Economy of Your Home Life with Economic Historian (and my dad) Clayne Pope — Episode 130

Let’s talk about basic economic principles that affect each of us and our lives with a world-famous economist.

Today’s guest is my dad Clayne Pope. He was an economic historian by trade (and worked on research with a nobel price winning economist). You can also read his BYU devotional here.

This episode was inspired by

Big thanks to our sponsor Family Routines. When everything seems scarce — sticking to routines can be a big win for you and your family.

In this episode

Scarcity, and how it affects our home life

What opportunity cost is and how it works in regular life.

Are you still getting the same benefit from the first dollar you spent?

How much do need for retirement?

Mitigating risk.

Other things that might interest you

My family finances posts.

Producer: Drew Erickson

Check out my other household tips podcasts:

Transcript

[00:00:00.130] – Hilary Erickson

Hey, guys, welcome back to the Pulling Curls Podcast. Today on episode 130, we are talking about economics and how economic principles affect our everyday life. Let’s untangle it.

[00:00:21.810] – Hilary Erickson

Hi, I’m Hilary Erickson, the curly head behind the Pulling Curls Podcast, where we untangle pregnancy, parenting, home and even travel. We know there’s no right answer for every family, but hopefully we can spark some ideas that will work for yours. Life tangled just like my hair.

[00:00:43.570] – Hilary Erickson

Hey, guys, before you get started, I’m giving you some pretty valuable information from a total expert here today. So in return, you could leave me a review because that’s how economics works.

[00:00:54.820] – Hilary Erickson

I think today’s guest has taught economics for over 45 years. If you went to BYU or BYU Idaho, or any of those local colleges, he wrote the American Heritage textbook. And I thought he had reached the pinnacle of Fame when we went on the submarine voyage at Disneyland, and the guy who let us on the submarine was like, “well, Hello, Professor Pope.” Like, I basically thought my dad was Johnny Carson because he was so darn famous. Today’s guest is my dad, Clayne Pope.

[00:01:21.910] – Hilary Erickson

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[00:01:51.790] – Hilary Erickson

Hey Dad! Welcome to the Pulling Curls Podcast.

[00:01:54.380] – Clayne Pope

Thank you, Hilary.

[00:01:55.670] – Hilary Erickson

I am sure that this goes right up there with working with a Nobel Prize economist, right?

[00:02:02.260] – Clayne Pope

It’s even better.

[00:02:04.150] – Hilary Erickson

Well, I mean, he is dead now, and I’m still alive. So there’s that that’s right.

[00:02:08.260] – Clayne Pope

If I could work with him today, that would be better than this. But go ahead.

[00:02:14.950] – Hilary Erickson

Okay. So, dad, you taught economics for how many years?

[00:02:19.870] – Clayne Pope

About 45. Something like that.

[00:02:23.280] – Hilary Erickson

So as long as I’ve been alive?

[00:02:24.620] – Clayne Pope

Yeah.

[00:02:24.990] – Hilary Erickson

No.

[00:02:25.590] – Clayne Pope

Before you were alive because you retired a few years ago.

[00:02:28.960] – Hilary Erickson

But you taught before I was born.

[00:02:30.440] – Clayne Pope

Yes.

[00:02:31.390] – Hilary Erickson

And your main economic historian, right?

[00:02:36.110] – Clayne Pope

Yeah.

[00:02:36.560] – Hilary Erickson

But all economists go off the same basic principles, right?

[00:02:40.610] – Clayne Pope

That’s true.

[00:02:41.600] – Hilary Erickson

Okay.

[00:02:42.170] – Clayne Pope

There’s a basic economic theory that we all start with.

[00:02:47.210] – Hilary Erickson

Okay. I asked my dad to come on and talk about how economics relates to our life at home because, well, I gratefully never took an economics class my entire life. I’m pretty sound on your basic economic principles. So go ahead, dad. What’s one of the principles that we can take in our homes?

[00:03:03.070] – Clayne Pope

I think we need to understand that economics is basically about how we make choices when things are scarce and we live in an environment where everything is scarce, that we have to decide how we’re going to use our time, how we’re going to spend our income. That’s what economic studies. The first basic principle, as you remember from all those discussions at dinner is opportunity cost.

[00:03:36.520] – Hilary Erickson

So many discussions.

[00:03:37.940] – Clayne Pope

How many times have you heard that term opportunity cost? That’s basically the way to measure cost, which is the cost of anything, whether it’s time or a pizza or whatever, is the next best alternative. So if we decide to have spend an hour laying on the couch sleeping, we can say, what’s the cost of doing that it’s what we would have done with that hour if we weren’t on the couch sleeping. And there are times when we need to think about what’s the opportunity cost of various choices that we will pay.

[00:04:18.000] – Hilary Erickson

I love that one. This is a lot like informed consent, my pregnant lady. Like, what’s the alternative? Right. You have to think about it all the time.

[00:04:25.260] – Clayne Pope

Yes. By now, I would say that most of your podcast listeners know something about the opportunity cost of having a baby, and it can be really high, but it’s worth it because of the returns that you get for making that particular choice.

[00:04:43.300] – Hilary Erickson

Mostly, sometimes you have to go on that baby’s podcast later on, though.

[00:04:47.720] – Clayne Pope

Yeah. There’s downsides to everything.

[00:04:51.430] – Hilary Erickson

Okay. Opportunity class is a big one. And I think a lot of people.

[00:04:55.530] – Clayne Pope

I mean, are we going to talk about no such thing as a free lunch that’s essentially expressing the idea that there’s always a cost because you’re always giving something else up for every choice you make. The idea that there’s no such thing as a free lunch is telling you, even though others tell you this is free, it’s not free because there are alternatives that could be considered. Yeah.

[00:05:20.440] – Hilary Erickson

And that is definitely that probably is the most important economic principle I think I learned in my whole life because so often, especially as an influencer, I’m offered free, quote, free thing. And there’s always an opportunity cost. But it’s all that.

[00:05:35.960] – Clayne Pope

Of course, other people are always trying to convince us that something is free or it’s cheap or it doesn’t have a cost. But it always does.

[00:05:45.270] – Hilary Erickson

Yeah. My dad always tried to remind my mom that she would say, Well, I saved XYZ when I went to the grocery store, and he would say, but you spent $600 on flour or whatever. Yeah. Just because you saved because the grocery store loves to tell you how much you saved. You still spent.

[00:06:01.850] – Clayne Pope

That’s right. You still have cost.

[00:06:03.660] – Hilary Erickson

All right. Next sound economic principle.

[00:06:05.810] – Clayne Pope

It’s really important to collect the information that you need to make good decisions. It’s really easy in our world today to keep track of where we spend the credit card records. Everything all you’ve got to do is put it into the categories. And you sort of know we spend this much on groceries. We spend this much on gasoline and so on and so forth. You’ve got to have those records to evaluate the way you spent your money. And once you have those records, then you can ask an important question, which is you want to get to the point where the last dollar that you spend on each category gives you roughly the same benefits. So are we spending too much on meals away? Are we spending too much on streaming by subscribing to every platform that we can find? Those are questions that you can consider if you know where you have spent your money.

[00:07:10.740] – Hilary Erickson

So the idea that you have one streaming platform and you love it, right? Because there are so many new shows for you to watch. Yada yada. Like when Netflix was brand new, you just felt like the world was your oyster. You could watch all these different things, but by the time you buy your third or fourth and you’re on Hulu plus, is it as exciting? Is that the idea here?

[00:07:29.970] – Clayne Pope

That’s part of the idea, because as you buy the second, 3rd, 4th, that last one you’re saying, what are we watching on here? Reruns of all in the family or of Seinfeld? Is it really worth it? It might be if those reruns are really important to you, but you at least have to ask the question.

[00:07:50.510] – Hilary Erickson

Yeah, I like that because some of our spending, especially for those types of subscriptions, just becomes very automatic. Right. So we’re looking at that credit card.

[00:07:59.450] – Clayne Pope

Yeah. Especially in this day where the credit card, unless we look at the statements, we don’t know what we’re spending. I’m guilty of that particular problem, but I’m old, and that’s my excuse.

[00:08:13.990] – Hilary Erickson

Yeah. I’m so surprised by people who for months have paid for a subscription, didn’t even know. And then the credit card somehow they glanced at it and they’re shocked. So that’s a good one.

[00:08:26.690] – Clayne Pope

One of the most difficult things to figure out that is an economic decision is how much we should spend now and how much should we save for the future? There is a tendency to just keep spending until we spend all of our income. The problem with that is that there’s going to be about 20 years of our life at the end of our life. For most of us, we never know exactly what will happen. But for most of us, we’ll have about 20 years in which our income will be very low because we’re not working anymore. That’s from about age 70 to 90 or 65 to 85, we have to figure out how much we’re going to save when you are your age. I won’t give that away on the podcast, but I’m 45. How much do you want to save when we’re still earning a good income so that we have something to spend when we’re in retirement. And that’s a very tough decision, because we don’t know how long we’re going to live. We don’t know how much we’re going to want to consume as we get into older years. It’s a decision that a lot of people postpone and don’t think about that’s.

[00:09:39.350] – Clayne Pope

Probably a mistake, because the things you do when you’re young will have a big effect on how much money you have available for yourself in retirement.

[00:09:51.310] – Hilary Erickson

So like how young?

[00:09:52.500] – Clayne Pope

I would say as soon as you have consistent employment if you’re working at McDonald’s while you’re going to school, you’re not going to think about retirement at that point. But as soon as you’re working as a nurse or a doctor or a lawyer or working for Costco, you should decide how much do I want to save? And companies have incentives for you to say you should obviously take advantage of those, but you have to figure out how much do I want to save. You can go on the computer and find all kinds of programs that will calculate what your income will be in the future. If you save a certain amount, you can use those. But it’s a tough decision. And one you have to spend some time thinking about. Most people don’t do that, but they should.

[00:10:42.510] – Hilary Erickson

Yeah. And at least be mindful of it. Right. Because when you’re young, money is going to be tighter than it’s going to be later. Most likely, although you never know, you just never know.

[00:10:52.160] – Clayne Pope

Yeah, that’s right. And it is tough. But the reason to think about it when you’re young is that a dollar put into your retirement fund when you’re 25 is worth lots more than the dollar that you put in at $65. Yeah. That dollar at 25 will be 5, 6 times multiplied for the dollar at $65.

[00:11:17.320] – Hilary Erickson

Yes. And I have another podcast with Joel where he talks. Well, I guess that’s one. It’s on College saving, but we should probably do one on retirement savings, too. Yeah, because that’s more important. Okay. Another sound economic principle. We can all stand by.

[00:11:30.150] – Clayne Pope

There’s always risk in life, and there’s always economic risk when someone tells you there’s no risk associated with this investment or with this decision, et cetera. They’re probably fibbing to you because there are always risks involved with investments. There’s always risk in the way that you spend your money. There’s risk in life because you don’t know how long you’re going to live. So we have to make some decisions to figure out how we’re going to deal with that risk. That’s what insurance is about. Insurance is a way of paying the insurance company to take some of the risk away from you. But in order to get the insurance company to do it, you have to pay them.

[00:12:15.600] – Hilary Erickson

Yeah. I mean, mitigating risk. We’ve had lots of conversations you and I about mitigating covered risk like so many people want to eliminate the risk, and you can’t do that, especially if you’re going to drive your car. It’s a risky business.

[00:12:26.850] – Clayne Pope

Yeah. And you don’t want to eliminate all risk.

[00:12:29.980] – Hilary Erickson

Well, because then you eliminate all the fun.

[00:12:32.120] – Clayne Pope

That’s right. And which leads to another principle, which is the end purpose of all economic decisions is to make you happier. It’s not to pile up a bunch of money in a bank account. It’s not to make the highest income you could possibly make it’s to try to help you to be as happy as you can be under the circumstances that you happen to have. Yeah.

[00:12:58.720] – Hilary Erickson

So is that money making you happy, or is it making you miserable? The things that you’re choosing, right. What’s your happiest thing you spend money on right now, dad?

[00:13:05.660] – Clayne Pope

Happiest thing I spend money on right now? It could be my grandkids. I love giving them money.

[00:13:13.270] – Hilary Erickson

When are you sending your grandkids money?

[00:13:16.630] – Clayne Pope

One of the things you learn as you get older is that your capacity to do things does diminish. And that tells you that some things you need to do earlier in life because as you get old, they’re going to be harder. Unfortunately, when you’re young, you don’t have as much income as you usually have when you’re old. But when you’re old, using that income is a little harder.

[00:13:42.350] – Hilary Erickson

Yeah. I thought it was your housekeeper if I was going to guess.

[00:13:45.630] – Clayne Pope

No, the housekeeper scares me a little bit because I’m a shy person. As you know, I think the hardest choices that we make are about time, not money. But the same principles apply to the choices that you make about time. Am I spending enough time on this? Am I spending too much on that? Those are tough choices. Should I be spending more time now to make my time in the future better? Tough choice.

[00:14:16.120] – Hilary Erickson

I agree. I think as a kid, you feel like you have all this time in the world. Right. And even as a young person.

[00:14:22.970] – Clayne Pope

Yeah, you can’t wait. And as you get older, it seems as if time just continuously speeds up and gets faster and faster. So the time between birthdays is about a week and a half or something.

[00:14:39.860] – Hilary Erickson

All right. Any more economic principles in that bag of tricks of yours?

[00:14:43.160] – Clayne Pope

Well, we could talk about a lot of different principles, but I think those are the basic ones. It all comes from scarcity when things aren’t very scarce. Well, here’s a principle that you might want to include. Scarcity makes all of us behave a little more selfishly as things become more scarce. Like, say, they’re starting to be lines at the gas station or people can’t find the special toy for Christmas. You got to watch yourself because the selfishness in you is just going to boil out and you’ll find yourself wanting to kill or maim other people because of the scarcity being so intense. At that point, you’ll find that with your children, you’ll find it true with yourself.

[00:15:34.440] – Hilary Erickson

Yeah. What do you do to fight the selfishness when you think something skin scarce.

[00:15:39.220] – Clayne Pope

Just recognize that it’s there. And this is probably not as important as you are making it, because the additional benefits your life from that toy or from this extra gallon of gas is not going to be all that great.

[00:15:56.380] – Hilary Erickson

That’s a good point. Although if I had run out of toilet paper, that really would have limited my life.

[00:16:00.830] – Clayne Pope

I think yes, I went to Costco yesterday. And of course, I always go by the paper stuff there in the back. I got some toilet paper and I got some paper towels, got home and found we had an enormous stock of both of them.

[00:16:17.550] – Hilary Erickson

I had just put them on your freezer when I was there last time. Have you forgotten them?

[00:16:22.510] – Clayne Pope

No.

[00:16:23.150] – Hilary Erickson

Okay.

[00:16:23.640] – Clayne Pope

It’s just that I had an automatic reflex to buy the toilet paper. I knew we had it at all.

[00:16:29.210] – Hilary Erickson

Yeah, you do. You have quite a lot. So no need to be selfish there.

[00:16:33.630] – Clayne Pope

Yeah. All right.

[00:16:34.370] – Hilary Erickson

Awesome. Well, I have to tell you one of my best blog posts on finances, not particularly a finance blog. It’s about the best financial advice you ever gave us where we were so poor. And I think we had a giant tax bill. And you were like, Well, Hillary, I have some really solid economic advice for you. And I was like, yes, I am going to learn how to make money. And you said, well, you can either spend less or make more. I was like, what? That is not helping me at all. But it’s really the only way that’s how the economy works, right.

[00:17:05.960] – Clayne Pope

I know that’s why economics is such a depressing subject is because we just deliver hard news to everybody, make more or spend less.

[00:17:17.850] – Hilary Erickson

Yeah. That’s really all you can do that’s right. When you boil it down. It’s disgusting, but true and want less, right. Because this isn’t really the true joy of not feeling scarcity. You just tell yourself you don’t really need that.

[00:17:30.630] – Clayne Pope

Yeah. And another mistake people make is they think they want something because they see other people that have it and they think they should have that and it will make them happy, even though it’s not something they really care about. It’s just imitation.

[00:17:46.730] – Hilary Erickson

Yeah. I mean, of the things that I’ve bought in my life that have really made me happy, there’s probably not a lot.

[00:17:52.620] – Clayne Pope

Well, a lot of the things we buy are just for maintenance.

[00:17:56.010] – Hilary Erickson

Yeah, that’s true. Right.

[00:17:57.750] – Clayne Pope

Toilet paper, toilet paper.

[00:17:59.490] – Hilary Erickson

What’s? The thing you’ve bought that made you the happiest. And you cannot say a child or a grandchild, probably potato chips.

[00:18:07.570] – Clayne Pope

I don’t know.

[00:18:08.630] – Hilary Erickson

Yeah, I really like my car. That’s about it. That’s the only thing that’s coming to mind. All right, dad, thanks for coming on. Was this miserable?

[00:18:18.470] – Clayne Pope

No, it was fine. It was fun.

[00:18:21.240] – Hilary Erickson

All right. Thanks for coming on.

[00:18:22.670] – Hilary Erickson

Okay. I hope you guys enjoyed that episode. I, of course, enjoyed that episode because I love talking to my dad. He’s one of the smartest people I know, and I won the lottery of dadness. When I went to BYU, I can’t tell you how many people came up to me and told me how much they loved my dad. And that always made me feel so good. And he’s just such a great guy and has so many good ideas. And growing up with him, you learned so many economic principles that relate to all of your life, right? Like making choices. And anyway, I just thought he has so much good advice for all the things that we’re dealing with right now; scarcity, and you name it. It all comes down to economics, which I absolutely hate because it is not a class I ever wanted to take and thankfully didn’t. But I pretty much know all the principles anyway. Thanks for coming on, Dad.

[00:19:06.610] – Hilary Erickson

Do not miss next week’s episode, we are talking about routine ultrasounds and pregnancy, so the opportunity to cost of that is a little bit of time and money. But man, seeing your baby, that’s really worth it, right.

[00:19:17.090] – Hilary Erickson

Thanks so much for joining us on today’s episode. We know you have lots of options for your ears, and we are glad that you chose us. We drop episodes weekly, and until next time, we hope you have a tangle free day.