Pricing Love, Marriage, and Divorce

According to the old saw, economists know the price of everything and the value of nothing. Since price and value are synonyms, the real point of the saying is that economists can price materials objects, but they can’t price feelings, like love.

As a dismal scientist, I have to object. We all can and do price love and other feelings on a routine basis. Unfortunately, we have to do this when it comes to making decisions like staying married or getting divorced that involve our emotions as well as our feelings.

Take Sally and Joey. The couple met 30 years ago. Joey was tall, dark, handsome, and fit with big-time joie de vivre and a very high-paying job. Sally was smitten. The two eloped on their second date. Sadly, things changed over time. Joey is now a low-paid, overweight, couch potato with a drinking problem. But he’s a nice guy and treats Sally well. For her part, Sally, except for a few aging lines, is little changed. She’s hard working, vivacious, and goes Tango dancing every night. And she’s kept her svelte figure despite bearing three kids.

Every night Sally tells Joey she loves him before sleeping in another room to escape his cacophonous snoring. But, truth be told, Sally’s just met Johnny at Tango class. Johnny has more money, better looks, and a lovely smile. Plus, he claims he doesn’t snore. Johnny wants Sally to leave Joey and marry him!

But Johnny’s not the father of Sally’s children. Christmas is around the corner and Sally treasures family reunions. Leaving Joey for Johnny would damage Joey, upset the kids, and change the holidays forever. Sally’s got a very tough decision to make. She cares deeply for Joey, but …

Fortunately, Sally has an economist friend named Molly. Molly suggests Sally decide what percentage increase in living standard she’d need to have with Johnny to be willing to leave Joey. After a week pondering this question, Sally tells Molly she’d need a 52 percent higher living standard give or take half a percent.

Molly says “Great! You just priced your love for Joey. It’s the same as your love for Johnny plus a 52 percent increase in your living standard.”

Sally says, “You economists are really something. You said I could price my love, if I thought about it hard enough, and I can! I’m thrilled to be able to put a price tag on my emotions. Trouble is I have no idea how to calculate my current sustainable living standard let alone the one I’d have with Johnny.”

“Ah,” says Molly, “I have just the service for you. A Boston University economist named Kotlikoff just started it through his company, Economic Security Planning, Inc. It’s called Fair Divorce Decisions. For a very small fee, he and his colleagues will calculate your current sustainable living standard with Joey and what it will be with Johnny. You just provide the data. They do all the work.“

“How do I verify the results?”

“You can see from the balance sheets and tax reports that everything is being properly calculated. They can also tell you how you’d do living on your own, including the alimony needed for you and Joey to have comparable living standards.”

Ok, I, Larry, apologize. I’ve put you in an infomercial. And I’ve also pulled your leg. I know Sally can’t come up with an exact price for leaving Joey. No one can. Our emotions are just too complex.

But, here’s the thing. Over half of us who get married are getting divorced. And we are generally doing so without remotely understanding the true living standard consequences of the settlements we’re reaching. Others of us are staying in very unhappy marriages because we’re assuming a much bigger hit to our living standards than would actually arise.

There’s no need for this. Our patented Economic Security Planner software can’t help Sally calculate her precise living-standard threshold for flipping husbands, but it can give her a pretty clear picture of the living-standard consequences of doing so. That’s not the case for the software being used by divorce attorneys and mediators. None of the divorce calculators on the market can figure out what a household can spend on an ongoing basis taking precise account of the myriad tax and Social Security benefit issues let alone cash-flow issues. Instead of calculating what you’ll be able to spend, the other programs ask you what you’d like to spend. My answer to such a ridiculous question is always the same – I’d like to spend $1 billion a day.

I started Fair Divorce Decisions because I a) understand the very major limitations of the financial tools (let me be blunt, awful financial tools) being used with/on divorcing couples and b) want to take the financial guesswork out of divorce decisions. Without the right tools no one can figure out the living standard hit from getting divorced. Nor can anyone decide whether they are getting a fair deal when it comes to their divorce settlement. And far too many couples are going to war because they are making completely different guesses about what they’ll each really get to spend after they split.

We just launched the service, but we’ve already helped one husband in a 25-year marriage decide it was too expensive to get divorced. We did so by calculating the dollar value of his living standard in his current marriage and the living standards he and his wife would experience based on the divorce settlement he had in mind. To his surprise, what he was proposing was far from fair. Once he saw his proposed alimony wouldn’t fly and that a fair level of alimony would cost him far too much, he decided married life wasn’t so bad.

We also helped a divorcing wife see that the settlement she was about to accept and thought was reasonable would leave her in very tough straits compared to her husband to whom she’d been married for decades. We also showed her how both she and her husband, once they divorced, could take full advantage of Social Security’s divorcee spousal and widow(er) benefits. And we determined that, for tax purposes, it would be much better for her husband to make alimony payments to her on a tax-free basis, i.e., that were no tax-excludable to him and weren’t taxable to her (since she would temporarily be in a higher tax bracket).

We’re now working with a very rich, unmarried gay man who wants to break off his long-term relationship. Although he believes he’s under no legal obligation to support his partner, he wants to do right by him. In this case that means giving the partner enough money to permit an adequate living standard going forward. We’re showing him precisely what that requires.

Our most recent client is a couple who are working with us jointly together with their divorce mediator. They are seeking an amicable divorce that achieves roughly comparable living standards with adjustments for the fact that one spouse is working intensely and the other is working only part time and that they will be occupying houses of very different values.

In each of these cases, our role is showing, not telling, remaining strictly neutral, and finding tax- and Social Security-efficient settlements that permit both parties to have higher living standards whether they stay together, separate, or divorce.

What really motivates me and why I’ve tried your patience with this infomercial is the big prize -- helping people get divorced without going to war. Divorce wars are far too common. They come at enormous financial and psychic cost to the partners and are absolutely horrible for their children. But far to often the fights are completely unnecessary because they are based on mistakes -- misunderstandings/incorrect presumptions about what’s really being offered, in terms of a sustainable living standard, by one party to the other. We can stop such wars and very quickly. This means we can help you or someone you know. Visit us at www.fairdivorcedecisions.com.