It has been over 11 years since I posted on how asymmetric loss functions affect my behavior. Recall that many situations are situations with asymmetric loss functions: the asymmetry is that a mistake in one direction has a much lower cost than a mistake in the other direction.
I faced this situation big time in shopping in Kenora, Ontario Saturday evening for food to use at my cottage in Minaki. Minaki is a good 40 minutes one way from Kenora. So if I buy too little of something or don’t buy any because the chance I’ll use it is low, the loss from making up for it by driving into Kenora is huge. The gasoline cost is rounding error. The major cost is my time. I get just a little under 2.5 weeks at my cottage each year and so an extra trip to Kenora takes away very valuable cottage time. I can use the time to swim, which I love even though the water temperature is only about 63 Fahrenheit, visit friends, read and fall asleep in the verandah, and listen to the wildlife.
I thought I might have enough bacon but I wasn’t sure, so I bought another package. I could have bought 1.5 pounds of ground beef but, to be safe, I bought over 2 pounds. Those are 2 of about 5 or 6 examples. I’m a fairly good planner and so my guess is that at the end of trip I’ll have not much more than US$40 of food extra. Also, since I like all of my neighbors (oops, I’m in Canada, “neighbours”) a lot, the $40 is an overestimate of the net cost to me because most of my overage will be useful to my neighbours.
The pic above is me in the water by my cottage. The water this year is higher than it has been since I started going to the cottage in 1951. Thus the fact that I’m wading to get to the gangplank that goes to the dock.
READER COMMENTS
Garrett
Jul 12 2022 at 9:55am
Reminds me of how some people will complain that the US (or whatever western country you prefer) “wastes” so much food. Food is cheap, but food shortages are one of the worst things that can happen to a society. It pays to have a lot of slack in the system for when supply get strained like during the beginning of covid.
nobody.really
Jul 12 2022 at 10:48am
In the US, our Dept of Agriculture (USDA) estimates that 30-40% of food is “wasted,” and has established a goal of cutting waste by 50%. This has become a favored cause for my wife and my neighbor. They chide me for my habit of buying food in large quantities at Costco/Sam’s Club because some of the food may spoil before we consume it all. They prefer buying lettuce in small plastic bags, on the theory that this will reduce the amount of lettuce they waste. I argue that lettuce is cheap and I’d rather minimize the waste of money, which I suspect is a better measure of economic waste overall.
(I also chide them about how their strategy results in more plastic bags being produced and discarded—but I’m less confident about that objection. Allegedly society is trying to reduce carbon emissions by sequestering carbon (CO2 in particular) underground. But doesn’t creating plastic also sequester carbon? The fact that plastic biodegrades slowly isn’t a bug; it’s a feature!)
But to Henderson’s point: I dispute that I waste food. Rather, the food I buy benefits me even if I don’t consume it all—because it provided me with an option to consume it conveniently. True, the distance I travel to the nearest grocery store is less than the distance Henderson would travel from his cabin, but I still value the opportunity to minimize the number of those trips. Every wilted lettuce leave can go to its grave knowing that it served its purpose just as much as if I’d eaten it; they serve who only stand and wait.
Tangentially related point: Why would the USDA adopt the mission of reducing food waste? The organization exists to promote the agriculture industry. This is why USDA, and not the Department of Health and Human Services, administers the Supplemental Nutrition Assistance Program (SNAP) (formerly known as the Food Stamp Program), the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), school lunch programs, etc.—they’re promoting the sale of agricultural products. The more food that gets wasted, the more food that gets sold, right? I never see OPEC promoting fuel efficiency standards….
nobody.really
Jul 12 2022 at 10:53am
Ha! Garrett and I had a similar reaction to Henderson’s post, but he beat me to the punch.
Mark Brophy
Jul 12 2022 at 4:13pm
Maybe you could sell some of your surplus water to the United States. They’ll pay a high price.
MarkW
Jul 13 2022 at 7:49am
There’s plenty of water in that area of the U.S. too — the parched parts are on the other side of the Rockies.
john hare
Jul 12 2022 at 5:45pm
Sounds much like my decision process on ordering concrete. Every cubic yard I over order costs me about $150.00-$160.00. (yes I remember it being 1/3 of that) But if I under order, I will have to wait on a truck to be available to deliver the shortage and I will be paying a stiff short load charge. Plus a possible QC issue of a non-continuous pour. Plus annoying the employees and paying overtime for the difference. Many people have attempted to get me to tighten the margin, but they don’t understand the trade offs. These are quantity decisions i make several times a week.
Also it screws up scheduling for the concrete supplier, which often hurts other of their customers, which means my average level of service from them deteriorates. Not everything follows from the top line.
MarkW
Jul 13 2022 at 7:40am
I wish I could convince my wife. When we head up to our cottage for a few days, we try to bring the food we’ll need with us. But she has this odd aversion to bringing something and then finding out we already had it. This is apparently really bad in a way that I just can’t grasp. So she’ll consider and reject bringing things if she thinks we already have some up at the cottage. Last time she packed all the fixings to make sandwiches…except for any bread or buns because she thought we still had left some in the freezer. Lol. First world problems, I guess.
Henri Hein
Jul 13 2022 at 11:49am
Always wearing a helmet when you rock-climb.
Related: always yelling “rocks” if you dislodge or see any rocks that go falling down a slope or cliff. I was hiking on Cone Peak with some people I hadn’t been out with before. We were scrambling over on its north side when some rocks went tumbling. I instinctively yelled “rocks.” The others made fun of me and called me a chicken little. It might have seemed a little funny, since there was clearly nobody else in that area. I still say the action is correct. You should always yell out the warning on instinct. If you make it a judgement call and try to think about if there is anyone below, you will sometimes make mistakes. To me it seems the cost of always yelling “rocks” is negligible, as long as you can soak up the embarrassment when people around you don’t get it.
Henri Hein
Jul 13 2022 at 11:50am
PS: Thanks for the term, David. I had thought about this type of evaluation before and remember thinking: “I’m sure economics has a term for this.”
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