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.)