When I was a student, a friend of mine fantasized about making 100 pounds a day. It felt like an incomprehensibly large sum of money; he just couldn’t imagine spending enough to exhaust such riches. This was nearly 30 years ago – today’s equivalent fantasy would be over £200 a day. My friend, who lived with his parents, was naive and wise at the same time. His dream income is about twice the average UK salary, several times the global average and about a hundred times more than the global poverty line. How much does someone really need?
Economists have given different answers over the years. In his famous essay Economic opportunities for our grandchildren, John Maynard Keynes argued that if incomes increased eightfold from 1930s levels, “the economic problem may be solved, or at least a solution in sight.” Incomes have increased much as he expected, and yet no solution is in sight. That may be because, as Keynes also noted, there is an insatiable desire for needs that makes us feel “superior to . . . our fellow human beings”.
A little over a decade ago, Daniel Kahneman and Angus Deaton, both winners of the Nobel Memorial Prize in Economics, discovered that $75,000 a year (more than $100,000 today—about my friend’s dream income) was enough to sustain the everyday experiences. optimize. More money than that did nothing to reduce the time people felt anxious, stressed, or sad.
However, there is another measure of happiness: do people rate their lives as satisfying? By this definition, Deaton and Kahneman found no limit to the use of money: additional income, at any level, correlated with higher levels of life satisfaction.
More recently, psychologists Paul Bain and Renata Bongiorno changed the focus: Instead of asking how much money was enough, they invited survey participants to imagine their absolutely ideal life. Then they asked how much money it would take to achieve that life, if it came in the form of a lottery win. Those raffle prizes ranged from $10,000 (for those whose absolute ideal life involves replacing the curtains and upholstery) to $100 billion (for those whose absolute ideal life involves a lot of drama about buying Twitter). However, most people were not in favor of the top prize. A $10 million raffle prize was a popular choice.
Why? One possibility is that no one really has a clue how to answer the survey question, and $10 million was the central answer, a thousand times more than the minimum and a thousand times less than the maximum.
Another is that people are just as naive as my friend. They don’t realize that after buying a nicer house and a nicer car, paying off their debts and building a generous pension, they would find that they could use a few more million dollars.
The writer Malcolm Gladwell has a different theory. As a guest on the No such thing as a fish podcast Gladwell argued that the problem with a hundred billion dollars is that you have unlimited choice. Simple decisions (packing lunch or buying a sandwich?) become impossibly complex (dining in Paris or Copenhagen, or just having my personal chef prepare something on my plane?). Life is cognitively overwhelming.
Another problem, Gladwell says, is that all of life’s challenges are taken away. Do you like collecting stamps, or key rings, or Beanie Babies? Forget it! You can buy them all, for that Copenhagen lunch if you want.
My own opinion is something else. I don’t want $100 billion, but cognitive overload is not the problem. I’m pretty sure billionaires aren’t overwhelmed by the prospect of lunch. And while projects are important, they are also scalable. If you enjoyed collecting key rings, switch to fine art collecting: Even with $100 billion to spend, the project to create the world’s largest private museum will likely have legs.
The real problem is that being a multi-billionaire would change your relationship with every other human being. Keynes knew that we often want to feel a little “superior to our fellow humans,” but when the superiority gets extreme, you become a target for kidnappers, terrorists, fraudsters, and prospectors of all kinds. Few of your relationships are likely to survive. Can you really trust those who do?
Bain and Buongiorno, the researchers who found that people would rather have $10 million than $100 billion, argue that their result offers hope for sustainable development because it suggests that people do not have unlimited material needs. Perhaps.
I draw a different conclusion. The richest people in past societies had material needs that they couldn’t satisfy, but we can: air conditioning, air travel, and antibiotics. Our descendants may well have material needs that we rarely think about because they are beyond our reach, from teleportation to eternal youth.
The best hope for sustainable development is not that we will stop longing for things we cannot currently have. It is that most of what we value is not a matter of money. My friend, with his fantasies of making £100 a day, enjoyed drinking beer and listening to music with the rest of us. It was a cozy lifestyle. On the other hand, life with $100 billion must be so terribly lonely.
Tim Harford’s new book is ‘How to add up the world‘
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