Over on the economics blog Marginal Revolution, a reader asked Tyler Cowen how to determine the financial value of his free time. Cowen responds in the post “What’s the value of your time?”
As usual, the correct answer is “it depends,” but here are a few principles:
- Don’t value your time by your implicit wage rate, no matter what your Econ 101 text says. For most jobs you are assigned some lumpy tasks and you don’t control your work hours at the margin as much as you might like to. The key question is whether the overall pattern of your time is an enjoyable one and marginal calculations aren’t always a good way to make that estimation.
- Ask the simple question: at what valuation of my time will I maximize the amount I look forward to each day, defined over the next five years? If your next five years are not so tolerable, reexamine what you are doing and that includes revaluing your time. For instance you might be an irrational workaholic or a lazy bum.
- Look to the economics literature on “golden rule” and “steady-state” path comparisons to address this problem. If need be utter the word “Flow” and try to remember how to spell that guy’s name so you can google it.
- What do you want time for anyway? When is your time ever “free”? If you choose to work more for money, isn’t that time “free” too? Only if your job is a total drudge should you frame the choice this way.
- Focus on defining the experiences you value most, and how to get more of those experiences, and wise money/time choices will flow from that approach.
Increasing or protecting “free” time to pursue what matters most to you is almost everyone’s top priority for an uncluttered life. Cowen’s valuation suggestions — in my opinion, especially two, four, and five — are a good starting point to figuring out this number for yourself.
Have you ever tried to determine the value of your “free” time? What do you think of Cowen’s valuation suggestions? I’m extremely interested in hearing from you in the comments. I find this to be a fascinating exercise.