (i.e., the amount of time that must be “assem­bled”). For a given indi­vid­ual these choices can result in dif­fer­ing mar­ginal values of time for leisure activ­i­ties of dif­fer­ent lengths…. The fre­quency and timing of the non-​market activ­i­ties matter and short-​run time con­straints and the pro­duc­tion tech­nol­ogy imply a shadow value of time (and hence oppor­tu­nity cost of the non-​market output) that need not be equal to the wage rate nor constant.

In this new model, fig­ur­ing the value of time becomes some­what more complicated:

Forget the sym­bols: the upshot is that leisure is worth more—i.e. it gets more expensive—the longer it goes on. (The authors also offer this, which might explain why every vaca­tion feels like it needs another: “Larger blocks of recre­ation time are pro­por­tion­ally more useful in pro­duc­ing recreation.”)

Dis­cus­sions like this usu­ally sound crass at best, espe­cially when con­sid­ered on an indi­vid­ual scale. Why do econ­o­mists care about them? Because work like this could help solve a prob­lem that has long plagued econ­o­mists: how to fix the bal­ance sheets that account for national income and pro­duc­tiv­ity so that they will reflect unpaid house­hold work. Why do I care? Let’s just say that the rela­tion­ship between time and money seems depress­ingly rel­e­vant these days…

(Thanks to Haiku Notjso for bring­ing this to my attention.)