Quotulatiousness

September 22, 2012

Charles Stross on the diminishing marginal utility of just about everything

Filed under: Economics — Tags: , , — Nicholas @ 10:08

A post at his blog looks at an economic concept that is becoming familiar to more of us than ever before (even in the middle of a long-term economic crisis):

There’s a concept in economics called the diminishing marginal utility of money. Loosely put: if you give a £20 bill to a homeless dude, it will make his day — it’s worth a bunch of hot meals or a hostel bed for a few nights. If you give £20 to an average wage earner, it’s nice but not a game-changer: it’s worth a couple of cinema tickets or a round of drinks at the pub. And if you give £20 to a billionaire they probably won’t know what to do with it — they have employees to carry the money around for them, and anyway, they earn more in the time it takes to open their wallet and stash the bill than the £20 note is worth. They’re losing money by taking it!

Money. The more of it you’ve got, the less useful any additional increment becomes. And you don’t have to be a millionaire to get a handle for this.

These days, I’m in the weird position where almost all the stuff I would want to buy with any additional income is either stuff I can simply buy right now … or it isn’t available at any price.

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