Brown bag economics

Marketplace Staff Jun 5, 2006

KAI RYSSDAL: The sole tidbit of economic data today comes from a group called the Institute for Supply Management. The ISM reports the service side of the economy grew in May. Just not as fast as it did in April. High gas prices are the culprit.

There’s not much you can do about pump prices. But what about the fuel you pour into yourself. Lunch? Should you slap together a sandwich at home, or run out to grab a bite? Economist and commentator Susan Lee says it depends on who you are.

SUSAN LEE: The decision on whether or not to brownbag it is huge. A majority of working Americans eat lunch at their desks. And there are thousands of websites devoted to the brown-bag culture. No kidding.

The chief reason people brownbag is to save money. The arithmetic looks like a slam dunk. Say it costs, on average, $3 to brownbag and $8 to buy takeout. Multiply that difference of $5 by number of working days and you get a savings of $100 a month, or over $1,100 a year.

Well, not so fast. The calculus is actually a little bit more complicated. Say you are a person who bills for her time. Like a doctor, lawyer, or consultant. Then you must count the opportunity cost of brown bagging.

Opportunity cost is the economist’s way of judging a tradeoff. It compares the task at hand to an alternative use of a resource like time or money. In this case, opportunity cost is a measure of the lost opportunity involved in the time it takes to make your lunch. The value of that time is the money foregone in billing a client.

Let’s say you bill $150 an hour and it takes you 15 minutes to slap together a tuna-fish sandwich. That means the 15 minutes it takes you to make your lunch costs $37.50. Then add in the raw material of $3 for a grand total of $40.50.

That’s right. Factoring in the opportunity costs makes that brown-bag worth over $40.

Now, to be fair, you might have to wait in line to get your takeout. But if getting a smoked turkey with apple costs less than 12 minutes of your time, it’s cheaper than brown-bagging.

In other words, if you have a very fast deli in your neighborhood, your morning quandry is solved. Takeout rules.

And, as a bonus, I did this entire commentary without mentioning that other economic concept: There is no such thing as a free lunch.

RYSSDAL: Economist Susan Lee lives in New York City.

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