Understanding Time as Money
Values and Rates
“My time isn’t the same as your time…” Many people first react to “Time as Money” with this statement–which is true. Your time almost always has adifferent value than my time. You have different skills and experience and I have my own skills and experience.
When I talk about “Time as Money” I do not mean time as Iexperience it nor do I mean the time as you experience it–the value of time between you and I comes from a transaction orexchange we agree to.
I call this value time and it is not connected directly to one orthe others experience of time observed.
What about Ithaca Hours? Isn’t that “time as money?” Partially. Ithaca Hours does denominate itself in hour, half-hour,and other units, however it also ties these units of labor to a fixed hourly rate in dollars. One hour = $10, half-hour = $5, andso on.
$10 was selected as the baseline because it was the “averagerate of pay” in Tompkins County where Ithaca Hours began. By backing itself in terms of another form of money, IthacaHours disqualifies itself from being a true “time currency.”
How much do you earn per hour? Most of us are accustomed to comparing how much weearn per hour to know if we’re better or worse off.
Minimum wage in the United States for the most part is near$7.75/hour.
Skilled workers or workers with skills in high demand arepaid more per hour.
- Auto Mechanic: ~$18/hour
- Lawyer with +20 years experience: ~$91/hour
If the mechanic works 40 hours, they earn $720.
If the lawyer bills 40 hours, they earn $3640.
Once earned, money is spent the same… While the mechanic and the lawyer have earned different amounts of money at different rates, when they spend it withother people, there is no expectation of future work. If the lawyer pays you $100, you don’t have an IOU for $100worth of “future lawyering,” likewise for the mechanic.
So how do you use “time” as money? By finding the “comparative advantage” between the participants of the transaction.The lawyer might be able to replace the starter on the car alone with some help from books or the Internet, or simply hire themechanic to do it instead. The price of the exchange willapproach the average amount of “time saved” by the non-expert—or value. If it would have taken the lawyer nine hoursto do it by his own experiential time, the mechanic should have a price close to ξ9 for that work. ξ9 is “nine hours of value”–even if the mechanic performs thework within one hour. The mechanic earns 9× actual time—ξ9/hour.
What about the lawyer? If the mechanic wished to pay the lawyer for services, anotherkind of comparative advantage calculation and pricing occurs.Naturally the mechanic can’t go through law school to “do it by themselves.” The mechanic will sanely rely on the ready-to-use experience of the lawyer. This is why lawyers are so expensive, so we would expect onbalance that the lawyer would charge a much more expensiverate for work to recoup the cost of law school or enjoy thebenefits of experience.If we take the $/hour as a guide, the lawyer probably earns close to 45×—ξ45/hour.
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