The negative value of money

If I were to be given £100,000 tomorrow, with no strings attached, I think this would not enhance my quality of life. My estimate of the value to me of this windfall is negative. I would be better off without it.

Would I accept this money if it were offered to me? Of course. I am a rational person … in the economic sense. More money is always better than less money.

Or is it? It’s a cliché that money does not make you happy, and the psychological  evidence shows that beyond a certain level of income this is true. Most of things that make life worth living, money cannot buy.

But … you may say, money can’t buy health and happiness, but it can buy the best treatments when your health suffers, and it can buy you a spot in a nice place where happiness is more likely. Ok, but … friends, good food and exercise are don’t need much money (at least in affluent countries), and are the best way of making health and happiness more likely. And in some areas – sex and organ donation for example – there are strong taboos against using money to get what you want.

But surely you can just ignore any excess money you may have, so it won’t do you active harm? Well, not necessarily for three rather different reasons.  First, you may have a spouse or partner, or children, or friends with whom you share your wealth. You might not want to spend your surplus half million pounds, but they might want to, and to prevent them would be mean at best. Second, the people after your money may not be your nearest and dearest; they may be beggars or thieves. Money may make you a target for crime. And third, and most insidiously, your own feelings that you should behave “rationally” may lead you to seek and spend more money than you know is really good for you. This idea of rationality is so deep is it may be difficult to ignore it. I think this is a big problem.

And if you do spend more than you want, it may do more than fail to make you happy. It could make you more miserable for a variety of reasons. The act of spending money is hard and stressful for people like me: I just don’t want the hassle. And often the more expensive item may be worse – for me, for example, a big house or a fast car or some posh clothes are not better: they take more upkeep and I have no interest in the advantages they supposedly deliver.

So, beyond a certain point, for some people in some situations, less money is better than more money.

This is not a trivial issue. The stress of over-consumption is wearing some people in the rich world down, and sucking badly needed resources from poorer countries and from poorer people in rich countries.

What should I as an individual do? Resist the temptation to do any paid work? Spend money sparingly? Give money away to deserving causes? Ignore the price of things, or perhaps even choose the most expensive option when I do make a purchase?

The second and third of these – spending sparingly, and giving – I think make good sense. But the pros and cons of the other two suggestions are more ambiguous. If, for example, highly skilled doctors refused to do any doctoring because they didn’t want the money, this would clearly not be in the general good. And buying the more expensive item might entail greater use of scarce resources that may be desperately needed elsewhere. Prices and wages do have a role as signals to encourage efficiency which it would be silly to ignore. (The arguments against any sort of resource allocation system using numerical signals are barmy, I think.)

What would happen if a substantial number of people started behaving as if money really does have a negative value? I’m not sure, but it’s likely that, in economic terms, both production and consumption would fall – which would have a variety of effects, some good and some bad.

What is wanted is an economic signalling system that is not subject to the flaws of the existing money system. And perhaps some sort of therapy to wean people off the assumption that more is always better. Not sure what the answer is, but I’m sure there are good ideas out there, and I intend to keep on thinking about it.

(Amended slightly on 11 November 2014 after watching “How rich are you?” on Channel 4 last night.)



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