Shopping for Soulmates

One of the fun parts about learning economics is realizing how broadly it can be applied. Once you understand the basic logic of scarcity, opportunity cost, and the rest of the economic way of thinking, all kinds of social phenomena are open to explanation.

Including relationships.

The economic way of thinking might explain some recent changes in how people find their way into romantic relationships. These changes affect marriage, divorce, and infidelity.

The key to the story is the idea of transaction costs. These are the costs of engaging in an exchange, from finding a trading partner, to negotiating a price or other elements of a contract, to ensuring that all parties abide by its terms. When transaction costs are low, people find it easier to engage in mutually beneficial exchanges. And when more of these exchanges take place, people benefit more.

One way of viewing the progress of the Western world is that, through a variety of institutional innovations, we have continually reduced transaction costs. These reductions have made exchange far easier and more common, making it simpler for people to increase their wealth.

In both romance and the marketplace, the other party has to have what you want and want what you have.

The discovery of language and the emergence of institutions like property, money, and the law are part of this process, as are the invention of modern banking and technological innovations in communication. Think of how the Internet and sites like eBay have made it so much easier to find trading partners.

Innovation has also made it easier to find a specific kind of “trading partner” — the romantic kind. And we can apply some basic economics to our thinking about finding a romantic match. 

People expend resources to look for Mr. or Ms. Right (or Right Now). For people to decide they have found a match, two things have to be true. First, the other person must m…