In the study of psychology, there is a methodology called behaviorism, which concerns itself over the behavior of humans and animals and allows for behavior to be predicted, given certain conditions. This has a lot of functions in economics, as, after all, economics is essentially the study of how individuals, groups, and organizations behave when given scarce resources in a market. Indeed, in the field of behavioral economics, psychology and microeconomic theory are combined to study how decisions are made by economic agents. Economic theory, then, is the sum of a number of assumptions about human behavior in a market on a large scale and is inextricably linked to psychology. Yet, what are these fundamental assumptions and what are they based upon?

The first and most basic assumption that economics relies upon is that humans assign varying degrees of value to goods and service and thus desire things of higher value. Though this is not the case if you’re a monk who relinquishes all attachments, in general, humans are assumed to be desiring beings. The prime motivation for any human is first the fulfillment of its needs then the acquisition of objects of value. Economics refers to this as demand and has developed a model that explains varying degrees of value in indifference curves, measuring an object or services value in terms of utility. As desiring beings, humans want what they do not have and the more they have of something, the less it is valued, which is expressed by the concept of marginal utility.

The second assumption is that humans want to maximize their value while reducing their costs. If successful, this is called profit. However, in any economic transaction, both buyer and seller are trying to profit the most, and so a middleground is found where both profit equally, which in economics is called an equilibrium. Economics measures how much each side profited with consumer and producer surplus. This second assumption is extremely important to psychology, especially in the practice of conditioning. The goal of operant conditioning is to manipulate value and cost in order to influence behavior. Positive reinforcement represents giving a desired value, which can be seen as profit, while negative reinforcement represents the removal of something of negative value, which can be seen as the removal of a cost. Positive and negative punishment work in this same way, as they either introduce a cost or remove value.

One can view that the majority of human behavior, at least, in a Western capitalist culture, is the result of applied economic concepts. Though not a proponent of capitalism, Marx based his theories on the assumption that economics was the root of human behavior and society. The practical uses of economic thought are many, yet, they nonetheless rely on the assumption that humans are rational beings. Often, the difference between theory and reality is a result of the failing of this assumption. While there are many predictable elements to human behavior that economics keys in on, there are always rogue elements that prove theory wrong. One might refer to this rogue element as free will or perhaps is the result of one party making an uninformed decision that proves unprofitable. For example, in the ultimatum game where two players must split a dollar bill, 50:50 seems a logical equilibrium but one player can demand more of the share or else refuse to trade, which rewards neither player. If one player is forced into a situation where their opponent receives 99 and they receive 1, the penny matters little to them, so they can refuse the deal and give their opponent nothing simply out of spite, when theoretically they should take whatever value is offered.

It is important to note that the range of these probabilities is somewhat limited because every economic transaction represents an agreement of two parties acting in self-interest. This variability is modeled well by supply and demand curves, which show that, even at the highest price, there might be a consumer willing to pay much more than the good is worth at equilibrium. Even then, it is difficult to predict and control an economy when human behavior often defies theory. Thus, when the assumption that humans are rational beings proves to be false on a grand scale, the dire results, to name a few, include bankruptcy, economic crisis, recession, inflation, and so on.

Before the 20th century, when a majority of Americans relied on agricultural as their primary economic resource, having a 3 month period where a family’s children could work in the fields during the summer then get an education for the remaining 9 months of the year made quite a great deal of sense.Now, though, in the 21st century with a vastly different economy and set of standard occupations, the reasons to have summer vacation are few. While they do allow families to spend more time together, many young people end up spending most of time in summer on fruitless leisure. This is most likely because the opportunity cost of leisure is so low; in my mind, there is little expectation that this time be used productively, thus, this lack of expectation means both a limited supply and demand of productive activities. I know that I’ve thrown away countless hours in summer and gotten very little utility out of them. Now though, I’ve reached the age where the opportunity cost of leisure is high enough and the utility gained from leisure is so low that finding a job becomes almost necessary.

This then raises demand for activity that has a higher utility and lower opportunity cost. For me, these activities have included volunteer work, a summer program at Carleton, and accounting work for my father’s small business. The last probably had the highest utility, as I was earning a wage and making money of my own, which gave me a lot of utility in the form of self-sufficiency and materials. As I think towards this coming summer, I am finding the supply in the job market not up to demand. The 3 month vacation lowers the supply of jobs, as businesses are hesitant to make short-term investments in employees, thus making it inefficient for both students and businesses. While there is a certain amount elasticity, as I have a few options that I am considering, their utility varies. My goal was to get hired by the Vista Fleet in my hometown of Duluth as a tour guide entertainer. Not only does it offer a decent fixed wage but also the possibility of earning tips, along with the opportunity to practice my public speaking and theater skills. While I already have experience in accounting, the value gained from starting a new job with a higher utility makes the change very worth it. I have yet to hear from them, which likely means that supply for that position is low, while the job supply at my father’s small business, despite being higher than my demand, is available.

These two represent the job options in Duluth, which are fairly inelastic. However, elasticity is higher outside of my hometown, as I have the option to work here at Carleton, at a vineyard in Washington, or in a hotel along the North Shore. These options, though, carry a very high opportunity cost involved with travel, room, board, and living away from family. They do offer a variety of new experiences, but whether the subsequent utility gained is worth the price is up for debate. Breakdown of the top three highest utility options:

Tour Entertainer: Living in Duluth (+utility, +room&board), wage ($10/hr + x tips), experience

Accounting : Living in Duluth (+ utility, +room&board), wage ( $10/hr)

Hotel: Outside of Duluth (-utility, -room&board), far from family (+travel cost), wage

As I’ve been attempting to think more economically in my decision-making, I’ve started to analyze the opportunity costs and prospective utility for each of my options. Whereas beforehand, I might have taken the options of highest availability and least resistance, now the effort in seeking new time investments is of higher value to me.

We’ve all heard of it. It’s what worries our parents, shocks the prude, and mystifies high-school students: the controversial college hookup culture, young people throwing commitment and caution to the wind to casually engage with one another in what used to have reserved to relationships. Yet, as this article in the NYtimes discusses, the recent “rise” of hookup culture has been the result of economic forces. Some researchers argue that, since “women now outnumber men in college enrollment by 4 to 3,” it creates a gender imbalance that gives men more power in the sexual marketplace, which could be represented by a supply & demand graph with fewer sellers than buyers, the supply of men being less elastic, and that if men prefer casual sex to long-term relationships, hooking up will become more common.

However, the real reason is much more practical. The premise is simple: time in college is a highly-limited and valuable resource. As much as students want and try to do everything, their supply of time eventually has to run out. Thus, students have to make calculated choices when it comes to allocating this precious resource. When it comes to dating then, many are finding that the opportunity cost of committing to a relationship is simply too high, saying things like “a relationship is like taking a four-credit class” or “I could get in a relationship, or I could finish my film. ” It’s just yet another factor that contributes to one’s daily stresses and can keep one from their ambitions; when applying to internships, writing essays, organizing clubs, playing sports, rehearsing, etc., few have the spare hours in their day to sleep, much less to invest time in establishing and maintaining a relationship. Indeed, relationships are seen as investments and as one women put it “we are very aware of cost-benefit issues and trading up and trading down, so no one wants to be too tied to someone that, you know, may not be the person they want to be with in a couple of months.” When forced to choose between a romantic interest and one’s future career, self-development, and success, few will opt for a relationship, especially in college, where one’s investments of time and effort yield a much higher utility than any other period in one’s life.

Instead, “hooking up,” an ambiguous term that can mean any number of things, though always signifying low-commitment encounters that allow otherwise busy students to enjoy what they’d be missing without a relationship, has become the answer for many students. In economic terms, hooking up costs less time, has a lower opportunity cost, and has a more elastic supply, since one is not limited to any one partner, compared to an inelastic supply curve for a relationship. It’s not that young people are upending societal conventions as some might claim, it’s just that they are becoming more calculated and practical when making choices about time management. They’re thinking economically.