24th December 2012
Economist David Henderson steps back and considers one of modern life’s most ordinary things.
Doing without a microwave reminded me of when and why we got our first one. It was in early 1985. Our daughter Karen was only a few months old. We had been saving for a house in the expensive Monterey peninsula, so we didn’t want to “waste” money on a microwave. But Karen regularly woke us up in the middle of the night to be fed. One of us, usually my wife, had to get up, go into the kitchen, fill a bottle with formula, get some water boiling on the stove, and warm the bottle. After a month or two of this, we decided to get a microwave. It saved valuable time every night and allowed my wife to be less awake while heating the bottle, which made it easier for her to get back to sleep. The microwave, which had seemed like a luxury to us, turned out to be one of the most valuable things we had ever bought.
I remember life without microwaves. It sucked.
Here’s an enlightening exercise: Start looking at the items you own, try to remember what you paid for them, and then think about their role in your life. Once you’ve thought about how they have enhanced your life, ask yourself the maximum amount you would have been willing to pay for them. One obvious item to start with is a smart phone. I would bet your consumer surplus, even after subtracting monthly charges, is at least one thousand dollars a year.
Perhaps you’re someone who doesn’t get large value out of a smart phone. Okay. But what about the value of your indoor plumbing? Think of what you pay for that: say $10,000 or so upfront for a toilet, sink, bathtub, and pipes, most of which last for 15 years or more. Probably less than $100 a month for your water bill. Annual cost: about $1,000. How much would you be willing to pay for indoor plumbing?
I’m one of the few people still around who remembers what it’s like not to have indoor plumbing. I grew up in a small town in midwestern Canada. We didn’t get plumbing until I was seven. Even through Canada’s harsh prairie winters, we had to go to the outdoor “biffy” to take care of our internal “plumbing.” When we got actual indoor plumbing, it felt to us as if we were living at the Ritz. Remembering what it was like to do without plumbing, I would be willing to pay at least $20,000 a year to have it. Now that’s consumer surplus.
We have the technology … Thank God.