Economists and others of that ilk frequently attempt to quantify human behavior into dollars and cents terms so that they can assess the costs and benefits of particular actions. To be sure, it’s an inexact science–some estimates aren’t easy to make.
But some efforts are better than others. William Shughart II, in an article entitled, “Daylight saving time costs nation $1.7 billion,” provides us with an example of the latter. Here he offers the rationale behind his $1.7 billion figure:
Although it is unclear what benefit Americans derive from adjusting their timepieces twice a year, the costs they bear are clear. As the Benjamin Franklin adage goes: Time is money, and time spent resetting clocks and watches is time that cannot be devoted to other, more valuable uses. Switching between daylight saving and standard time has what economists call an ”opportunity cost.”
Economists typically value the opportunity cost of a person’s time at his or her wage rate. The U.S. Department of Labor’s Bureau of Labor Statistics reports that the average American’s hourly wage was $17.57 in September 2007. Assuming that it takes everyone 10 minutes to move all of their clocks and watches forward or backward by an hour, the opportunity cost of doing so works out to $2.93 per person. Multiplying that number by the total U.S. population (excluding Arizona) yields a one-time opportunity cost for the nation of just under $860 million — or, to be more precise, $858,274,802. Since clocks must be changed twice every year, this back-of-the-envelope calculation must be doubled, to approximately $1.7 billion annually.
Shughart bases his estimate not on what people actually have to pay to change the time (an accounting cost), but rather on their supposed “opportunity cost” to do so.
According to Wikipedia, opportunity cost is “the cost incurred (sacrifice) by choosing one option over the next best alternative.”
For Mr. Shughart’s estimate to be accurate, every American needs to be faced with the choice of either (1) working an extra 10 minutes, or (2) setting his or her clocks.
The vast majority of Americans are NOT forgoing time they would otherwise be working when they set clocks on Saturday night or Sunday morning. Thus this calculation misses the mark.
UPDATE: A recent study on electricity usage in select Indiana counties suggests daylight savings time slightly increases energy consumption:
We found based on the natural experiment in Indiana that contrary to the conventional wisdom, daylight saving time … decreases consumption for artificial illumination but increases consumption for heating and cooling.
The magnitude of our estimate (for increased usage) ranged between 1% and 4%.
But the researchers acknowledge that the net energy consumption effect of the time change may be different in other parts of the United States.