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> And since the opportunity cost of time of richer folks is lower, not to mention that they're more likely to be socially connected, they end up displacing poor

> And since the opportunity cost of time of richer folks is lower, not to mention that they're more likely to be socially connected, they end up displacing poorer consumers Your conclusion is correct, but this should say "since the opportunity cost of time for richer folks is higher". People who earn more have a higher opportunity cost of time, which means (all things equal) that they will have fewer children and choose residences with lower commute times than those who make less money.

tpeo 10y ago
I'm sorry to say it, but you're mistaken. The opportunity cost of time is decreasing over income, since the marginal utility of income is also decreasing, and these things should be equal in equilibrium. It seems somewhat counter-intuitive, because the high income worker might be much more highly paid than a low income worker, and thus gives up much more in monetary terms than the low income worker. But the value of an additional dollar isn't the same for these two workers, since it's also a function of their present income. An hour work missed could mean a low income worker this week's lunch or his kid's medicine, whereas for a high income worker it often means just a little less money in his savings account. I won't touch the issue of having children, because I don't think anyone has quite yet successfully tackled human reproduction. But when it comes to commuting, all workers in an would be interested in reducing their commutes. Richer workers can afford higher rents because their wages are higher. But that still doesn't mean that their marginal utility of income is higher than thay of lower paid workers. It's somewhat unintuitive, because often people go through Econ 101 without trying to understand what a decreasing marginal utility of income means. But in Urban Economics, the falling opportunity cost of time is the mechanism which allows cities to form, first from cottage industries, as the agricultural productivity grows. So it's a standard argument. The whole overall effect is that queues benefit the richer among the eligible for whatever they're queueing for.
- chimeracoder 10y ago
  > The opportunity cost of time is decreasing over income, since the marginal utility of income is also decreasing, and these things should be equal in equilibrium. In a two-good, work-leisure market, the opportunity cost of non-work time is the foregone income. It's not (just) equal at equilibrium; it's equal by definition. The two things that are equal at equilibrium (and only at equilibrium) are the marginal utility of the income and the opportunity cost of working (that is, the marginal value of an extra unit of non-work time). That's not the opportunity cost of the non-work time, which is what we're talking about when we refer to the opportunity cost of time. > But the value of an additional dollar isn't the same for these two workers, since it's also a function of their present income. You're confusing the marginal utility with the opportunity cost. There's a function that relates these two concepts, yes, but they're not the same thing, as you can see here: > Richer workers can afford higher rents because their wages are higher. But that still doesn't mean that their marginal utility of income is higher than thay of lower paid workers. Nobody said that the marginal utility of income for the higher-paid workers is greater than the marginal utility of income for lower-paid workers. In fact, that's a comparison that can't really be made - utility is explicitly not comparable between two individuals (that's a fairly fundamental axiom of microeconomics). We can say that, as an individual's income increases, the marginal impact of further increases in income decreases, but the comparison you're trying to imply here is a value judgment between two individuals. However, we can say that the opportunity cost is higher for the higher-paid workers, because that is something that is comparable across individuals - it's dollar-denominated. The opportunity cost of non-work time for both sets of workers is the foregone income, and that will be higher for higher-paid workers (by definition). That does not diminish the importance of what either set of worker might choose to do with an additional $50 (or any fixed lump sum of money), but that's a value judgment and is not the same as the opportunity cost of the work-leisure trade-off (which is an objective measure). > I won't touch the issue of having children, because I don't think anyone has quite yet successfully tackled human reproduction. It's pretty well-established that children are inferior goods (in the economic sense - the income-elasticity of demand is less than zero). > It's somewhat unintuitive, because often people go through Econ 101 without trying to understand what a decreasing marginal utility of income means I have a degree in economics. I know how diminishing marginal utility works.

tpeo 10y ago

I'm sorry to say it, but you're mistaken. The opportunity cost of time is decreasing over income, since the marginal utility of income is also decreasing, and these things should be equal in equilibrium. It seems somewhat counter-intuitive, because the high income worker might be much more highly paid than a low income worker, and thus gives up much more in monetary terms than the low income worker. But the value of an additional dollar isn't the same for these two workers, since it's also a function of their present income. An hour work missed could mean a low income worker this week's lunch or his kid's medicine, whereas for a high income worker it often means just a little less money in his savings account. I won't touch the issue of having children, because I don't think anyone has quite yet successfully tackled human reproduction. But when it comes to commuting, all workers in an would be interested in reducing their commutes. Richer workers can afford higher rents because their wages are higher. But that still doesn't mean that their marginal utility of income is higher than thay of lower paid workers. It's somewhat unintuitive, because often people go through Econ 101 without trying to understand what a decreasing marginal utility of income means. But in Urban Economics, the falling opportunity cost of time is the mechanism which allows cities to form, first from cottage industries, as the agricultural productivity grows. So it's a standard argument. The whole overall effect is that queues benefit the richer among the eligible for whatever they're queueing for.

chimeracoder 10y ago
> The opportunity cost of time is decreasing over income, since the marginal utility of income is also decreasing, and these things should be equal in equilibrium. In a two-good, work-leisure market, the opportunity cost of non-work time is the foregone income. It's not (just) equal at equilibrium; it's equal by definition. The two things that are equal at equilibrium (and only at equilibrium) are the marginal utility of the income and the opportunity cost of working (that is, the marginal value of an extra unit of non-work time). That's not the opportunity cost of the non-work time, which is what we're talking about when we refer to the opportunity cost of time. > But the value of an additional dollar isn't the same for these two workers, since it's also a function of their present income. You're confusing the marginal utility with the opportunity cost. There's a function that relates these two concepts, yes, but they're not the same thing, as you can see here: > Richer workers can afford higher rents because their wages are higher. But that still doesn't mean that their marginal utility of income is higher than thay of lower paid workers. Nobody said that the marginal utility of income for the higher-paid workers is greater than the marginal utility of income for lower-paid workers. In fact, that's a comparison that can't really be made - utility is explicitly not comparable between two individuals (that's a fairly fundamental axiom of microeconomics). We can say that, as an individual's income increases, the marginal impact of further increases in income decreases, but the comparison you're trying to imply here is a value judgment between two individuals. However, we can say that the opportunity cost is higher for the higher-paid workers, because that is something that is comparable across individuals - it's dollar-denominated. The opportunity cost of non-work time for both sets of workers is the foregone income, and that will be higher for higher-paid workers (by definition). That does not diminish the importance of what either set of worker might choose to do with an additional $50 (or any fixed lump sum of money), but that's a value judgment and is not the same as the opportunity cost of the work-leisure trade-off (which is an objective measure). > I won't touch the issue of having children, because I don't think anyone has quite yet successfully tackled human reproduction. It's pretty well-established that children are inferior goods (in the economic sense - the income-elasticity of demand is less than zero). > It's somewhat unintuitive, because often people go through Econ 101 without trying to understand what a decreasing marginal utility of income means I have a degree in economics. I know how diminishing marginal utility works.