November 3rd, 2007
The Economics of Prenuptial Agreements
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In two recent posts regarding personal ads on Craigslist, Freakonomics analyzes the economics of gold-digging and sugar-daddying . Basically, if you put together a beautiful 20-something out-of-work actress and a rich 30-something investment banker, marriage makes economic sense for the woman (but not the man) and dating makes economic sense for the man (but not the woman).
What you suggest is a simple trade - you bring your looks to the party, and I bring my money. Fine, simple. But here’s the rub - your looks will fade and my money will likely continue into perpetuity… So, in economic terms, you are a depreciating asset and I am an earning asset… So in Wall Street terms, we would call you a trading position, not a buy and hold … hence the rub … marriage. It doesn’t make good business sense to “buy you” (which is what you’re asking) so I’d rather lease. So a deal that makes sense is dating, not marriage. (link)
