The Right Question Is How Much Time Does It Cost?

Seven reasons why time provides a much better way to measure than money.

One of the reasons we love money is that it makes trading easier. Everyone will take money in a trade. Much harder to trade for shoes or bread or economics lessons. Pricing things in dollars and cents gives us a quick way to calculate how products relate to each other. But money has a fundamental problem: it can be created at will or arbitrarily by governments, making it an unreliable measurement tool. Imagine if governments could change the speed of light or the value of pi due to political pressure from lobbyists. In 1897 a politician from Indiana proposed setting pi equal to 3.2 to make life simpler for youngsters doing geometry. His bill made it through the Indiana State House before being stopped in the Senate by a Purdue mathematician.

Is there a better way than money to measure? Yes there is. Since we buy things with money but we pay for them with our time there are really two ways to think about prices: money prices, expressed in dollars and cents, and time prices expressed in hours and minutes. We can transform a money price into a time price by dividing the money price by hourly income.

For example, if a pizza costs $20 and we’re earning $20 an hour then the pizza costs us 1 hour, or 60 minutes of our time. If, a year later, the price increases to $22 but our income has increased to $24 an hour the time price is now .92 hours, or 55 minutes. The time price has decreased by 5 minutes, or 8.3 percent ([55 ÷ 60] - 1 = -.083 = -8.3%). Another way to look at this change is how much pizza you now get for one hour of your time. In this case you get 9.1 percent more pizza today for the time it took to get one pizza last year ([60 ÷ 55] - 1 = .091 = 9.1%). Your personal pizza abundance has increased by 9.1 percent.

It is the change in the time price over time that reveals if life is becoming more or less abundant. There are seven reasons why time is better than money for measuring things:

1. Innovation shows up in lower prices and higher wages. Time prices capture these changes because they provide a ratio of the two variables.

2. Time prices transcend the contention and subjectivity of the Consumer Price Index (CPI). The CPI tells us if something has become more or less expensive, but time prices tell us if they have become more or less affordable.

3. It’s possible to calculate a time price on any product, at any time in history, in any place, and with any currency. With this tool we can compare the time price of bread from 1850 Paris with that sold in present-day New York City, or indeed from any other time and place for which prices and wages are known.

4. Time is a universal measurement. Six of the seven units of measurement we use in science are based on time. That’s why time is the constant of constants. Using time as the standard instead of money to measure allows economics to be like the rest of science

5. Unlike money, time cannot be counterfeited or inflated.

6. Time provides perfect equality because we all get exactly the same amount; 24 hours in a day.

7. You can’t buy or sell time. If you could rich people would never die.

These seven reasons show why time prices are the true prices.

Please consider enjoying our new course on the Economics of Human Flourishing at the Peterson Academy.

We explain and give hundreds of examples why more people with freedom means much more resource abundances for everyone in our book, Superabundance, available at Amazon.

Gale Pooley is a Senior Fellow at the Discovery Institute and a board member at Human Progress.