Marginal Revolution: How to spend less money

December
S	M	T	W	Th	F	St
	1	2	3	4	5	6
7	8	9	10	11	12	13
14	15	16	17	18	19	20
21	22	23	24	25	26	27
28	29	30	31

« Henry Niman, worrying | Main | My favorite things North Carolina »

How to spend less money

Jane Galt has a good list of suggestions, yet I don't follow them all. When it comes to "don't eat out" I receive an F minus.

Arguably I have excess self-discipline, rather than the opposite problem. That means I will try to rationalize this spending, rather than apologizing for it.

I view dying young as an enormous tragedy. It would be so, so, so, bad. As the economist would say, it would not equate marginal utilities of money across different world-states. It is also very hard to insure against premature death. The life insurance payment would help my family but it doesn't go to poor, lil' dead ol' me.

Given the imperfection of post-death markets, what else can I do? Er...I can spend money now. If I die soon, I had bigger kicks today. That is a kind of partial compensation for the tragedy; admittedly I run a greater risk of outliving my remaining savings. (Quick micro quiz: Do bloggers, by offering free fun outputs, raise or lower the savings rate?)

Can we find a testable prediction? Religious people should save a greater fraction of their incomes.

I don't hold the view that religious people should be indifferent to death; presumably they think they are on earth to fulfill God's plan. But they should have fewer purely selfish reasons to fear death. (Good religious people, that is, or at least those who think they are good.) A weaker selfish fear of death means less need to buy insurance against premature death. The devout should spend less money now.

Last night we ate at Zengo's -- Latin-Asian fusion -- which was excellent. Get the hamachi, the empanadas, the ribs, and the arepas.

Posted by Tyler Cowen on December 12, 2005 at 05:26 AM in Education | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/t/trackback/3576/3828030

Listed below are links to weblogs that reference How to spend less money:

Comments

Great subject, great post!
And another reason for why some religious people don't choose to live-it-up here and now: curtailing excess pleasure (sharing
in the world's overall suffering) is a small price to pay for the promise of infinite happiness in the next life (what would
that Indifference Curve look like?).
BTW, did the empanadas have raisins in them (we used to eat them that way in Chile)? For Mexican cuisine, I highly recommend
chipotle, and also chicken mole ... if you haven't tried them yet. It's amazing how many variations of arepas there are too -
made with different ingredients within just Venezuela, for example.

Posted by: tom2 at Dec 12, 2005 6:35:26 AM

Re: the quiz, I take it that by "savings rate" you mean the savings rate of blog consumers/readers. In this case we can apply ye ol' Keynesian formulae (sorry, I don't know the English notations):

I == AC + c I + s I

where I = income, AC = autonomous consumption, c = propensity for consumption, s = propensity for saving.
Free blogs to read means increased income and consumption, resulting in a lower saving rate. (I just know I'm going to get an F- for this! I guess I'll take this class again next term. ;-)

Posted by: Gabriel at Dec 12, 2005 7:23:05 AM

Don't overlook cryonics. A modest life insurance policy payable to your cryonics provider gives you a nonzero chance at a second life: http://www.merkle.com/cryo/

I feel -slightly- less fear about death, being signed up for cryonics. As interest in cryonics and biotechnology increases each year, I get a bit more optimistic, but there are still probably several decades of work to do to implement reanimation. Of course I would much rather live through those decades, than spend them at liquid nitrogen temperature... but I'll certainly take the liquid nitrogen tank over a coffin or cremation...

Posted by: Fjarlq at Dec 12, 2005 7:27:06 AM

You are assuming that religious person = belief in life after death and non-religious person = belief that death is the extinction of consciousness. But there are plenty of people who are not religious who believe that consciousness is not strictly a function of brain activity and survives death of the body based on the evidence, and plenty of religious people who believe that death is anihillation.

Of course all this assumes an easy common definition of what "religious" means which I would suspect will be difficult to arrive at. For instance, I would call the belief that human beings will conquer ageing ala SENS, Drexlerian self-replicating nanobots, Kurzweilian downloads into computers, strong AI, cryonics and the like as variant forms of religious belief.

Posted by: Matthew Cromer at Dec 12, 2005 8:55:03 AM

Gabriel,

Have no fear of your F, for we shall fail together!

Professor, isn't there a difference in recognized savings rates between time and other assets? I find I spend less money on books and magazine subscriptions since I started reading blogs lately, leading to a net positive change in my bank account. The time I spend consuming commentary and information is the same, but for less money. Is that registered as a positive change in my savings rate, or just as productivty growth?

I would say that blogs are definately positive. The only question is, through savings or superior execution? Considering how blogs run circles around the major papers it has to be at least in part the latter!

As for your question, the religious do not seem to save any more in the IRA/savings account sense. In fact, they consume less (in the selfish, Latin-Asian fusion sense), but give more to charity (and trust in charity to care for them in their times of need). It's much like Social Security in that sense. I went to a Church that had a wide range of incomes at different services, but since I was the Reverand's helper on some matters, I saw all of the congregations. I suspect that savings rates were non correlated with religion.

Posted by: Brock at Dec 12, 2005 9:02:01 AM

"Religious people should save a greater fraction of their incomes."

Max Weber, call your office...

Posted by: David Hecht at Dec 12, 2005 9:07:20 AM

17) Inventory your enjoyments, and enjoy the efficient ones. If you like walks in the park, you don't HAVE to fly 3000 miles to some other park. Leave that to the people who can't enjoy their surroundings. Or, I've owned Porsches and mountain bikes ... it's amazing how much fun the mountain bikes are for such a small faction of the expense. Dining in the strip malls, something that Tyler and I have co-discovered, is a simple pleasure.

Or, if you like BBQ, learn to do it. Just curious Tyler, how are you at running a smoker?

Posted by: odograph at Dec 12, 2005 10:56:36 AM

I was surprised to see that Zengo's menu looked pretty good. My experience living in Japan taught me that nothing, and I mean nothing was worse than Japanese Mexican. I still have nightmares.

Posted by: Jason Ligon at Dec 12, 2005 11:10:03 AM

I concur with your review of Zengo. I and various groups of people who have eaten there several times have been satisfied. But no mention of the Mojito Cuzco? As yucky and fru-fru as it sounds, they make a tasty cucumber mojito.

Posted by: Patinator at Dec 12, 2005 12:09:07 PM

Median US households spend <$5/person/day on food. They are NOT eating out all the time. I recommend reading "the two income trap" for an unfortunately non-economically thoughtful but at least numerically informed study of middle class bankruptcy. It goes far towards addressing the myth of overconsumption. Ultimately, their main recommendation is "Don't have kids", as kids aren't compatible with a middle class lifestyle on a median income with two working parents. Like "don't eat out", this may work on a micro level, but is ghastly advice on a macro level.
While we're dishing out socially harmful but selfishly rational advice, here's mine. Don't buy medical insurance even if you don't believe Robin Hanson. Make sure all your savings are bankruptcy protected, avoid doctors except in emergencies, and go bankrupt of you have an emergency instead. Buy antibiotics on-line and self-diagnose/self-treat obvious bacterial infections. Travel abroad for medical treatment if you really want to treat a chronic problem. You shouldn't have medical insurance unless your IRAs are fully vested, and should probably save wealth in a home (local bankruptcy law permitting) and possibly, if you have a small amount left over, in physical precious metals or small art objects or collectibles. If you have savings left over after this, you aren't earning like a typical American and you should buy medical insurance.
I think the over-consumption myth is a result of lying by calling people who's incomes differ by an order of magnitude "middle class". The "upper middle class" really do waste money egregiously, but they have high enough incomes that they can afford to do so. In general, they are prepared to retire at a comfortable level just by selling their houses and down-shifting to an expensive but less expensive house. At the same time, the median American, with a much smaller income, spends almost all of it on necessities, and still spends far more than a tithe of their discretionary income on charity (and generally do this without a tax deduction), which the upper middle class does not do (sadly, most of this money is wasted). When despite their frugality they are unable to save enough to deal with even moderate ill-fortune, they then get lectured and criticized for wasteful spending which they simply didn't do.

Posted by: michael vassar at Dec 12, 2005 12:14:37 PM

Another reason not to save publically is the utterly anti-savings structure of FAFSA. Disgusting institution.

Posted by: michael vassar at Dec 12, 2005 12:16:38 PM

You might try the method a former employer of mine used - he only ate lunch and only at all you can eat buffets. Essentially, he ate 2 meals at one sitting. Since he was practically on call all the time, any food he bought tended to go bad in the fridge. It was hell trying to adjust to his eating pattern, since I only worked part time as needed.

Posted by: rmark at Dec 12, 2005 12:53:03 PM

You're too old to die young, but there would be a loss in value to your death. Does that count?

Posted by: Ken Houghton at Dec 12, 2005 3:06:59 PM

Every study I have ever seen--not at all inclusive--has indicated that churchgoing (leaving open the question of whether that is a fair proxy for "religious") white people have higher incomes than their non-attending counterparts. (Makes sense; it's a social networking opprtunity.)

So there would be incremental income, and therefore a greater opportunity for savings.

The counterpoint, depending on how you define religious, is whether they tithe--or approach tithing--in which case the added benefit is more than counterbalanced.

Posted by: Ken Houghton at Dec 12, 2005 3:19:02 PM

The one flaw in the philosphy of "Eat drink and be merry, for tomorrow you may die" is that most of the time tomorrow you are still alive.

Posted by: triticale at Dec 12, 2005 4:48:05 PM

I disagree with Michael's advice on health insurance: while getting traditional insurance is indeed under many circumstances wasteful, catastrophic insurance is very cheap (e.g. 180$/month for a middle-aged family of three, with a small child), and it protects you from going bankrupt in case of medical emergency - which also saves you from having to save in precious metals (a losing proposition, mostly) instead of stocks. Another thing, buying antibiotics on line: it is really very uncommon that you need them, and self-diagnosis is for the highly sophisticated consumers, especially with access to diagnostic labs. In my 40 years I had an antibiotic only twice, if I remember correctly, for a periapical abscess and for a foot injury: even that may have been too much. Traveling abroad for treatment of chronic problems is also not so useful: after all, how frequently can you fly to Mexico for diabetes or PD care? You should consider obtaining care abroad mostly for scheduled surgery.

Posted by: Rafal Smigrodzki at Dec 12, 2005 8:20:26 PM

students shit in bad ^^^ leerling kont ^^^ lesbiche azione in casa ^^^ voyeur dvd ^^^ le plus froid seduisante quarante deux ^^^ la plus mignonne asiatique uriner ^^^ pere boulotte ^^^ le plus chaud maman vestale ^^^ emotivo giovane masturbate ^^^ desiderare agente di polizia ubriache ^^^ sagolik flickor gruppen ^^^ gulligare tonaring aktion ^^^ caldo segretaria inculate ^^^ desiderio studentessa amore ^^^ begjar fillesak ^^^ i sengen purk ^^^ kjoligst sadsprut ^^^ hetest himmelsk elsker ^^^ eklektos servitora ^^^ oreo astinomikos agapi ^^^ mere anal ^^^ plus chaude mman mpegs ^^^