All Commentary
Tuesday, September 29, 2015

Shopping for Soulmates

The 21st-Century Mating Market and the Economics of Romance

One of the fun parts about learning economics is realizing how broadly it can be applied. Once you understand the basic logic of scarcity, opportunity cost, and the rest of the economic way of thinking, all kinds of social phenomena are open to explanation.

Including relationships.

The economic way of thinking might explain some recent changes in how people find their way into romantic relationships. These changes affect marriage, divorce, and infidelity.

The key to the story is the idea of transaction costs. These are the costs of engaging in an exchange, from finding a trading partner, to negotiating a price or other elements of a contract, to ensuring that all parties abide by its terms. When transaction costs are low, people find it easier to engage in mutually beneficial exchanges. And when more of these exchanges take place, people benefit more.

One way of viewing the progress of the Western world is that, through a variety of institutional innovations, we have continually reduced transaction costs. These reductions have made exchange far easier and more common, making it simpler for people to increase their wealth.

In both romance and the marketplace, the other party has to have what you want and want what you have.

The discovery of language and the emergence of institutions like property, money, and the law are part of this process, as are the invention of modern banking and technological innovations in communication. Think of how the Internet and sites like eBay have made it so much easier to find trading partners.

Innovation has also made it easier to find a specific kind of “trading partner” — the romantic kind. And we can apply some basic economics to our thinking about finding a romantic match. 

People expend resources to look for Mr. or Ms. Right (or Right Now). For people to decide they have found a match, two things have to be true. First, the other person must meet their minimum standards for a desirable romantic partner; second, the other person has to find them acceptable as well.

Think about barter. If I have wheat and want to trade for corn, not only do I have to find someone who has corn, the person with corn has to want my wheat. In both romance and the marketplace, the other party has to have what you want and want what you have.

With romance, we take on search costs in looking for a match. We will keep looking for a potential match until we find someone who meets the two criteria, and who is sufficiently desirable that we think it’s no longer worth searching further.

Imagine driving on a busy street, looking for the cheapest gas station. At some point, you will just take the lowest price you can find because you don’t think the costs of searching for an even cheaper station are justified by the probability of finding one, multiplied by the savings you’d get if you did.

One element of modern life has significantly reduced the transaction costs of finding the right person to marry: the Internet. We now have a whole host of websites and mobile apps dedicated to facilitating romantic matches., eHarmony, and OkCupid are some of the best known, but there are also more specialized sites like ChristianMingle and JDate for Christians and Jews, respectively. There is also FarmersOnly for farmers and GlutenFreeSingles for those who’ve gone wheatless. There are sites for gays and lesbians, too. And if all you seek is a dalliance, apps like Tinder provide the same reduction in transaction costs for finding shorter-term matches.

All of these sites dramatically reduce the transaction costs of finding a romantic partner by expanding the pool of potential matches, reducing the search costs, and more precisely matching the daters’ preferences.

All else equal, such sites should have several consequences.

First, we would expect better matches. By reducing search costs, both in terms of finding a potential match and getting to know them, these sites make it less likely that people will settle for “good enough,” because it isn’t that difficult to keep searching for something better.

Second, to the degree that people spend more time searching for a better match because the costs are lower, the older we should expect people to be when they first marry. We’ve already seen the age of first marriage rise over the last few decades for other reasons; the emergence of these sites should increase that trend.

If people are delaying marriage to engage in longer and more productive searches, marriage rates will fall. If those searches produce better matches, the divorce rate should fall among those who do marry. Both trends are supported by the empirical evidence, as we have seen a small decline in the divorce rate among couples married within the last 10 years. And there is some preliminary evidence that marriages made through the major websites are less likely to end in divorce.

The Internet also reduces the transaction costs of finding someone new once one is married. Whether through social media, sites like Ashley Madison, or any number of other online meeting places, the Internet has made it cheap and easy to meet new people from around the world. This increases the chances that one might find, if only by accident, a new “trading partner” who seems like a better match — even after having committed to a first partner. On the other hand, perhaps the Internet has helped more people find the right person to marry and be less tempted to cheat, even though temptation is easier to indulge in than it used to be.

The turn of the 20th century changed the nature of the marriage match through the increased presence of women in the public sphere, especially work, which created more opportunities to meet a potential partner. That change also reduced the transaction costs of finding a better match. But that change pales in comparison to what the 21st century has brought, as the Internet’s effects on marriage and divorce continue to play themselves out.

  • Steven Horwitz was the Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he was also Director of the Institute for the Study of Political Economy. He is the author of Austrian Economics: An Introduction.