Cost of owning a tractor

[gladehound]

I Bought my first tractor for $8200 and sold it 8 years later for $7000 + free metal fab on various projects. Because I owned the tractor, I did work with it that I otherwise would have paid ~$15,000 to have done. I also made several thousands of dollars in "gas money" from neighbors for whom I did favors. The tractor also saved me hours and hours of labor that I would not have had hired out, giving me more time to do other things.

It improved the quality of my family's lives. I gave many a hay ride to my daughter's and their friends, and taught my older daughter to drive it. I remember how proud she was the first time she got mulch with it for her mom. I also remember my wife asking for a ride after she heard that country song that goes something like "... we could take a ride on my big green tractor..." as well as many other fond memories. My younger daughter knew that tractor all her life and cried when I told her I sold it. But she smiled when I told her I sold it to my cousin who lives 7 miles away.

Besides basic fluid and filter changes, it needed repair one time. The part cost $35 and I got a free 2 hr education when I replaced it myself (some people actually pay lots of money for less useful educations!).

I probably also avoided pain and suffering from manual labor. However, there is actually no way of knowing that.

There are infinite ways in which I could calculate the cost of my first tractor, but it is not worth the time to do so.

I am fairly sure that I am ahead for having owned it.

 

[smstonypoint]

Steve,

"all models are wrong, but some are useful". - George E. P. Box

I mention this quote to remind you that regardless of how perfect you try to be in your economic assessment, it will be wrong. And in the end, probably less useful than the assessment of those you are trying to "teach" because unlike them, you are not in a position to place value on the tradeoffs or know what is the appropriate comparator.

Best regards,

Ron

Ron,

I made no value judgements. I am the best judge of how I can maximize my well-being subject to my constraints, as others are their own best judges of how they should spend their time and money. My only point is that consideration of implicit costs adds useful information as individuals make their own decisions.

Steve

 

[IslandTractor]

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

I don't think we are defensive, it just doesn't seem logical to insist on valuing our personal time operating a tractor as a "cost". That is especially the case when operating the tractor for one hour saves four plus hours of either backbreaking work or hiring out a job instead of using your tractor. If there is a "cost" of my time operating a tractor, I have to compare it to what alternative I have to get a certain job done. If I consider that it will take me four times as long on average to do a task without the tractor, then perhaps my labor cost using the tractor should be quantified as a negative number or "profit". I do appreciate and generally understand opportunity cost. In this setting however (non commercial, weekend work, escaping honey do's, no ball game to watch on TV etc) where necessary tasks are being done, it seems to me that operator time (i.e. my time) has no particular "opportunity cost" when operating the tractor.

Case in point: Last week we had a water leak in our community water system (small private system for fifteen homes). To fix it required digging to locate the leak then digging out an area to work in to fix it. Prior to having my tractor TLB, this would require three or four guys digging a 3ft x 10ft x 5ft deep pit to isolate the leak. It would take almost a day to just do the digging by hand. Call it 16-20 man hours. I did it with my backhoe in about an hour (being careful not to hit the line). What was the "opportunity cost" of my time in that setting? I saved myself and three others about 3 to 4 hours each of shovel work that had to be done. I couldn't watch TV or sit on the porch relaxing, the water leak had to be fixed. I'd argue that my "opportunity cost" was negative three hours (a negative cost or credit) as I was able to finish the task and get back to drinking beer and watching a ballgame three hours sooner than if I did not operate the tractor.

 

[oldpilgrim]

You cant measure the cost/roi of the pleasure you get using your tractor.

 

[Sysop]

You cant measure the cost/roi of the pleasure you get using your tractor.

...and even more, someone else's... Everyone's "economic models" they follow are based on what works for them. What works for one most certainly will lead another to failure. To each their own...

 

[smstonypoint]

I don't think we are defensive, it just doesn't seem logical to insist on valuing our personal time operating a tractor as a "cost". That is especially the case when operating the tractor for one hour saves four plus hours of either backbreaking work or hiring out a job instead of using your tractor. If there is a "cost" of my time operating a tractor, I have to compare it to what alternative I have to get a certain job done. If I consider that it will take me four times as long on average to do a task without the tractor, then perhaps my labor cost using the tractor should be quantified as a negative number or "profit". I do appreciate and generally understand opportunity cost. In this setting however (non commercial, weekend work, escaping honey do's, no ball game to watch on TV etc) where necessary tasks are being done, it seems to me that operator time (i.e. my time) has no particular "opportunity cost" when operating the tractor.

Some may enjoy mowing their lawns, but I am not among their number. It's a routine and monotonous task for me. I gave up a serviceable lawn mower for a ZTR and cut my mowing time by about 50%. That's time that I can now spend on activities that I consider more beneficial/enjoyable. For me, the increased explicit cost was more than offset by the decrease in the implicit cost of my time. However, the 1.5 hours I now spend mowing could be spent taking my Lab to the creek for a romp, participating in TBN, reading economics blogs )), etc.

In your example, the tractor saves four hours of your time, an implicit cost savings. But the one hour of time you spend on the tractor still has an implicit cost -- that's an hour that you could spend in another activity.

Steve

 

[dstig1]

Steve, I get the econ 101 points. I actually took a lot more than that in college as we had a couple great instructors. But in my 25 years since all that I have come to realize a few things. For one, I wasn't even talking about tractors, just decisions for a household. So I am not defending mine, no matter how much it has helped. I have learned over the years that it is very hard to find someone who will take the care to find the problem and solve it like I do. It will sometimes take me longer (I had my crappy Honda down for 2 months trying to figure out the problem, but a lot of that was dead time as i am still building a house, and so a bit busy...) Still fixed it for half of what it would have cost me for a decent mechanic). And this is my point - marginal utility/opportunity cost assumes equivalence in outcome. I get better results at less cost when i do the work myself. If i don't get good results, I can improve and fix it (but that costs more time). And if I like doing it? It does not fit well in the models... There are times where paying for it makes sense. There are times where buying better equipment makes sense (your mowing example), but households do not react in the same manner as businesses do to these factors. Many people would like to spend less time mowing, but cannot justify the expense of a faster mower as it is not an investment but an expense. Opportunity cost all over that, baby.

 

[masalser]

One thing that occurs to me reading this thread is that every time I hire something out or attempt to do so I end up spending significant time explaining the job to the person I am trying to hire. Often I can avoid that list time by simply doing it myself. It is pretty rare that a project doesn't require the owners input and that ends up costing time

 

[ultrarunner]

^^^ Spot on.... often say by the time I explain, hire and keep tabs... often the job could have been substantially completed.

 

[Duwop]

With all due respect can I get one college credit just for reading this thread. It has been a good read and I even learned something. I went to work out of high school but my wife constantly reminds me that had I gone to college perhaps I may not have had to work so hard during life. Thanks for the economics lesson.