It's money, stupid.

[digitaldiscipline]

Economic Irrationality is, apparently, intrinsic.

Sorry, ikilled007, Mises is tilting at windmills, and not many folks are capable of overcoming millions of years' worth of evolved altruism.

[courtesy of jaylake's daily linkfest]

Comments

[etcet.livejournal.com]

I think that buying power was attempted to be removed from consideration - "Assume for the moment that prices of goods and services will stay the same."

So, you could buy twice as much as yourself; it's only relative to others that you would not seem as wealthy.

[razerwolfe.livejournal.com]

But it would not 'stay the same' and people are savvy enough to know that. If I'm the only one getting 50k and everyone else is going to get 25k then prices will fall to reflect the worldwide buying power of only 25k, leaving me still having 2x the buying power over everyone else. If I'm making 100k and everyone else is making 250k, then prices will rise to accomodate the new norm and my buying power is even less. People see the intrinsic fault in the question itself versus their real world response and answer correctly to increase their own buying power.

[fenixinthedark.livejournal.com]

I must beg to disagree...

Many times, the economy does not accurately reflect the actual buying power of the public. The housing market being in the mess it is in now is one example. Banks.. well, "banked" on the real estate bubble being permanent (when will they ever learn from history??), and now there are fewer people considered for loans which means that those who wish to sell cannot find a buyer, and many of those who wish to buy cannot purchase because they cannot get the loans they need even when they are capable of paying them back, and have no real problems on their credit history. The market has not adjusted to accomodate the reality of peoples earning power. It, in fact, fucked itself (and all of us) very hard up the ass on that score.

So, given that scenario... which scenario would you choose? I'd choose the one where I earn the greater amount total... not as compared with my peers.

[the_axel]

That assumes that the amount of goods & services available for purchase per capita is static.

But for the requirement "prices of goods and services will stay the same" to be true, there must be more goods & services to be purchased per capita.

Look at it these ways - would you prefer to be earning double the average income in 1850 or 40% of average income today?
Or earn 40% of the average income in the US or double the average income in India?

[razerwolfe.livejournal.com]

Eliminating numbers, it still comes down to this: Do you want to earn 2x more everyone else, or 2.5x less than everyone else.

[etcet.livejournal.com]

True enough; however, if 40% of what everyone else makes is still "plenty, and twice as much as I would get otherwise" . . . . ?

[razerwolfe.livejournal.com]

There's something of the 'being happy with tablescraps' that bothers me about your statement. I will be, by default, at a huge disadvantage in the world versus everyone else (and everyone else does matter since they produce and sell the things I need or want). Mayhap, this is a perceptual difference in how we see human nature.

[etcet.livejournal.com]

I can see what you're saying. I don't know if this is intrinsic in the way the question is phrased, or if it's evidence of the underlying irrationality when it comes to money.

The fact that you and I are having this disagreement leads me to believe that it's the question that needs changing. Savvy responders would, as you pointed out above, recognize that the economy doesn't exist in a vacuum, and market pressures would cause inflation in the wealthier scenario (and I doubt this was taken into consideration when the query was crafted); however, the ignorance of the average person on the subject might make them take the 50/25 for completely different, non-rational reasons as the article contends.

I'm not happy with scraps - I've done that, and it sucks. However, I think that there is a point where having "more" becomes superfluous, though that's not really the thrust of the article's thesis.

[razerwolfe.livejournal.com]

Perhaps the question is a poor one, or perhaps the answer were given but the wrong conclusions were made based on what the questioners wanted to hear and or test for. There is more to getting reward or value from a decision than simple monetary gain. I think that the concepts of status and prestige were not considered in people's responses. You would have more status and prestige in the 50/25 than in the 100/250, and so it also goes in the following 'test' with the prize in the movie line. If the events were isolated, then I'm sure no one would mind getting either the 100 or the 150. But, in the first instance, you are a Winner, while in the second instance you are Second Place. That counts for a lot, and it seems a majority of people (myself included) would not mind winning slightly less and having the prestige of telling others you were a Winner.