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Wednesday, May 02, 2012

Baumol's Cost Disease

Back in January, 2012, Yahoo News opined that it might have become too expensive to raise a child.

After all, they noted, the direct costs of raising a child to age 17 is over $150,000.
If you're paying for college, it could rise to $250,000.


Sounds like a lot.

Or does it?

Divide $250,000 by 17 years - that's $14, 705 a year, on average.
Divide that by 365 days in a year and it's about $40 a day.

The IRS business mileage allowance for 2012 is 55.5 cents per day.

So, if you make a round-trip commute to work of about 80 miles (40 miles there, 40 miles back), your annual commute costs as much as a child.

An 80 mile commute entertains, perhaps, an hour and a half of your day.
A child entertains his or her parents 24 hours a day, seven days a week.

Having five children is the equivalent of owning five cars with one important difference.

The value of cars depreciate over time.
You always have to go buy a new car every few years.

Children don't depreciate.
You can't even say that the increase in value.
It's that the value is so wildly, superlatively different than a car that the comparison is... crazy.
And that invested value keeps .... hmmmm.... not growing... but mutating, changing, whirling your world to greater and greater heights every year.

And it doesn't stop after 17 years.
It turns into marriage, family, grandchildren, great-grandchildren, vacations, first tooth, gap tooth, diapers upon diapers, new puppy dogs, fish tanks, vomit, diarrhea, lollipops, carnivals, braids, scraped knees, riding bicycles, driving cars, fishing, bowling, plays, tears, laughter, tickles, learning to wink, first haircuts, the alphabet song, braces, funerals, waterfalls, shooting stars, caterpillars, tadpoles, first loves, first loss, LIFE, leaping and bounding whirlwinds of excitement with each passing year.

All of this for the price of less than a two-hour daily commute?
You would pay more over the course of 30 years for pretty much any house you care to name.
And it pays off in much less time.

So, this is expensive, eh?

1 comment:

Nilk said...

Is this expensive?

No, Steve, it's priceless.