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Marginal Utility Of Money

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I was talking with an intelligent friend of mine about our society and economy, and he views most things the same as me. Anyway one astounding great point he made was at £75,000 a year in income you basically can afford everything. Everything that really matters in making a big difference to your quality of life.

For example to have your own car, and to afford to run it. But say you spend three times as much on an auto expenses. What do you get? A second car.. well the marginal utility of having a second car for yourself is pretty marginal compared to when you get the first car.

What about housing. We see many rich in Britain buying second, third and fourth homes. But how much does this increase their standard of living.. I would argue not much, if anything. However having a home versus being homeless is a giant leap forward.

So what is the list of things to buy to increase your quality of life in the year 2010. This is what people in the developing world aspire to, and people in the developed world consider middle class. Having a car, a refrigerator, flush toilet, running water, be able to buy enough food for your family, including the proteins you want, heating, electricity costs, television, computer, cable tv, internet, cell phone. And thrown in ability to take a nice vacation to a foreign spot once in awhile.

So by extension, for our society it is better to have 100 families who earn £100k a year, than 1 family who earns £9 million, and 99 families who earn £10k each.

I would also argue it is a stronger economy to have 100 families with 100k each a year.. that is some real disposable income. Its great to be a car maker or car salesman in such an economy.

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So what is the list of things to buy to increase your quality of life in the year 2010

A list bigger than your immediate peers seems to be the in-thing.

Edited by Alan B'Stard MP

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With the exception of food and water, everything on your list is surplus to requirements (and since you said running water, that too).

It all depends on your expectations, just as much as the big yacht or the Lear jet or your very own top football club. There are several things on your list I neither have nor miss. There are others (headed by the fridge) that I'd hate to live without, but at the same time I'm fully aware that it's a luxury of the rich society I live in.

But a home where I don't get woken at 5:something a.m. and other such hours on a regular basis is a luxury I really do wish I could afford.

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A list bigger than your immediate peers seems to be the in-thing.

Some sick peoples definition of happiness is having more than their friends and other members of the community. So they would be quite happy with themselves living in poverty in an African tribe.. as long as they had a bigger hut than other people, and more bone carvings on their mantle than their friends.

Possibly BTling one of the neighbourhing huts.

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With the exception of food and water, everything on your list is surplus to requirements (and since you said running water, that too).

It all depends on your expectations, just as much as the big yacht or the Lear jet or your very own top football club. There are several things on your list I neither have nor miss. There are others (headed by the fridge) that I'd hate to live without, but at the same time I'm fully aware that it's a luxury of the rich society I live in.

But a home where I don't get woken at 5:something a.m. and other such hours on a regular basis is a luxury I really do wish I could afford.

Some would argue, actually the consensus opinion in Britain is that one rich guys right to have 5 houses, outweighs your want of 1 house.

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Some would argue, actually the consensus opinion in Britain is that one rich guys right to have 5 houses, outweighs your want of 1 house.

Nevertheless, the tax system treats me as a rich person, and takes more from my income than your "average household" earn in the first place.

Wouldn't mind so much if that very tax wasn't being spent on keeping me priced out of a house (among other Very Bad Things - and even some good ones). And now the government of HPI is finally gone :D

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I have previously thought about this issue but in a slightly different manner.

Some of an older generation contend that young people have a better standard of living than they did at a similar age and then in 25+ years times we'll "earn" the house and trapping the older person has now. i.e. stop moaning that houses are expensive, stop buying ipods, buy an expensive house and inflation will make it cheap in a few years...

My response would be that my parents saw massive changes in their lifestyles/standard of living but what my generation sees are rapidly diminishing improvemnts. For instance, an inside toilet would have been a massive improvemnt on the outside lav but nowadays, the "upgrade" to having an ensuite is much less of a difference. Youngsters apparently benefit from more exotic holidays, yes we fly further and more varied than spain every year but we don't seem to have much more free time to spend on holiday (which would be a real improvement in a standard of living). The wides spread adoption of TV, there's a big difference between no TV and hving a black & white one. The prgression to colour, bigger, flat etc much less. As you say the difference between no car and having a shitty car is huge, the difference in quality of your car marginal. Nominally we have far more money but lots of us, less to show for it.

Where that leaves us, I don't know, my thoughts are not fully formed on the matter. One of the areas where we will obviously benefit as time goes on is medicine but as demands on the NHS grow, will we get the service we expect as we get older?

Edited by daiking

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Some interesting thoughts. I especially liked the point about more free time, as opposed to flying further as a real improvement. I think a leisure dividend would be a smart way to create more jobs, while increasing standard of living for all.

On the NHS, I think the same utilitarian ethics should apply. Ok we have £120 billion pounds to spend this year on the NHS.. how to spend that to get the maximum value in improvement in human quality of life.

And there different nations are coming to different conclusions on what value is. For example in some countries on the continent severe premature babies with severe health problems are left to die. The thought is the child would likely only live a short and painful life. While in other nations the thought is everything possible should be done to keep them alive as long as possible.

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Some of an older generation contend that young people have a better standard of living than they did at a similar age and then in 25+ years times we'll "earn" the house and trapping the older person has now. i.e. stop moaning that houses are expensive, stop buying ipods, buy an expensive house and inflation will make it cheap in a few years...

My response would be that my parents saw massive changes in their lifestyles/standard of living but what my generation sees are rapidly diminishing improvemnts.

The first statement is true. We all benefit from the material improvements that are now regarded as normal. Why do you think your generation are losing out because you are not seeing the same rate of "improvement". What would be an equivalent improvement from, to take your example, an outside lav to an indoor bathroom to an en-suite? Is there one?

Once your basic needs are met, then most other things are nice to have but not essential. Of course because of human nature we tend to demand more and more. We take so much for granted. I remember around 1980 chatting to a man, who must have been eighty or ninety years old, he was telling me about his first job. They had to move a family who were relocating from Wantage to London. At the end of the first day he told me they got as far as Milton Hill; a distance of about 10 miles. Now just think less than a hundred years later we think nothing of getting in a car and travelling to London in an hour or so. Do we need travel times to continue to reduce at that rate? Using your argument i could whinge that it takes too long to travel to London because the rate of improvement didn't continue.

Because we have had step changes from one generation to another does it follow that every generation should see a step change from the preceding generation?

Edited by sleepwello'nights

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Some interesting thoughts. I especially liked the point about more free time, as opposed to flying further as a real improvement. I think a leisure dividend would be a smart way to create more jobs, while increasing standard of living for all.

On the NHS, I think the same utilitarian ethics should apply. Ok we have £120 billion pounds to spend this year on the NHS.. how to spend that to get the maximum value in improvement in human quality of life.

And there different nations are coming to different conclusions on what value is. For example in some countries on the continent severe premature babies with severe health problems are left to die. The thought is the child would likely only live a short and painful life. While in other nations the thought is everything possible should be done to keep them alive as long as possible.

Im afraid the budget planners at the NHS are ruled by a....how can we pay everyone in the NHS within our budget this year what with pay scales increases, bonuses, new laws and interest costs.

And they get their figures from much management reporting to quangos, and they are a cost, and of course, budgets not spent in the year are spent in the last month...needed or not, otherwise there is no budget for that next year....tables that cost £20 from Argos cost £300 from the buying office suppliers......Im sure many in the NHS or ANY OTHER PUBLIC SECTOR BODY, would have plenty of examples of the waste we are paying for with deficit spending.

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So by extension, for our society it is better to have 100 families who earn £100k a year, than 1 family who earns £9 million, and 99 families who earn £10k each.

I've seen distributions with both kinds of extreme skewiness in real live markets.

(100 bidders with £100k limit at one end; 1 bidder at £9m, 99 bidders at £10k at the other)

The latter tends to have downward moving midpoints (the former tends to become illiquid free of recapitalisation events).

It's probably incorrect to assess happiness in terms of fullness of belly (so sweat-of-brow to gross-weight-of-commodities ratio), but this is a loose proxy for it regardless.

But if you will entertain me (and look at happiness as a byproduct of satiation), the distribution with one extremely high outlier is probably the happier of the two.

It might be a different story if you compared {1@99m, 99@10k} vs {100@10k}... but people never do.

(my own theory - based loosely on observation of price-setting behaviour in detail - starts with rice and ends with bellies; income matters little when weighed against basic agricultural surplus or deficit - if the system's liquidity grows at a rate sufficient to outstrip improvement in surplus, misery ensues)

Edited by ParticleMan

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Im afraid the budget planners at the NHS are ruled by a....how can we pay everyone in the NHS within our budget this year what with pay scales increases, bonuses, new laws and interest costs.

And they get their figures from much management reporting to quangos, and they are a cost, and of course, budgets not spent in the year are spent in the last month...needed or not, otherwise there is no budget for that next year....tables that cost £20 from Argos cost £300 from the buying office suppliers......Im sure many in the NHS or ANY OTHER PUBLIC SECTOR BODY, would have plenty of examples of the waste we are paying for with deficit spending.

I feel one thing they have decided is with £120 billion to spend what is a good way to improve human standard of living? -why employ 1.4 million people in relatively high paying, stable jobs.

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  • 149 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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