Dear Emily,
I’m a 30-year-old man, and I’m getting ready to move in with my boyfriend. Right now we both have separate bank accounts, and we’re trying to figure out the best way to share expenses. His income is a lot higher than mine (almost twice as much). The fairest thing to do would probably be to split rent, groceries, and other household items 50/50. But that would have a much bigger impact on my day-to-day life than his. From an economist’s perspective, what should we do?
According to economics, the goal here should be to maximize your household utility—the sum of the happiness that you both experience.
In general, this means optimizing “on the margin.” This means for all of the items your household consumes, you want the last dollar you spend on each of them to deliver the same amount of happiness. Otherwise, your household should change the way you spend money.
Consider an example: For dinner, the two of you mostly order from either a Mexican restaurant or a Chinese restaurant. The last time you ordered from the Mexican place, the food was fine, but nothing special. But the last meal from the Chinese place was absolutely delicious. This means you are not optimizing on the margin—the marginal burrito is a lot worse than the marginal mapo tofu. You’d be better off ordering from the Chinese restaurant more often, and scaling back on the Mexican one.
Now apply this logic to the issue of household expenses. If you and your partner split your primary expenses 50/50, it’s going to create a situation where your marginal consumption is providing way more happiness than his. Keep reading
Log in