Exchange Rates

October 10, 2010
Posted by Jay Livingston

Viviana Zelizer has a new book coming out in a week: Economic Lives: How Culture Shapes the Economy (or what’s left of the economy). I got an e-mail about it from Amazon. They’ve got me pegged.

Will I spend $23.62 for the book? If I thought rationally about money, I would consider what else that $23.62 could buy. But nobody thinks about money with perfect rationality. Dollars are fungible, but not completely so. They have a different value in different sectors of life and do not always flow easily from one sector to another. Exchange rates between sectors are idiosyncratic and rarely specified.

I was reminded of this yet again by Jacob Avery’s recent paper on poker players. Is it rational to bet an amount greater than your weekly paycheck on the turn of a card or the outcome of a baseball game? It’s irrational only if money is perfectly fungible from the world of gambling to the world of everyday living. But it isn’t.

The gamblers I knew would frequently say that “gambling money” was “sacred.” In other words, there was such a thing as gambling money, and it was different from other moneys. It fell under a different set of rules and valuations.

Here’s a slightly different example though also from the world gambling. It’s from a “This American Life” show originally broadcast in November, 2003.* The reporter is Mary Beth Kirchner.

This 2:20 excerpt is from a story about a limo driver in Las Vegas. He is a good blackjack player. Yet he will leave the table, where he’s making a bundle, so as not to miss the peak hours for catching fares, even though these will net him less money than blackjack:



Here’s a transcript from the last part of the clip:

JOE: I was playing about like $2000 a hand. And I told the doorman, “If you get a good ride, like to the golf course, come and get me,” y’know, like $75. Anyway, he came up to the table and told me, “Hey, I got a ride” Seventy-five dollars. The people in the pit, they all think I’m nuts, y’know. I just stopped.. I left, I took my money, and I ran down to take the guy for $75, and there I am playing two grand a hand.

I try to separate the two. One has nothing to do with the other.

MARY BETH: I don’t understand that.

JOE: I know. Nobody does.

 MAURY BETH: Do you understand it?

JOE: I don’t. I just. . . .Gambling to me is gambling, work is work.

Nobody understands it? Viviana Zelizer does. So do most people, at some level. They know that their treatment of dollars is not universalistic They just don’t write books about it.


*This is my first try at embedding an audio clip. If it doesn’t work, you can go to the full This American Life podcast (here): The story begins at about the 23 minute mark. The part I excerpted here begins at about 33:20.