Sentences to ponder

by on September 11, 2008 at 12:04 pm in Philosophy | Permalink

Recent research by economists Amy Finkelstein, Erzo Luttmer, and Matthew Notowidigdo suggests that you’ll get a bigger bang for your consumer buck by spending while you’re healthy, before old age starts to take the fun out of life’s indulgences.

Here is more.  I worry about the asymmetry between gaining happiness and avoiding pain.  Surely money for the young is better for the former but how about the latter?

1 Braden September 11, 2008 at 12:50 pm

I’ve thought about this before, but when I realize that forty years at five percent real interest septuples my money, it seems hard to assert that I’ll enjoy it more now. Not that my intellectual position on the matter changes my habits. :-\

2 liberty September 11, 2008 at 12:59 pm

I totally agree. A friend pointed out to me the costs of stress, of wasted time and energy, of delaying enjoyments and delaying real investment in the future, by too much thrift. I thought it was wise, and good economic thinking.

Deficit spending! Whoohoo!

3 MS September 11, 2008 at 1:40 pm

Didn’t read the article but I thought about this question before. What needs to be considered is the opportunity cost of not spending money. How much fun can you have without spending much? Looking back at my life, I was happiest in childhood, and in college, when I hardly had my own money (any my family was never rich). Not saying money does not correlate with happiness but it does seem like it is easier to have a good time w/o spending much when you are young. When you are loder, you need to worry about your health, family and dependents, socio-economic status and so on. Plus as you get older you tend to have fewer friends and it is harder to meet people.

4 CB September 11, 2008 at 2:31 pm

Well you can all be less stressed if you get someone else to do the work for you!

5 Luis Enrique September 11, 2008 at 3:20 pm

Can anybody explain how this relates to the notion of a) time preference and b) predetermined preferences.

There are lots of things that (arguably) it makes more sense to do while you’re young, so when I spend money on those things, this seems like a different thing to a simple decision about how I value present consumption relative to future consumption, beause the contemporaneous utility is varying over time, as opposed to just being discounted. Alternatively, you could just view the desire to fill your youth with things better enjoyed when young as part of what’s ‘under the hood’ of the discount rate, and regard the discount rate as a reduced form of a more complex set of considerations. If so, then estimates of the discount rate might need splitting into components, one of which would be pure time preference. (this might be garbage, I’m just thinking out loud)

As for b) I only have passing familiarity with the theory of consumer choice, and tend to regard the assumption of predetermined preferences as more of a modelling convenience when looking at short-term allocation problems, than a literal statement about people are. So perhaps this is of no interest – but do changing preferences over time constitute a form of endogenous preferences? Does it matter?

6 Geoff September 14, 2008 at 11:38 pm

Happy camper, I think the source you are looking for is this:

“World Death Rate Holding Steady At 100 Percent”

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