Quote:
Originally Posted by BASaint
fine, but you'd care x amount if I took $1000 out of your pocket right now, more than you'd care if I did the same if you had $1m (i'm assuming you're a poor schmoe like the rest of us)
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take that x and divide it by 1000, thats a good approximation of the utility of a marginal dollar to you.
but now youre using a linear approximation rather than a diminishing or non-linear approximation which is where the whole debate started. In reality, I think utility from a marginal dollar is huge until basic needs are met, then steadily, but slowly diminishing until you live comfortably, then flattens out a lot more beyond that which supports the theory of diminishing marginal utility. However, I think there are MASSIVE spikes at certain numbers that would make you happier. I imagine that people, on average, have increased satisfaction the first time they become a millionaire or billionaire just in knowing they accomplished that somewhat arbitrary goal. Also, if you were the richest man in the world by $1 I bet that you would be happier than if you were in 2nd by $1. The percent of your wealth that this would encompass is immeasurably small, but the satisfaction of knowing you are the richest person in the world is probably a measurable spike in utility. Likewise, if I was $1 short of being able to afford an NFL team I would be MUCHHHHHH less happy than if I had enough to buy one and owned a team. So while there are diminishing returns, I think they are overstated and at certain values the return from a marginal dollar is extremely high, and likely higher than the value of an extra dollar to someone like me or you even if it is 100,000x more impactful to our wealth than theirs.