People are constantly insisting that we all "invest" in ourselves—urging us to either "invest" in our happiness or our time." However, like most cliché phrases, these words are often deemed generic or meaningless and tend to be ignored. Why, in a world of individuals obsessed with investments relative to the stock market or large for-profit organizations, do we ignore the opportunity to invest in the most integral business venture of our lifetimes? Self-investment is important, if not necessary, in order for one to achieve a profitable and equally satisfying life.
So why not invest in yourself? The proposition to invest in oneself is not easy, but it is far from impossible, and involves a fairly new, Nobel Prize winning concept known as behavioral economics.
First, let's talk basic economics. One important concept to keep in mind when discussing the economics of behavior is, "elasticity of demand," or the degree to which consumption depends on the demand or price.
In terms of behavior, money is either time or a preferred behavioral concept (happiness).
Consumption or spending, depends on multiple factors. For example, if you were going to buy something from the mall, you would most likely take into account three main factors before making a purchase.
The three main factors influencing spending include: availability of substitutes, price range, and income level.
How do each of these factors influence the ways one spends (or invests) exhibiting a certain behavior or indulging in an activity for a certain amount of time?
1. Availability of Substitutes
This describes that spending should only increase with the increase in price if there are no other substitute. However, if there is a lot of variability in price, we are more likely to accommodate.
For instance, when gas prices fluctuate, our perception of the price of gas at a certain gas station becomes dependent on the current and past price of gas. Similarly, when one's situation fluctuates, allowing for a behavioral substitute of equal or greater value to the value of the desired situation, one is willing to behave "better" when they are offered a "better" solution.
Therefore, one chooses whether or not to invest in his or her time or behavior only if there is an alternate situation that gives them the same amount of potential time or potential happiness.
2. Price Range
Probably one of the most important deciding factors influencing investment decisions is price. Spending should only increase with an increase in price if the price fluctuation is small. However, spending is usually determinant on the value of the item and also, how one values his or her money.
Therefore, if one values both his or her time and business, he or she would invest in something worthwhile. The same should go for the way people invest in themselves for the improvement of their well-being. Easier said than done, right?
3. Income Level
As we all pretty much are aware of, we cannot spend money that we do not have. Therefore, income level is vital for determining how much we spend and what we spend it on. Spending should then only increase when the price of something increases if the individual is wealthy. So that is why when you go to Whole Foods, you are more likely to spend money on a granola bar with a unique brand name, although it has basically the same ingredients as a Nature Valley bar—you are going to Whole Foods, a health store containing fairly expensive items, with more money than you would say, walking into Marcs. Exhibit A: Increased spending and an increased income often go hand in hand.
When you are investing or spending money on your time or happiness, you often take into account your invested time or how much you are planning to invest (or have already invested) in yourself, before making a decision that affects your mental health.
We, as a society racing towards smarter investments, often leave ourselves behind. In order to maximize gain and minimize output in terms of our well-being, it is important that we strive towards working smarter rather than harder. If we do that, we have a chance at reaching our behavioral bliss point.
