10 Lessons from an Economist on Love

Now, you might think that love is an area best reserved for the philosophers, psychologists and biologists. William Nicolson begs to differ. Instead try using the cool, rational tools of economics to get yourself a whopping return on your investments in the market for relationships, starting with these 10 rules:

1. Restrict your supply, but only once you’ve differentiated your product

Rule 1 of any Economics textbook or dating manual is always going to be play hard to get (restrict your supply) to increase your price. You need to be expensive because people don’t want to get with someone who is obtainable by just about anyone — we want to feel that we have earned exclusive access to our lover’s affections. But don’t go playing it cool from the off — they won’t know that you’re worth the extra cost until you’ve differentiated yourself from who else is on the market.

2. Incur type-revealing costs if you want to show her that you’re a nice guy

A big problem for nice guys in the early days is they’ll do and say almost exactly the same things as jerks, only they’ll do or say it because they like the girl, while the jerk will do it because they want to sleep with them. How can the nice guy differentiate himself without going overboard (see Rule 1)? He needs to do something a jerk would not be willing to do: wait. Jerks discount future pay-offs more than nice guys, and so if the nice guy deliberately inhibits his chances of getting action quickly (such as going for lunch rather than dinner), he’ll let the girl know he’s into her for real.

3. When evaluating your relationship, ignore sunk costs and think about opportunity costs

This may sound pretty brutal, but don’t dwell on the great times you’ve had with someone when deciding whether to carry on a relationship. It’s never “a waste” to end a relationship because you once were happy. You need to think about how many good times there are to come, or whether better times could be had elsewhere. Sorry, just being rational.

4. If they seem too good to be true, they probably are

Has the most amazingly beautiful, clever, funny, single person ever come up to you in a bar and asked you out for dinner? The chances are that this hasn’t happened to you, as someone else will probably have already beaten you to that person. In a market for relationships, where many parties have access to the same information about the “assets” being traded, good deals don’t stick around for long — so if someone’s single, they’re probably single for a reason.

5. Think about your risk preferences before investing in a relationship

If you ask me, one of the key selling points of being in any relationship is security. You know whom you’re going home with at the end of the night, and you’ve always got someone to turn to when things go pear-shaped. In other words, you get a steady, risk-free investment — a bit like putting your cash in the bank. But perhaps you actually prefer volatility, with uncertain periods of drought punctuated with big one-off pay-offs from one-night stands. If that’s the case, it might not be time to hang up your stock-trading jacket just yet.

6. Playing the field? Diversify your portfolio

Never been much of a player myself, but if I were to do it, I would take the fund manager approach: take on different levels of risk with each girl by coming on strong with some and more conservatively with others. If you get burnt on the risky trades, you’ll still have your safe-harbors keeping you afloat. Smooth (returns).

7. You can get a better return on your investment by sacrificing liquidity

Because people like to stay flexible with their money (i.e. to keep it liquid), they are compensated with better returns when they tie it up for longer periods of time. The same goes for relationships: be prepared to give up some of your freedoms and you will be richly rewarded.

8. Self-deprecation is a signal to the market that you have strong fundamentals

By showing willingness to talk your own abilities down, you are in fact showing that you have plenty of ability to spare. Arrogant people, on the other hand, don’t have sufficient ability to withstand the cost of self-deprecation. So that’s how Hugh Grant does it.

9. Pack your calendar to boost your bargaining power

We tend to get our way with something when we have lots of other potential options: if you go shopping in a market, you can usually haggle someone down by saying you’ll go to the next door stall. Similarly, in a relationship if you feel like you’re getting a rough deal, make yourself as busy as possible. If you can show them you’re perfectly happy without them, you’ll soon be getting your way.

10. Find an undervalued asset

If you’re not having much luck pursuing the most attractive people around, you’ll actually be much better off seeking out those who don’t get so much attention — sacrifice looks for quality of personality. Looks depreciate over time, and so tend to be overvalued in the short-run. Warmth and kindness, on the other hand, are just the opposite.

William Nicolson is the author of The Romantic Economist.