Attention Economy


Saturday, September 1, 2018

A Simple Cost-Benefit Analysis Lesson

From Washington Post’s Wonkblog: Shelled vs. unshelled pistachios: A cost-benefit analysis
“…we can't truly compare the costs of shell-on and shell-off pistachios without accounting for the indirect cost of manual shelling time associated with the former.
The simplest way to do this is assume that a person's time is worth whatever their boss pays them to go to work: If you make $10 an hour, an hour of your time is worth $10. So we can multiply a person's hourly wage by the fraction of an hour it takes to shell one cup of pistachios to determine their true cost per ready-to-eat cup when buying the shell-on variety. We don't need to run this extra step for the shell-off pistachios, which require no additional labor on the purchaser's part.
I found it took me almost exactly six minutes, or one-tenth of an hour, to manually remove the shells from one cup of shell-on pistachios at a casual pace. That means it takes 12 minutes of shelling time, or one-fifth of an hour, to transform two cups of shell-on pistachios into one cup of shell-off nuts.
Accounting for labor in this way has drastic effects on the true cost-per-shelled-cup of shell-on pistachios. If you make $20 per hour, for instance, shell-on pistachios work out to nearly $10 per shelled cup: $5.99 for the nuts, plus $4 in labor to remove the shells. If you make $40 per hour, the cost rises to roughly $14 per shelled cup. Recall that the cost of the shell-off pistachios remains the same, regardless of your hourly wage because you don't need to do any work to remove the shells.”