Sunday, August 27, 2006

The time value of money

Warning: This post contains examples of misused economic terms and concepts. Those sensitive to the proper construction of financial principles would be advised to skip this entry.

I recently received an email from a user regarding a comment I left on a third user's blog. The letter was somewhat irate, in which I was accused of committing certain heresies against the orthodox of money and it's relationship to happiness. Below is my original comment, reproduced in full, from Purple Haze.

I think the evidence is pretty clear. Money can't buy you happiness. And yet, it seems obviously true that the more you have, the more likely you will be happy.

Money is an enabler. The ultimate enabler, in fact, at least in a capitalist society. Money allows you to do the things you want, or avoid those you'd rather do without. It converts actual time to personal time, real time to free time.

If you can't be happy with money, that speaks volumes about who you are as a person, but it doesn't say anything bad about money.

Just so there is no misunderstanding, I do not believe that money can itself guarantee happiness. Nor do I assert that rich people are necessarily thrilled with life. You can be poor and ecstatic, you can be loaded and miserable. Money is an it, a thing, a possession. It doesn't make anyone do anything. It can't make you happy, nor can it force sadness on you.

However, it is also undeniable that money plays a big role in most of our lives, and the inability to manage it or put it into proper perspective can lead to big problems, and that was the point of my comment. As I said, money is an enabler. It allows you to do things, and the more money you have the more options are available. But it does more than that.

Money is power, and with it you can reduce opportunity costs and limit unpleasant externalities. Financial means allows you to manage your time according to your inclinations, by providing alternative solutions to annoying but necessarily problems. After all, many rich people don't clean their own homes, and they convert the time that would be spent into other pursuits. This then brings me to my comment's second conceit.

If you are rich enough to where you can choose how to spend your time and you aren't happy, that is an indication of a serious deficiency. Where the fault lies would differ with each person, of course, but it should be manifestly obvious that someone relieved of financial concerns has a significant leg up in the pursuit of happiness.


Grafxgurl said...

THE point is...we are all just stewards of what we have or what talents are given to us and what we are capable we are good stewards...things will go right...if not...then bad stuff will hapen...we cant blame it on anyone thing.. because money changes doesnt really belong to us.

Guruh Roy said...

yes i agree with you that money could not buy happiness. but sometimes it does help a lot to buy happiness. And money have a big role in our lifes

Gabe said...

Someone told me money can't buy you love, but it can buy you a big car to go cruising for it. I find that I enjoy the things money buys and people are so nice to me when I am spending it. On the other hand I have none and so I do not have to worry about things being taken from me becasue I have nothing of any real value. Probably just justifying being broke, but I really don't mind it most of the time

Laura said...

In response to your comment:

I became interested in scrapbooking after seeing a scrapbooking magazine in a grocery store. I was looking for a way to safely preserve my photos and other things I collected from New York, while I was there for my brother's graduation from West Point. I thought it looked interesting, tried it, and loved it. I've been scrapbooking ever since.

And I agree that money can't buy happiness. I try not to worry about money... if I have it, I have it, and if I don't, I don't.

Moon Goddess said...

I read your warning and decided to take your word for it -- economics, math, numbers in general... not my thing.

Just popping in though to say hi. I was camping for the past few days. I just got around to answering your question about perms and curlers on my blog.


ateegoy said...

i didn't mean to rude or anything like that. what you said is absalutely true. i was having some personal issues myself thats why i wrote that silly post. overall that seems the nature of human beings- always wanting more as the grass always seems to be greener on the other side ;)

Molly said...

You make a salient point, money can't buy happiness but it enables people to choose how they spend their time more readily and it can give ease to achieving happiness.

LeperColony said...

No worries ateegoy, you weren't rude at all. Another user sent me an email about the comment I left on your blog.

Of course, even had you been rude, that is, after all, your prerogative. Your blog, your rules.

MathiasTCK said...

I don't consider lack of happiness a serious deficiency, even in rich people. Happiness is a good goal, but it's also too high a bar to set. Decency is a good bar, as long as you don't define decent to mean not naked. I'm thinking more along the lines of, trying not to harm others.