When I was a student, a friend of mine imagined earning £100 a day. It felt like an incomprehensible amount of money. He simply could not imagine spending enough to exhaust such riches. This was almost 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 twice the average salary in the UK, several times the global average, and about a hundred times more than the global poverty line. How much does anyone really need?
Economists have offered different answers over the years. In his famous article, Economic prospects for our grandchildrenAnd the John Maynard Keynes argued that if incomes were eight times higher than the levels of the 1930s, “the economic problem may be solved, or at least in sight.” The income has increased a lot as he expected, however there is no solution in sight. It may be because, as Keynes also pointed out, that there is an insatiable desire to satisfy needs that make us “feel superior to . . . our fellows”.
A little more than a decade ago, Nobel Memorial Prize winners in Economics, Daniel Kahneman and Angus Deaton, found that $75,000 a year (more than $100,000 today – almost my friend’s dream income) was enough to improve everyday experiences. More money than that has done nothing to reduce the amount of time people feel 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 uses of money: extra income, at any level, was associated with higher levels of life satisfaction.
Recently, psychologists Paul Payne and Renata Bongiorno changed focus: Instead of asking how much money is enough, they invited survey participants to visualize their perfectly perfect life. Then they asked how much money is required to achieve this life, if it is in the form of winning a lottery. These sweepstakes prizes ranged from $10,000 (for those whose perfectly perfect lives would involve replacing curtains and furnishings) to $100 billion (for those whose perfectly perfect lives would involve a great deal of drama about buying Twitter). However, most people did not prefer the first prize. The $10 million lottery prize was a popular choice.
why? One possibility is that no one really had an idea how to answer the survey question, and that $10 million was the central answer, a thousand times more than the minimum and a thousand times less than the maximum.
The other thing is that people are as naive as my friend. They don’t realize that – after buying a nicer home and a nicer car, paying off their debts and creating an ample pension – they will find out that they can actually use another two million dollars.
Writer Malcolm Gladwell has another theory. as a guest on There is no such thing as a fish Podcast, Gladwell argued that the one hundred billion dollar problem is that you have unlimited options. Simple decisions (pack lunch, buy a sandwich?) become impossibly complex (dinner in Paris, Copenhagen, or just have a personal chef prepare something on my plane?). Life is cognitively overwhelming.
Another problem, Gladwell says, is removing all challenges from life. Do you love collecting stamps, key rings, or Beanie Babies? forget that! You can buy them all before lunch in Copenhagen if you wish.
My own opinion is a little different. I don’t want $100 billion, but the cognitive load isn’t the problem. I’m pretty sure billionaires aren’t overwhelmed by the prospect of having lunch. And while the projects are important, they are also scalable. If you enjoy collecting key rings, turn to fine art collecting: even with $100 billion spent, the project to create the world’s largest private museum probably has legs.
The real problem is that being a billionaire would change your relationship with any other human being. Keynes knew that we often like to feel “over our colleagues” but when the superiority gets too extreme, you become the target of kidnappers, terrorists, fraudsters, and gold miners of every kind. Few of your relationships are likely to survive. Can you trust those who do this?
Payne and Bonjorno, researchers who have found that people would rather get $10 million over $100 billion, argue that their result offers hope for sustainable development, because it indicates that people do not have unlimited material needs. Probably.
I drew a different conclusion. The richest people in previous societies had material needs that they could not satisfy, but we can: air conditioning, air travel, and antibiotics. Our grandchildren may 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 wanting the things we can’t currently have. That is, most of what we value is not a matter of money. My friend, with his fantasies of earning £100 a day, enjoyed drinking beer and listening to music with the rest of us. It was a joyful lifestyle. In contrast, a $100 billion life must be very lonely.
Tim Harford’s new book isHow to make the world add“
Follow Tweet embed On Twitter to get our latest stories first