The economics of cheating – Australia’s new leisure class can afford time and resources for affairs

In an interesting Brisbane Times article last week (Mistresses, married women and early morning workouts), Katherine Feeney quoted her hairdresser on how common affairs are nowadays:

“So many married men – so many wealthy, married men – have mistresses these days. I know this for a fact. I know, because I do their wives’ hair, I do their hair – I probably even do the mistresses’ hair. In any case, I know these affairs are happening – Brisbane, Sydney, Melbourne – it’s always been the way.”

Apparently affairs between personal trainers and wealthy clients with time on their hands are very popular now. The opportunities to cheat are probably greater nowadays, with dating websites – including the Ashley Madison site which is dedicated to people seeking affairs – and social media making it much easier to connect with new potential partners than ever before. No doubt greater opportunities lead to greater instances of cheating, as many find temptation hard to resist.

It’s also possible that there are economic factors at play. While reading the Brisbane Times article, I was reminded of Ray Fair’s brilliant 1978 article in the Journal of Political Economy, A theory of extramarital affairs. To summarise, the theory is that a person’s hourly wage/salary doesn’t have a clear effect on the likelihood of having an affair, but an increase in non-wage income (e.g. earnings from dividends, interest or rent) makes it more likely someone will have an affair.

The impact of wages on cheating is ambiguous, because although higher wages might give someone the resources to pursue an affair, this is offset by the attractiveness of working the same or more hours at a higher wage rate, rather than wasting time on an affair. Economists will recognise this as the conflict between the income and substitution effects, which work in different directions.

While wages have an ambiguous impact on the likelihood of affairs, non-labour income has a clear positive impact. With greater non-labour income, people can cut back on their working hours and devote more time to affairs. One of the noticeable trends in Australia’s income distribution in recent years has been the strong growth in non-labour income and the growing inequality in this income (i.e. the rich are getting richer), as described in a 2013 Productivity Commission report, Trends in the Distribution of Income in Australia (see the charts I’ve copied and pasted from the report below; N.B. non-labour income is labelled “Capital & other” in the charts).

incomeThis growing non-labour income allows more time and resources to be devoted to affairs by the wealthy. So, in addition to seeing an increase in the incidence of affairs across the whole population because of the greater opportunities provided by the internet, I’d expect to see a disproportionate increase among the wealthiest Australians. With their increasing non-labour income, the wealthy can buy time and other resources for affairs. This is why it appears a disproportionate number of wealthy people are having affairs – they can afford to.

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6 Responses to The economics of cheating – Australia’s new leisure class can afford time and resources for affairs

  1. Katrina Drake says:

    An interesting deviation from your usual subject matter.

    I have no further comment to make until I have had the opportunity for further research – I’ll check with my PT and hairdresser tomorrow.

  2. Jim says:

    I suspect that you are right. It is the non-labour income that might explain the additional time to pursue an affair. But I think that it might not be the extra time that that non-labour income buys that is the driver of the affairs. I suspect that it is the assets that back up that non-labour income that is driver, as it changes attitudes towards risk.

    My reasoning…

    Both partners in a high net wealth couple would walk away from a divorce with enough capital to live comfortably. This cannot be said for a low wealth couple that would need to sell the family home etc. So, if you are part of a wealthy couple, you are in a position to take on the additional risk of an affair because the financial consequences are relatively lower.

  3. Katrina Drake says:

    Interesting, but I would have thought the opposite…..

    My reasoning…….

    Low wealth couple have little to loose. While high wealth individuals would better be able to assess the risk of having to split their assets, and undo property, trust and tax and SMSF arrangements. Family lawyers can drain a wealthy estate arguing about who get to keep the cat. Forced divorcee sales of assets burn wealth. There is far too much lifestyle and wealth at stake to risk on affairs.

    Something else is the driver here…. Perhaps the hormones generated by the rise and fall of the stock exchange….

    • Gene Tunny says:

      Yes, good point, Katrina. Also it has occurred to me that many wealthy people are born risk takers. Taking risks has helped them accumulate wealth, and they are willing to take risks in their personal relationships, too.

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