The diseconomies of do-it-yourself.

• Author: Murphy, Ryan H.
• Position: Essay

Do-it-yourself (DIY) is the performance of a household task by oneself instead of hiring an outside party to perform it. Examples include making home repairs, moving, cooking, cleaning, and doing auto repair. Many of those who partake in DIY implicitly reject the idea of comparative advantage, claiming that you can save money by avoiding markets. In this short article, I argue that DIY reflects antimarket bias (see Caplan 2007), or the inborn tendency to view transactions as zero or negative sum. Under this intuition, one party gaining is evidence that another party lost. This is why individuals attempting to act prudently and responsibly make decisions that render them systematically worse off. Antimarket bias as conceptualized here is related to the argument by Antoine Beretti, Charles Figuieres, and Gilles Grolleau (2013) that monetary incentives create repugnancy costs. There are also parallels between how economists should view DIY and how they already view sunk costs.

This definition of do-it-yourself is to be distinguished sharply from what has been confusingly called the "do-it-yourself economy" (Matthews 2015), a recent trend that involves individuals pursuing their comparative advantage via self-employment. What I claim has no bearing on the "do-it-yourself economy."

The magnitude of DIY is difficult to measure. It is part of the shadow or underground economy, which is difficult to measure generally. Friedrich Schneider and Dominik Enste caution against defining the underground economy too generally and including DIY in it because DIY reduces the division of labor; they give the example of a doctor painting his own apartment (2013,150). Andreas Buehn, Alexander Karmann, and Friedrich Schneider focus solely on DIY "capital formation" (as opposed to DIY everyday tasks) and find it to be approximately equal to 5 percent of gross domestic product in Germany as of2005 (2009,718). (1) The authors emphasize that the incentive for DIY may be reduced via a reduction in regulation and taxes, and on the margin that claim is almost certainly true. However, it is far easier to document the stated motivation for avoiding market exchange than the stated motivation of the top marginal tax rate.

The focus of this paper is the belief that avoiding market exchange "saves money" or is otherwise prudent, although other interpretations are also considered (the "saves money" interpretation is also closest to an economic hypothesis). As of June 2016, a Google search listing pages that contain the phrases "save money" and "diy" yielded more than 8.4 million results. At the time of this search on June 17, 2016, the top-five results were "50 Nifty Tricks for Big DIY Savings" at thisoldhouse.com, "Cool Things to Make at Home That Save Money" at diynatural.com, "65 Tips to Save Money through Self-Reliance" at motherearthnews.com, "When You DIY, How Much Do You Save?" at houselogic.com (the subtitle of this article is "When You Factor in Return on Investment, You'd Be Nuts Not to DIY"), and "Make Your Own Everyday Items and Save Money!" at quickenloans.com. This pattern continues for dozens of pages of results. Motivations besides saving money are possible. Specifically, this paper addresses whether DIY is simply a consumption good. Deeper investigations into motivations other than the "reductionist" classification of a "consumption good" can be found in Williams 2008 as well as in Wolf and McQuitty 2011. (2)

Aside from the idea that avoiding market exchange saves money, the rationale for DIY that is best supported by microeconomics is the existence of transaction costs. Hiring labor to perform simple household chores that are not necessarily one's comparative advantage is very often too costly to be worthwhile. However, individuals may perform for their household some DIY tasks that are elements of their comparative advantage, without selling their labor in markets in exchange for performing those same tasks, due to the presence of transaction costs in markets. One cannot freely choose to work in exchange for wages at any point in time because reality has frictions. DIY as conceptualized somewhat relentlessly in terms of transaction costs, as opposed to what "saves money," is the more cognitively difficult but a better heuristic for determining labor allocation within a household. This reasoning is a special instance of applying work by Ronald Coase (1937).

In the next section, I present the problem in a more formal way with respect specifically to the interpretation of labor supply. Then I frame the issue in terms of antimarket bias and discuss how that bias could relate to repugnancy costs associated with market transactions.

Hobbies versus Work

Speaking of opportunity cost, mine is so low that my economic rent from my job is greater than my salary.

--Dwight Lee

When asked, most workers indicate they enjoy their job. According to one survey performed by Gallup, 91 percent of those asked responded that they either like or love their job (Saad 2005). On the margin, of course, there is disutility. However, in the absence of norms to the contrary, it may be accurate to characterize workers as holding a willingness to pay for doing their job. That is to say, if they could pick and choose the best parts of their job, they would pay to do the parts of the job they enjoy. This attitude is illustrated in figure 1, which shows an individual's labor- supply curve cutting through the x axis. In this scenario, the worker receives w * wage while working Q * hours. For many of those hours, the worker would have paid to do the job.

Consider next what I classify as hobbies, found in figure 2. There are portions of the curve where the consumer-worker is willing to perform...