Monday, May 6, 2013

Beware false economy

A classic “false economy” is when you get something cheap that turns out to cost more than you thought – a car that breaks down all the time, shoes that fall apart quickly.  But cheap things can cost you not only money, but also time and the goodwill of others.

As a teenager I was suspicious of adults because they seemed less idealistic than young people. I didn't want to become like them. But now I see that it wasn't just that people become more selfish as they age, but also that they have a better understanding of false economies. Some sacrifices that seem noble to adolescents are recognized by adults as wasteful.

I was talking to a friend who gives away a lot of his money but who bit the bullet and got himself a good suit.  He realized that there were circumstances where he needed to talk to important people about these ideas, and having a good suit was part of being credible. Part of him resisted spending the money, but there are times when spending money lets you do a lot more good than donating it.

Saving money may be a false economy if it costs you time.  If you would be doing something worthwhile with the saved time, it may be better to take faster, more expensive methods of transit.   (If you wouldn't be doing anything worthwhile with your time, maybe you should find something.)  An easy-to-use phone and laptop are another good investment. 

Look out for "savings" that tax your relationships with other people. I spent a summer as a houseguest at a stage when I was very concerned about the fuel it takes to heat water, and the family I was staying with found it bizarre that I wanted to wash the dishes in cold water. I should have just done things their way to avoid the conflict – maintaining good relationships probably allow you to do more good than saving a bit of fuel or whatever you're trying to avoid.

I tell myself all this, but I still find false economies hard to avoid.  (Years of skinflintery are hard to overcome!)  I keep telling myself I'm going to spend some money and get decent versions of things I use all the time, like socks and pens. Then I succumb to finding the cheapest ones and usually end up dissatisfied. I think I need to set some kind of price floor before looking. Or maybe have a rule that I can only buy ones I wouldn't be embarrassed to give to a friend.


  1. Great points.

    Personally, I'm more susceptible to "false economy" with my time. I'm working on learning:

    "If it's worth doing, it's worth doing well."

  2. I find I navigate these sorts of tradeoffs poorly when they're hidden, and better when they're explicit. Using cold water to wash dishes is the sort of mistake that only happens if you don't know how much hot water actually costs. And for things like socks and pens (and most miscellaneous small purchases, really), this makes shopping online work much better than shopping in stores: there are enough reviews to make any price/quality tradeoffs clear. A minimum number of stars works better than a price floor; and if you're tempted to ignore something's low rating, you can read reviews to find out what specifically is wrong with it, and determine whether that's okay or not. The correlations between price and quality tend to be surprisingly weak anyways; it's fairly often the case that the best-reviewed item is also one of the cheaper ones.

    The noteworthy exceptions are very-large purchases, where the transaction should be a research project; clothing, where you can get very cheap stuff but only if you're willing to spend a lot of time sorting through things that don't fit; and hard-to-ship things that tend to show up on used-goods markets that don't clear (such as furniture and dishes).

  3. Actually the "cost" of hot water is complicated if you consider the environmental as well as economic costs. But even there you need to learn about how your hot water is produced. Where I live, most hot-water tanks (including mine) are electric, and nearly all electricity here is produced by hydropower, so the environmental impact of using hot water is negligible. In fact the environmental and economic advantages of using a dishwashing machine (which is more energy- and water-efficient than washing by hand) tend to disappear when you're using cheap renewable-supplied energy.

    Getting back to the main point, though, I agree that it's good to be mindful of false economies. It's worth thinking through the life cycle of stuff to help determine the larger costs of buying cheap stuff that you need to replace more often. For many years, almost all the clothing I owned was made by Patagonia, because their clothes are built to last and have a lifetime guarantee. And they honor that guarantee: I've sent back a number of items for repairs over the years; they've replaced zippers, snaps, and fixed tears for free. It cost me a lot more than I would have paid otherwise, and less of my old clothing ends up in a landfill or recycling bin.

    Another good strategy is to look for high-quality secondhand clothes, which have even lower environmental impact since you're reusing them. The drawback there is the time cost of having to go to stores and hunt through the racks.

    1. Oops, instead of "It cost me a lot more than I would have paid otherwise, and less of my old clothing ends up in a landfill or recycling bin" I meant "Buying those clothes cost me a lot more than I would have paid for cheap clothing, but less of my old clothing ends up in a landfill or recycling bin, and it lasts longer."

      I actually still own some Patagonia clothing that I bought in the 1980s; still nearly good as new and it looks great.

  4. David: Then the trick is remembering not to do things that aren't worth doing. :)

    Brad: Sounds like you have a good method! I find that the buy-incredibly-long-lived-clothes method doesn't work for me, because I tend to change my mind about what I want to wear. Thrift stores do work for me, though they probably eat more time than I should give them.

    With the water, I was living in a coal-powered state at the time, so the fuel I was burning actually was about as bad as it could be. But it probably wasn't the most important thing I should have been considering.