Daylight Savings Time – the economics of economising on sleep

In the United States this weekend, the clocks will go forward one hour. At precisely 1.59:59 on Sunday, our clocks will wind forward a whole hour to 3am. We will have leapt forward into spring as the saying goes and observe Daylight Savings Time (DST). The mornings will become darker and the evenings lighter.

In the UK, we also observe DST. But we do so a few weeks later than in the United States, ever since the US extended DST into March back in 2007. British clocks won’t change until Sunday March 31st. As a British diplomat, I notice this difference because it means for the next two weeks the time difference between the East Coast and the UK is only four hours compared with the more conventional five., which means it’s actually easier to speak to colleagues in the London office.

But what are the economics behind this practice? Apparently, Benjamin Franklin was the person who came up with the idea back in 1784 although it wasn’t actually instituted until 1918. The motivation was to save on energy consumption – candles in Franklin’s day. Indeed, the US stopped observing DST for a while but brought it back in the 1970’s as a consequence of the energy crisis gripping the world economy.

Modern day economic forces are more complicated. First of all, while families might be able to use less electricity in the evening when they come home during hours of sunlight, they might need to use a little more in the morning when they are getting ready for work – especially with flexible working practices having grown so significantly and the conventional working day being less dominant in 2013. Likewise for heating in the last few weeks in which it is needed – people might need a bit more of that in their morning routines and a bit less in the evening. Moreover, in some of the warmer states, any savings from reduced electric lighting might be offset by using more air conditioning.

Then there are the more direct impacts on people’s sleep patterns. Some studies argue that there are negative productivity impacts from DST – grumpy, sleep deprived workers are less energetic and more prone to error and poor performance. That sounds like a bad thing economically. But it is possible the opposite happens when we ‘fall back’ into the colder months – workers could become more productive on the back of an extra hour in bed.

So as with so many things in economics, the answer to the question ‘what are the economic effects of DST’ is: it depends. And in reality, some people like it more than others.  Retailers and the leisure industry are beneficiaries – people are more likely to shop and to participate in outside activities when it is light. On the other hand, farmers are often said to not be particularly fond of the practice. Personally, the costs and benefits for me almost exactly balance out – one less hour in bed this weekend is compensated by a couple of weeks in which speaking directly to my colleagues in London is made just that little bit easier.