Value of Time

Time is the key! The Time measure of a thing’s worth, is the hours of work it takes to acquire it. If you have to acquire it entirely by doing all the work yourself, it usually takes a lot longer than if you can get it ready made from other people who make it more efficiently in exchange for what you can make more efficiently. As things become cheaper people use more of it. The average Briton, as Matt Ridley notes, today consumes 40,000 times as much artificial light as he did in l 750’s. He also, consumes 50 times as much power and 250 times as much transport (measured in passenger miles travelled). Free time comes from exchange and specialization and the resulting division of labour. Self-sufficiency is clearly not the route to prosperity, even if at all possible.

This is what prosperity is: the increase in the amount of goods and services you can earn with the same amount of work and the Time you gain for yourself by working more efficiently.

Ridley worked out that – ‘In 2005, a journey from Paris to Bordeaux costs equivalent to about a day’s wages and is fifty times faster and more comfortable than in a stagecoach in the mid-1800s which would have cost the equivalent of a clerk’s monthly wages. A half-gallon of milk cost the average American 10 minutes of work in 1970, but only 1 min in 1997 and today it is almost free. A 3 min phone call from New York to Los Angeles costs 90 hours of work at the average wage in 1910, today it costs less than 2 mins. A Kwh of electricity costs an hour of work in 1900 and only 5 min’s today. In the 1950’s it took 30 mins to earn the price of a McDonald’s cheeseburger today it is 3 mins. Healthcare and education are amongst the few things that cost more in terms of hours worked today than they did in the 1950s – but in these fields what it meant then and what it means today are not really comparable.’

People usually got to be rich (millionaires/billionaires) by making things cheaper and better. Ofcourse, when they did so, their competitors, unable to match their efficiencies, cried foul and sought government intervention to preent the drop in prices. Even when falling consumer prices is what enriches people, allows them more choice in what they want to buy and more time to use it as they deem fit. (This deflation leading to enrichment does not hold good for asset prices, which can ruin them, that is because they are using inflated asset prices to get them the additional wherewithal to purchase even more non-productive and non-essential items or assets).

Like transportation, housing too has got even cheaper and more affordable. It is true that whereas it took 16 weeks work to earn the price of 100 sq.ft. of housing in 1956, it now takes only 14 weeks and the housing is much better in facilities and quality. It would have come down much faster but for the Governments that prevent this by using planning or zoning laws to restrict supply and by using the tax system to encourage mortgage borrowing and finally doing all that they can to prevent prices from falling after a bubble. To remedy this, governments have to encourage/incentivize the building of more affordable housing, allow vertical growth, or subsidize mortgage lending to the poor to allow them to afford a home. Free housing not only does not encourage dignity or prosperity, but develops in the citizens an attitude of unending demands for entitlements of so many other things and hence, should never be offered.

“Never misallocate borrowed or essential resources to unproductive ends, to asset price inflation or, to war, corruption, luxury or theft.” – Matt Ridley.

If somebody somewhere takes out a mortgage which he will pay in 30 years’ time to invest in a business that invents a gadget that saves his customers time, then that money brought forward from the future, will enrich both him and his customers to the point where the loan can be repaid to posterity. That is growth. If on the other hand, somebody takes out a loan just to support a luxury lifestyle, or to speculate on asset markets by buying a second home etc. then posterity will be the loser.

Urbanization makes poor people richer. The density and infrastructure of cities allows for greater interaction and exchange of ideas and information that makes people more productive and more able to afford to buy what they need and allows them greater choice of what they may spend their time on doing.

Such opportunity is what makes the rural poor choose to move even into slums in urban areas.

Today in the USA about two percent work in Agriculture, 24 percent in Industry and 74 percent in Services and Entertainment. All Countries will, sooner rather than later, tend to similar distribution and such distribution leads to greater urbanization and if due care is not taken to deal with such urbanization it would lead to collapse of cities being throttled by slums. (See “Urbanization” and “Smaller States – How Small? – How Many? – Why not Bigger?

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