Should everything in life be about money? In the mind of this economist the answer is no. This past weekend was the 4th of July. For most people this means eating hot dogs, hamburgers, and watermelon by the pool or water. For me it also means the Winthrop Horribles Parade. Winthrop is a small town, right beside the Boston airport. The parade has been going on for 135 years and has changed very little in my lifetime. Local residents dress up and march down the main street (in parts of the parade route it is the only street) to cheering crowds. Then after the parade there are running races, pie eating contests and the announcement of the parade winners. I have been marching in the parade and making a fool of myself for decades. Relatives and friends have often asked me why?
I teach my students cost-benefit analysis. Cost-benefit analysis is a pretty simple idea. First, calculate all the benefits and add them up. Then you subtract all the costs. If the answer is a positive number the benefits outweigh the costs and you should consider doing the project. Negative answers mean the costs outweigh the benefits and the project should not be done.
The monetary costs and benefits of the parade are easy to calculate. The winning group in each category gets $20. This year I spent $45 on our parade costumes, so in economic terms I knew even if we won first place there would be a monetary loss for participating.
So why do I keep participating in the parade even when it is a clear money loser? The important idea in cost-benefit analysis is that you also have to include non-monetary costs and benefits before making the final decision. For example, parade marchers have to get up very early on a holiday morning. This increases the costs.
The Horribles Parade, however, gives some great non-monetary benefits. The same people line the route at the same spots year-after-year. Parade watchers have reminded me of my past performances long after I have forgotten. As we were finishing this year an old man standing by himself said, “Thank you for doing this.” That comment alone made the cost-benefit calculation positive this year.
For those of you wondering, in honor of this year’s FIFA World Cup soccer matches, my wife and I dressed up as two giant plastic cups decorated with globes and carried a soccer ball. We were “world cups” and won first prize in the most hilarious category.
Should everything in life be about money? Definitely not!