University of Wisconsin–Madison

EQ Vol.12: Sleep Economics

Contributing Writer: Thomas Haddock | May, 2022 I often stumble into friendly debates with roommates or classmates surrounding sleeping habits and schoolwork. It seems the widely held belief is that unless you are a master of time management, sleep often comes second to schoolwork. Why do we value a little extra studying over a little extra sleep? I was curious how economists view this time versus productivity tradeoff. It turns out, the topic of sleep has rested heavily on the minds of economists and social scientists in recent years.  Researchers are showing a growing sense of interest to include sleep as an economic variable in their social experiments. This in large part is due to the findings that demonstrate insufficient sleep and rising levels of sleep disorders are leading to lower productivity and in turn resulting in growing economic costs.[5] However, many of these studies are targeted at working adults, but what do these sleep studies mean for students? It turns out that because of the unquantifiable nature of productivity benefits, students tend to undervalue additional sleep. It is now widely established that insufficient sleep is harmful to your short and long-term physical health. In fact, the CDC has recently declared insufficient sleep a “public health epidemic.”[5] According to the Harvard Medical School, sleep deprivation is linked to higher mortality risk and many health problems, including obesity, diabetes, high blood pressure, and heart disease.[1] The Harvard Medical School also explains that insufficient sleep can even potentially leave you “more vulnerable to mental health issues such as depression and anxiety.”[1]  Not only does insufficient sleep have negative physical health effects, but several recent studies demonstrate the economic implications of a less productive, tired workforce. On a microeconomic level, sleep was widely held as an economic constant in studies of economic decision-making and productivity until economist Dan Hamermesh published “Sleep and the Allocation of Time.” Hamermesh argued that time spent sleeping is inversely related to both the wage and the time spent working in the labor market. He concluded that sleep should be factored into economic studies more because the choice of how much to sleep is affected by the same economic variable as other consumer choices.[4]  More recently, many studies are finding deeper relationships between sleep and productivity loss, with corresponding effects on national GDP. Studies find that even the smallest changes to increasing your sleep duration could have a significant impact on the economy. The Rand Corporation finds that “if individuals that slept under six hours started sleeping six to seven hours then this could add $226.4 billion to the U.S. economy.[5] They calculate that the U.S. loses roughly $411 billion dollars, 2.2% of GDP, each year to a loss of productivity from insufficient sleep.[5] Another interesting study attempted to determine the correlation between salary and sleep duration. In our time zone system, according to the clock, “sunset happens roughly one hour earlier on the eastern edge of the time zone than the western edge.”[2]  So in this study, researchers used two cities, one on the eastern edge of the central time zone and one on the west. They found that the further east you go, the more people tend to be sleeping. The researchers’ “main result is that sleeping one extra hour per night on average increases wages by 16%, highlighting the importance of restedness to human productivity.[2] This number may be surprisingly high and may lack causation in the experimental design, but it does give another hint as to the importance of restedness on productivity and economic outcomes. 
 “An individual that sleeps on average less than six hours per night has a 13 percent higher mortality risk than someone sleeping between seven and nine hours”
At this point, more studies like these are documenting varying aspects of sleep and its relation to economic topics. These studies are fascinating and certainly worth examining, but what do they mean for students? Many of these sleep studies have focused on adult populations and specifically working populations, but students provide a different case study due to our varying incentives and definitions of “work.” For instance, in the most basic of utility functions, we learn that utility is a function of leisure and consumption, with consumption being the wage rate multiplied by the hours worked. However, “for a college student, a strict ‘wage rate’ does not exist.”[6] Essentially, college students’ “work” is made up of both academic priorities and extracurricular obligations – both not necessarily paid for by a measurable wage rate.[6] In a way, students are studying with a future wage rate in mind (which is heavily discounted) and you could even argue a negative wage rate from paying for education. Sleep is also a biological necessity, while our other consumer options, work, and leisure, are not by themselves necessities. This adds to the complexity of factoring in the choice of hours spent sleeping into a utility function. Essentially, this lack of a defined wage rate for students leads to a cloudy view of the benefits of additional sleep. It’s harder to grasp or see increases in productivity while studying than an increase in your earnings.  Naturally, the question arises on the evidence surrounding sleeping more and higher student achievement. Many studies find it difficult to extract cause and effect relationships between sleep and student performance because of the complexity of factors affecting sleep decision-making. There are causal questions of whether it’s just true that students who sleep more perform better rather than more sleep being the cause of their higher performance. Nevertheless, one study offers a potentially promising answer. These researchers find a “statistically significant and relatively large effect of sleep on test scores” and estimate that the optimal sleep time in adolescents (children aged 10-19)  is 9.25 hours.[3] Exactness is worrisome in these studies because it can fail to account for the multidimensional nature of sleep decision-making, but this study does provide a potential answer to the sleep-achievement relationship.  I have always personally found that I function much better as a person with more sleep, and I think most everyone would agree. Why then, do students seem to reject more sleep? The response I usually receive in these friendly debates is: “I don’t have the time.” Now I should clarify, I don’t mean to say that overall, extra studying is worse because you lose sleep: sometimes that studying is needed and we are unable to fit studying earlier in the day for a variety of factors. But from the economist’s perspective, it appears Americans value sleep far too little, and students specifically are no exception. By attempting to examine this “public health crisis” with the tools of an economist, it begins to come into focus that lack of sleep is not only a health problem but a more personal, microeconomic problem with macroeconomic implications. For students, the lack of a clear “wage rate” for studying, along with a complex set of incentives makes it difficult to allocate our time effectively and rationally. This irrationality results in students valuing any kind of studying, no matter how efficient, over some extra sleep that would yield more productivity the next day. In comes the economic concept of opportunity cost: How productive are you with your current sleep vs. how productive could you be with more sleep? It appears that because it may not be visible or as easy to calculate, students tend to undervalue the opportunity cost of losing sleep.  With this in mind, perhaps we should place a little more emphasis on more sleep for students, and the next time you’re pushing past your usual bedtime to crank out some more studying, maybe set down the books and lay down for some well-earned shuteye. Your body, mind, productivity, and probably test scores will thank you.
REFERENCE
  1. Corliss, Julie. (2017). The Health Hazards of Insufficient Sleep. Harvard Health Publishing: Harvard Medical School. https://www.health.harvard.edu/staying-healthy/the-health-hazards-of-insufficient-sleep
  2. Dubner, Steven. (2015). The Economics of Sleep Part 2. Freakonomics Podcast. https://freakonomics.com/podcast/the-economics-of-sleep-part-1-a-new-freakonomics-radio-episode/
  3. Eide, E. R., & Showalter, M. H. (2012). Sleep and Student Achievement. Eastern Economic Journal, 38(4), 512–524. http://www.jstor.org/stable/23271228
  4. Hamermesh, D. and Biddle J. (1989). Sleep and the Allocation of Time. National Bureau of Economic Research. https://www.nber.org/papers/w2988
  5. Hafner, Marco. & Taylor, Jirka. Why Sleep Matters: Quantifying the Economic Costs of Insufficient Sleep. RAND Corporation. (n.d.). Retrieved February 14, 2022, from https://www.rand.org/randeurope/research/projects/the-value-of-the-sleep-economy.html
  6. Maleki, A. (2010). The Economics of Sleep for a College Student. Yale Economic Review, 6(2), 16-18. Retrieved from https://ezproxy.library.wisc.edu/login?url=https://www.proquest.com/scholarly-journals/economics-sleep-college-student/docview/857666455/se-2?accountid=465
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