4 ms·

On average, yeah, I think so. It would then be a way to say that money has non-linear utility, which is probably true. An aggregated million dollars probably

• fsckboy 4y ago
  > An aggregated million dollars probably does have more utility than a million single dollars. no, it's the exact opposite, there is a declining marginal utility to money. Think of it this way, homeless person gets a dollar, that's some food for the day. A second dollar is better, but it's not as valuable as that first dollar, but the second dollar is worth more than a third dollar; all the way up to Bill Gates, how much does he care about a dollar? It's an important concept because it underlies attitudes about and mathematics of risk: even in a fair lottery, the pain of losing money is greater than the thrill of winning some, as an aggregate across the population. It's fundamental to the stock market, and the insurance industries, which exist because of the asymmetry of up vs down, but operate on the aggregating of millions of single dollars. btw, I'm not meaning this casually, people won Nobel prizes for figuring this stuff out
  • TimPC 4y ago
    What’s the utility of being in a different economic class? There is more to money than just spending it and I’d argue there are large utility gains from crossing class boundaries. The academic models ignore any utility except spending and don’t even adequately account for things like more expensive high-quality goods being cheaper in the long run. So I don’t find this utility argument that proven or convincing.
    • fsckboy 4y ago
      if the marginal utility of wealth declines for an individual, it declines for a population. you have to show that these things add, but it has been. in ye olden times there may have been strict class distinctions based on birth etc., but the notion of class you are using is hazy and undefined but basically is based on wealth, which does not slot neatly into categories but is continuous and differentiable and is a standard population density function, depending how you look, gaussian or pareto, etc. you just accounted for higher quality goods being cheaper in the long run in your head and you make that assessment when you purchase, so why do you think markets or models of markets can't handle that or that the people who study them haven't thought of it? they have. you being unimpressed with the argument is like me being unimpressed by what my doctor says. what are the odds he knows more about it than me, where "me" and "he" are extended across the population and all doctors?
      • zozbot234 4y ago
        In theory, poverty traps can lead to increasing marginal utility of wealth, and make it quite rational to e.g. gamble on a lottery. However, the notion of a poverty trap is not very popular these days. The concept only ever had traction wrt. people in extreme poverty, and even for those it has now been shown that small increases in income are hugely beneficial. There's no need for what used to be called a "big push" to pull people out of the trap.
        • TimPC 4y ago
          Poverty traps are still very real and exist in most welfare systems. Small increases have to be targeted to not push someone over a clawback boundary in order to be beneficial. If you give someone $100 and they lose their subsidized housing as a result that’s still a poverty trap.
  • ISL 4y ago
    I wasn't referring to the marginal utility for a person, but rather the economies of scale that come with focused capital-allocation. A million people with single dollars probably can't coordinate to build a consumer product. A Kickstarter with a million dollars may be able to generate a consumer product that improves the lives of a million people.
    • fsckboy 4y ago
      > A million people with single dollars probably can't coordinate to build a consumer product. yes they can, it's called banking and the stock market. Syndication like that is why the market does not reward diversifiable risk