Effort and Value

Making decisions seems easy: A person should do an activity if it provides her more value than it requires in accompanying costs. For instance, Nancy buys a cake for her son’s birthday party if she values the cake at more than its $20 price. Dan Ariely, in his book The Upside of Irrationality, suggests that identifying the value of something is not so straightforward.

Ariely notes that people value something more highly when they contribute to making it. In our case, Nancy may place a $25 value on a cake she purchases in a bakery. However, if she buys a Betty Crocker cake mix and adds oil, milk, and eggs to the packaged mix and then bakes the batter, she will value the cake at more than $25 – even if her cake is identical to the baker’s cake. Because she put effort into the creation, the cake became more valuable to Nancy. Note that Nancy does not have to completely make the cake from scratch in order to feel this extra value. Nancy can do 30 percent of the work, leaving 70 percent of the work for the good people at Betty Crocker, and still feel that her effort increases the value of the cake.

While Ariely’s book and textbook accounts of concepts can be interesting, these ideas become fascinating when we can see them apply to our lives. A current UCA student has had a summer that breathes life into Ariely’s account of how people determine value. The student had two signature experiences over the summer.

First, she went to Ghana. She had never been to Africa, so being exposed to a new culture gave her learning experiences that allowed her to grow as a person. She left the continent with a different way of looking at the world and this student places a very high value on this experience.

However, even though the student thought her African trip was extraordinarily valuable, she believed her second summer experience was even more valuable. The student had an internship and she was part of a team that produced output that was covered in the national news.

These two summer activities offer some insight into how people determine the value. Traveling offers great experiences and some possibilities to exert effort in ways that can increase the value of trips. Using myself as an example, I vastly prefer going on trips that I plan compared to trips, such as cruises, that are planned for me. However, even during my self-planned trips, I view travel as mostly an exercise in passively viewing my surroundings. I am certainly not creating my environment. In contrast, this particular student’s internship was such a valuable experience to her because the people who run the program realize what Betty Crocker knew all along: When people contribute to something, they value it more highly.

The take away from this column is that we should not go through life merely searching for experiences that offer more value to us than they require in cost. Instead, the take away should be that we should search for activities where we want to devote our energies, knowing that our effort will make these experiences even more valuable.

Joe McGarrity is a Professor of Economics at UCA. He can be reached at joem@uca.edu.