I get that you are coming from an economics standpoint, but there is a key difference between a business and a household: Businesses operate on an ROI basis. Households are almost purely expenses. As such, households deal more with a cash flow issue than anything approaching an ROI. Yes, I have heard all the arguments about what is your free time worth? Like several posters here have said, "I paid for the tractor with the first one/two/three jobs - the rest are free" That is cash flow/expenses talking, not ROI. If you got quotes for $40k of landscape work and bought a 20k tractor and got all that work done, you would be money ahead but it cost you your time. But then you now have $20k in extra money to use for a week at Disney, or maybe to just be able to afford to do the work at all - $40k may have been untenable. That is your call as an expense center...
People often give me the 'what is your time worth" question in similar discussions. I say my time is free. I do what I want, and this is what I want. It costs me nothing, in my mind. I am a salaried engineer, so I don't get overtime, and I can't really get more income from my free time from my work, unless I wanted a second (separate) job. And I don't. I already have that with my house build ...
Classical business economics don't apply rigorously to everything, even if they do get you thinking about the what and why of the things you are considering.
Well stated. Household economics are not the same as LLC economics.
I can however, think of quite a few things higher on my bucket list than spending $20K in savings "for a week at Disney"!
I think I'd go for a month in Bali for starters.
Old habits die hard, so when I perceive a teachable moment, I go for it. But Geez, some of you get defensive when it comes to your tractors.
Economists assume that consumers try to maximize their satisfaction subject to their income and time constraints, and firms try to maximize profits. The consideration of explicit
and implicit costs is relevant both for individuals and firms.
When you ask a farmer about his production costs for say, soybeans, he will focus typically on his explicit costs (seed fertilizer, herbicides, machinery, etc.) and ignore the value of his time, an implicit cost. And if he owns the land, he will ignore the rent that he could have obtained if he was not using the land himself, an implicit cost.
If you took ECON 101 in college, chances are that you were introduced to the concept of opportunity costs when your instructor discussed the costs of obtaining a college degree. In addition to the explicit costs (tuition, textbooks, etc.) of college, he/she would have discussed the wages you could have earned by going to work straight out of HS as an implicit cost of that degree. He/she would have added that the implicit cost of your time need not be measured in monetary terms. We use forgone wages in many of our examples because they are observable and measurable.
To say that your time is free is saying that that there is no scarcity of time. Time spent in a particular activity is time that could have been spent in other activities that you enjoy or find beneficial. Activities foregone are implicit costs. A day is but 24 hours, a constraint that is binding for everyone.
Speaking of ROI, consumers obtain benefits from their expenditures. Several of the posters in this thread have said that the benefits of owning and operating their tractors (via costs savings, convenience,etc.) have exceeded the costs of owning and operating their tractors. Hence, their tractor investments have a positive ROI according to their measurement of costs.
Steve
