Mediating a Couple Arguing About Money
My friend and his wife are having a major disagreement over their household finances. He is self-employed (I don’t want to be more specific and tip some readers off as to his identity) and does one-off projects for clients. He relies on advertising and word of mouth to generate new leads.
Anyway, he asked me to chime in on the disagreement. I have my opinion, but I want to let you guys comment as well, to see if I’m missing anything. I’m going to change some of the numbers a bit for his privacy, but the below summarizes the spirit of the argument:
WIFE: Look, you really have to cut back on your business expenses. Our househeld debt is up 50% since you started your aggressive advertising campaign in early 2009.
HUSBAND: This is really stupid. How many times are we going to have this argument? Look, the advertising is the only thing that saved us. All my clients were dropping off like flies when the crisis struck in late ’08, remember? Who knows how broke we would have been, had we not spent that money?
WIFE: Well, we’re going to keep having the argument because you keep driving us deeper into the red. I never agreed with your premise that spending 20% more as your revenues collapsed was a good idea. I can’t believe I let you talk me into that.
HUSBAND: Huh? Eventually the revenue turned around, just like I said it would. And now that we’re following your advice, by slashing the advertising budget, we’re getting the predictable results–racking up more and more debt, just like I said we would.
WIFE: What the heck are you talking about?! We didn’t cut the advertising budget.
HUSBAND: Sure we did. As a percentage of my business’ potential revenues, we’ve slashed our spending by more than 50% since 2011.
WIFE: What kind of crazy accounting are you looking at? We’ve done no such thing. As a share of revenue, the advertising–
HUSBAND: Zip it! You’re not listening, as usual. I said as a share of potential revenue.
WIFE: What the hell is “potential revenue”?!
HUSBAND: It’s how much the business would have earned in each of the last three years, had you listened to my advice back in 2009.
So, decide which spouse you agree with. Then read this recent Krugman blog post.
Let me guess. This isn’t a real story between a husband and wife.
http://data.bls.gov/timeseries/LNS11300000
You put a straight edge up against the screen from late 2008 up to the present day and it is close to linear with a very slight banana hinting that the rate of decline is not as bad as it was a few years back. Nothing is actually turning around, nor is there any significant boost visible in 2009 (highest stimulus year) as compared to other years.
From 2001 to 2008 the employment participation was flat (almost constant) despite much lower deficits and less “stimulus” under the Bush years. So why wasn’t that also “strongly contractionary fiscal policy”, but even more so? Interest rates were also overall a bit higher during the Bush years, so monetary policy should have also been contractionary I suppose. How come the definition of “contractionary” randomly varies from year to year?
Every day I become more and more incredulous over how people use statistics to forecast. I can’t believe quantifications of counterfactuals are taken seriously.
Might as well calculate “potential GDP of US economy where everyone has jet packs and genius IQs… Also everyone is as fit and motivated to succeed as Michael Jordan was in his prime.”
Could you imagine
They need to separate the household finances from the husband’s entrepreneurial activity.
They need to decide who is the entrepreneur, so the entrepreneur can run the entrepreneur’s business as the entrepreneur sees fit.
Suppose the husband finances his business with 50% (his share) of the family’s resources. The wife could then leave him alone to run his business.
As it is now, she feels she should have a say, since she is providing some of the funding.
I’ve mentioned my marital history before Bob. I agree with the wife. Someday I’ll read the post and see what I’ve agreed to.
Darn, maybe I should have posted this:
http://consultingbyrpm.com/blog/2013/04/delong-flirts-with-notion-that-stimulus-efforts-thus-far-have-gained-nothing-on-the-margin.html#comment-60804
Here instead.
This is not just your regular husband and wife. This couple abides by a different set of economic laws.
This couple has a troll working in their basement, printing off dollar bills. This couple is not revenue constrained. They need not ever default on their debt.
They are also making dollars money by hiring other trolls to force everyone else to pay them in dollars, no matter what they earned.
They are therefore better than you and I. They don’t have to constrain their spending and debt to the silly and naive concept of non-coerced value judgments in a context of respect for property rights. Utopian nonsense! We live in a world with violence, and so….this violence is justified. What is actual is rational and what is rational is actual. They can send boxes of fake dog poop door to door, and the money will still come in.
Go away with your economic laws. They are immune from them.
Hallelujah, Obe-la-di obe-la-da, hakuna matata, kumbaya, suck it Trebek.