Two can live as cheaply as ?

I have a question about how this assumption works. When I
use the assumption that Two can live as cheaply as Two, I get a discretionary
spending number that 10% greater than the assumption that Two can live as
cheaply as One. This is opposite that what I would expect which is
if two can live as cheaply as one, you should have more discretionary income,
not less. Please explain. Thank you.

Comments

I also found this counter intutive result. Would appreciate understanding why this happens.
Thanks
James

dan royer's picture

Yes, this language to express "economies of scale" can be confusing. If two live as cheaply as 1.6 then this is revealed in our program by taking the per-adult living standard times 1.6 to equal the discretionary spending. Actually the per adult living standard does go up when you scale from 1.6 to 1. And the opposite. But the discretionary spending (not per-adult living standard) might go down because insurance costs can go up to protect the per-adult living standard advantage of an economy of scale achieved by both being alive and living together.