How an Ugly Old Man Can Marry a Beautiful Young Woman

What economists call an ability to make “compensating differences” is a valuable tool in everyone’s arsenal. If people are prohibited from doing so, they are always worse off. You say, “Williams, I never heard of compensating differences. What are they?”

Jimmy Soul’s 1963 hit song, “If You Wanna Be Happy,” explained the concept of compensating differences. His lyrics went: “If you want to be happy for the rest of your life, never make a pretty woman your wife. So from my personal point of view, get an ugly girl to marry you.” His point was that an ugly woman would treat you better. But more importantly, a less attractive woman’s willingness to compensate for her differences enables her to effectively compete with a pretty woman.

It goes the other way around, too. I’ve presented people with the following scenario: Suppose you saw a fat, ugly cigar-smoking old man married to a beautiful young woman. What kind of prediction would you make about the

During the 1930s, ’40s, and ’50s, one could not prevent whole neighborhoods in the north from going from white to black occupancy virtually overnight. This was before government anti-discrimination laws related to housing. You might wonder how poor, discriminated-against people managed to seize the land-use control of neighborhoods. They did it through the market mechanism. For example, there might have been a racially discriminatory landlord who rented his three-story brownstone building to a white family for $100 a month. Maybe six black families approached the owner with the proposition that if he cut the building up into six apartments, each family would pay him $50 a month. That would mean that he could earn $300 a month renting to blacks rather than $100 renting to a white family. The evidence suggests that landlords opted for the higher earnings. Black people simply outbid white families.

Compensating differences abound. Even though chuck steak is less preferred, it outsells filet mignon. Less-preferred Toyotas compete effectively with Mercedes-Benzes. Costume jewelry competes with fine jewelry. In each, the lower price compensates for the difference. You might say, “Williams, people are not cars, steaks or jewelry!” That’s true, but they respond to the same economic laws as cars, steaks and jewelry — just as people would obey the law of gravity the same way bricks would if they fell off the Empire State Building.

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