How many times can you lose a bundle of euros?

by on May 21, 2014 at 4:50 am in Economics, Travel, Uncategorized | Permalink

Just before departing for Paris, I went up to the bureau drawer and found, to my surprise, a stash of unused euros.  Wow, all of a sudden I am getting a few free days eating, I thought.  The prospect of the trip brightened, as paying $8 for a small block of dry goat cheese no longer seemed so outrageous.

I stuffed the money into my pocket — or so I thought — and headed off to the cab.  After paying the cabbie at Dulles, he gave me a big smile and said “Thank you sir for the very nice tip,” with an accent I could not quite trace.

Half an hour later, in the airport, it occurred to me that my tip wasn’t that unusually large.  What was he talking about with those profuse thanks?  And suddenly I could not find those euros in my pocket.  They must have fallen out in the cab, perhaps while I turned around to close the distant rear window so I could hear the person calling me on the phone.  Ah, so that was the very nice tip the cabbie was talking about.  Very nice indeed.

While feeling vaguely (and unintentionally) charitable, I was mortified as well.  Yes, I could afford that loss, but how unreliable my systems must be.  What else was going to go wrong?  (And I wondered whether, morally, the cabbie had in fact asked for and received my permission to keep such a nice, large tip.  Perhaps he felt the need to mention the tip to avoid highly negative consequences in some future world to come.)

Upon arrival in France, I then had to withdraw an equivalent amount of euros from the Parisian ATM.  Every time I spent that money I felt like I was losing it twice.  It reminded me of the first loss of the euros in the cab, and then I had to pay for everything yet again.  That block of goat cheese now felt like buying a diamond, and I hoped all the more that something good would come of my unintended charity.

Finally, Natasha told me that I had left a large stash on euros on the kitchen counter before departing.

But was I relieved?  Not really, in fact I now felt worse yet.  All that worry and psychic trouble and loss of confidence in my own economic rationality…and for what?  Furthermore — and indeed worst of all — I had forgotten to take those euros with me and thus missed out on a lot of free Parisian food!

The goat cheese now seemed three times as expensive.

So how will it feel when I, during my next trip, finally end up spending those euros?

I now know how to lose a bundle of euros three times, is there any comparable algorithm for spending it multiple times?

Addendum: I learned this morning that in fact Natasha has spent the euros.

andy May 21, 2014 at 5:33 am

How big was the actual tip for the cabbie??
I would have been relieved to find I hadn’t lost the money.
I would then have wondered how big a tip I actually left.
I would then have felt even worse when questioning my ability to distinguish gratitude from sarcasm.

anon May 21, 2014 at 5:34 am

I don’t follow the third loss at all. What are you talking about?

Axa May 21, 2014 at 7:37 am

Opportunity cost.

Mark Thorson May 21, 2014 at 9:37 am

Economists never lose anything just once.

Evan Harper May 21, 2014 at 10:18 am

You didn’t read the story very carefully.

BC May 21, 2014 at 5:43 am

Are algorithms subject to cognitive biases like mental accounting and sunk cost fallacies? I don’t know of any algorithms that can “spend” money multiple times, but here is one that somehow “saves” change that doesn’t exist, or something:

https://www.bankofamerica.com/deposits/manage/keep-the-change.go

BC May 21, 2014 at 8:11 am

Two algorithms for spending money multiple times: (1) Social Security “trust fund” and (2) “cutting” spending by increasing it at a rate that is lower than originally planned.

Evan Harper May 21, 2014 at 10:19 am

Yes, let’s turn this around to your preferred political hobby horses, that’s a good use of all our time.

TMC May 21, 2014 at 12:15 pm

ACA is built on that premise.

dearieme May 21, 2014 at 5:44 am

How old are you, Mr Cowen?

Meets May 21, 2014 at 6:14 am

Was the cabbie being sarcastic?

Maciste May 21, 2014 at 6:28 am

Aren’t all your expenditures being refunded by GMU from your travel budget anyway?

prior_approval May 21, 2014 at 10:33 am

Absolutely not – the Commonwealth of Virginia is not that generous with taxpayer money.

But then, the general director of the Mercatus Center does not have to be concerned about the taxpayers of the Commonwealth of Virginia.

And though I have absolutely no personal knowledge of how the Mercatus Center handles things, other private centers (IHS comes to mind) were adept at straddling the line between public and private from the start.

For example, the Mercatus Center is located on property owned by the Commonwealth of Virginia – want to take a guess how much they pay in rent? And if they are paying more than nothing, then they should figure out why they aren’t getting a better deal than another GMU based ‘private enterprise public interest’ operation.

Cliff May 21, 2014 at 11:57 am

So after all this time and all these posts, finally “I have absolutely no personal knowledge of… the Mercatus Center”

LOL

Grant Gould May 21, 2014 at 6:30 am

So the multiplier is 3, is what you’re saying?

Michael Mouse May 21, 2014 at 6:34 am

“I now know how to lose a bundle of euros three times, is there any comparable algorithm for spending it multiple times?”

This asymmetry – between the ease of losing money compared to the difficulty of spending it wisely – has, I believe, been noted widely in the literature.

The good news is that human ingenuity has been applied repeatedly to the problem throughout history, and there are now very many mechanisms for multiply-spending money. The bad news is that they are almost all very illegal.

Bob Knaus May 21, 2014 at 6:39 am

It’s true that “money” and “happiness” seem highly important to us. But they are human constructs, just like “space” and “time”. Without our consciousness to enable them, they would at best be unresolved possibilities.

Brian Donohue May 21, 2014 at 6:51 am

Cowen does Kahneman and Tversky?

marc May 21, 2014 at 6:56 am

Actually, now that your wife knows that your hoarding a big stash (for goat cheese?), she’s going to help you spend it — for the fourth time. Otherwise, your quadruple spending problem suggests you need the algorithmic protections of BitCoin… I knew you would start to see the light….

dan1111 May 21, 2014 at 6:59 am

The good thing about Bitcoin is that when you lose it it’s really lost. No risk of re-finding it and having to do a lot of painful soul-searching.

liberalarts May 21, 2014 at 7:08 am

Didn’t the failed Bitcoin exchange have a bunch of unaccounted for (lost) Bitcoin that they later found?

Mark Thorson May 21, 2014 at 9:42 am

Not this guy. He knows where his bitcoins went. He even went out to the landfill to see if there was any possibility he could get them back.

http://www.theguardian.com/technology/2013/nov/27/hard-drive-bitcoin-landfill-site

Axa May 21, 2014 at 7:38 am

Your algorithm is pretty simple: jetlag. Be thankful that all you lost was a bundle of euros.

Hoover May 21, 2014 at 7:43 am

“So how will it feel when I, during my next trip, finally end up spending those euros?”

If the exchange rate has shifted in your favour, you might feel quite pleased.

andy May 21, 2014 at 7:46 am

First World Problem if I’ve ever heard one.

David R. Henderson May 21, 2014 at 8:36 am

:-)

Benjamin Cole May 21, 2014 at 7:56 am

And I thought it was only me that thought this way. Litvok blood?

Matt May 21, 2014 at 8:06 am

The rather severe neurosis presented here can only be caused by a Ph.D. in economics.
1. Stop worrying.
2. Taste the cheese. It tastes great.
:)

anon May 21, 2014 at 8:37 am

Maybe Tyrone should stay home when you travel.

Willitts May 21, 2014 at 8:45 am

Sounds like an allegory for fiscal/monetary policy.

Affe May 21, 2014 at 9:37 am

This reads like drunk posting. Needs more “Dude, I was like…” though.

derek May 21, 2014 at 10:14 am

What kind of financially literate person is not making almost all purchases, even abroad, with a credit card? There are lots and lots of cards that waive foreign transaction fees, and why would you say no to 1.5% cash back on everything?

Axa May 21, 2014 at 10:29 am

a) Not all shops accept American Express in Europe.
b) Try paying 10 euros with your Visa card in a small shop.
c) Local payment system works with the 6 digit PIN, some shopkeepers are confused/scared to accept cards that use the signature system for validation.

Paul May 21, 2014 at 12:24 pm

Security.

After making a trip abroad my card number was used fraudulently. No guarantees at home either but why take on extra risk for 1.5%?

Sean May 21, 2014 at 10:23 am

This is the funnies thing I have read in a very long time. The addendum nearly killed me.

JWatts May 21, 2014 at 4:43 pm

Yes, the addendum is what made me crack a smile.

prior_approval May 21, 2014 at 10:34 am

So, this is what eurogeddon looks like, isn’t it?

Jason B May 21, 2014 at 11:27 am

I think the main problem, that Tyler is not specifically addressing, is that you can easily find yourself carrying around 20 euros in a small number of coins. American men are poorly equipped to deal with coins (our wallets rarely have coin purses), and its very easy to lose $30 in the same way some quarters and dimes spill out into the couch cushion.

Not used to valuing coins, you leave them around the house: on counters, in a drawer, in a bag or a pants pocket.

This is my primary issue, at least

Bill May 21, 2014 at 12:16 pm

When a classical or uber rational man economists recognizes elements of behavioral economics in their post there is hope for the world.

Ricardo May 21, 2014 at 1:28 pm

Saying that all economists believe that all people are always rational is a strawman.

However, if you must choose between the extremes–people are either 0% rational or 100% rational–then 100% rational is probably a better modeling choice.

Bill May 21, 2014 at 3:58 pm

Ricardo, A straw man!

Were it so.

What elements of classical theory would be given up by you? And, since you pose it as either/or for modeling, as if a behaviouralist presumption might gum up the works in a classical model, I can guess which one you model with.

But, in fact, there are behavioral financial modelers…look up Ackert and Deaves, Behavioral Finance (2010).

GKG May 21, 2014 at 12:33 pm

You would make a terrible athlete or warrior. But a fine academic and author.

Sandy Ikeda May 21, 2014 at 12:58 pm

Very funny! More posts like this, please. It’s worth it – at least for me.

esposito May 21, 2014 at 9:52 pm

Some guy with a PhD and a tenured job has extra cash laying around the house that he’s lost track of. An amount we might therefore assume is immaterial to him. Now he’s whinging because he might have over tipped a cabbie. What’s wrong with you?

Enrique May 22, 2014 at 2:40 am

What’s that old saying about their being no Twenty Dollar bills lying around? Does it apply here?

Mike May 22, 2014 at 9:30 am

Plan your menu for the next few days with the approximate costs. Then you should just eat beans until you have saved the cost of the lost euros. I am sure you will feel better.

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