The Economics of a Long-Distance Relationship

Three years ago, I met my boyfriend in Los Angeles. He’s a San Franciscan native, and I was a London transplant. Inevitably, I had to move back to the British capital, which meant we committed ourselves to an eight-hour time difference, an eleven-hour plane ride, and an indefinite timeline of when we’d be back in the same continent.

People often ask me how I cope with not seeing the boy all the time. Truthfully, it’s not that hard. I don’t think we need to be in each other’s physical presence to feel loved. Moreover, the space between us eliminates any societal pressure to speed things up. We’re in no rush to get engaged, get married or have babies. Instead, we have the luxury of time, a utopian bliss while we’re still young.

I can relate to the internal conflict when deciding whether or not a long-distance relationship is right for you. Both my boyfriend and I were non-believers, and yet here we are. While there have been moments where we’ve considered throwing the towel in, we realise that most of our arguments arise due to the distance. Inevitably, we feel foolish to give up, and we accept the fact that long-distance relationships are about as challenging as they are rewarding.

But perhaps it’s easier to understand why these relationships might suck in economic terms.

The Alchian-Allen theorem is a lesser-known economic theory, which can provide a cost-benefit analysis of a long-distance relationship. The theory suggests that when a fixed cost, such as transportation cost, is added to two substitute goods, such as high and low grades of the same product, people are likely to increase consumption of the higher-grade product. This happens because the added per-unit amount decreases the relative price of the higher-grade product.

A common example used to illustrate the theorem is through the consumption of wine. Australians drink higher-quality Californian wine than Californians, and vice-versa since the transportation costs would only be worth it for the more expensive wine.

Economist, Tyler Cowen, argues that the same principle can be applied to long-distance relationships. When you take the effort to travel to see your significant other, you won't waste time doing mediocre things. You’d, in theory, want to make the most of every second you spend together, which might imply a lot of fun, extravagant activities to justify your trip’s fixed costs.

I’ve seen this play out in my own case. When my boyfriend and I lived in the same city, it was more acceptable to do nothing. But now that we're not so accessible to each other, we try and avoid lazing around. Sure, sometimes it’s nice to relax, cook and watch a movie at home. But we generally prefer to go out given our limited time together.

There are also significant trade-offs involved. For example, we might miss out on events with friends or family because we’ve already made travel plans during that time. Cancelling travel plans could incur a financial loss, and so any longing to be spontaneous or impulsive is compromised.

Human emotion further complicates everything because we could end up making decisions based on emotional benefits, even if we can’t afford to.

In this regard, a long-distance relationship puts a heck of a lot of pressure on both parties. As Cowen explains, you may start to expect too much from each visit, and you could be left disappointed if plans don’t go accordingly. Striving for high-grade adventures isn’t always favourable to chill out sessions. It’s ultimately the latter that forms the basis for a successful long-term relationship. The Alchian-Allen theorem, therefore, highlights why so many long-distance relationships tend to fail.

For me, I'd rather persevere through the dread and drawbacks of a long-distance relationship than seek a mate out of geographical convenience. You can devise a cost-benefit analysis of any relationship, be it local or long-distance, but it'll always result in a limited outlook. I genuinely believe a long-distance relationship can work if people abandon any conscious or subconscious attempt to calculate the return on investment. Besides, you just can’t quantify happiness.