#5 The meaning of life

The first one to tell me the title of the book this picture referres to gets a free guest post 😉

Woao, this is a hell of a title for a small post, isn’t it? Maybe a bit too big shoes to walk in? Maybe, but however, I just had no other idea to introduce what I am trying to write:

What the hell are the important things in life?

Well, lets start out with a bit of economic theory.

Background: I turned to economics some years ago to learn better how to live a good life. I learned a lot there, and certainly improved massively in handling my money and better understand economic affairs (happy to share this if anyone requests), but no, they could not help me with the way to live your life.

What does economic theory say?

The part of economic theory that’s dealing with the individual is called Microeconomics, in contrast to Macroeconomics. Classical (more that 100 year old) Microeconomics measure everything you do in so called “utility” (=well being or “Nutzen” in German), meaning the “utility” you derive from certain actions or consumption. Basic utility  theory comprises things like decreasing marginal utility (e.g. the first burger gives you a lot of utility if you are hungry, the second a bit less, and the 5th probably no more additional utility at all…well, probably – I don’t know your eating habits though…).

This is a fairly vague concept but it makes a lot of sense and is worth studying.

Problem is that it’s difficult to measure utility. But as economic mainstream since the 90s is very eager to measure everything, very often utility is set equal to money.

This is the first mistake:

Many people (and politicians and consultants and managers) think that maximizing money equals having a good life.
This is incorrect. Correct would be:

Happiness is key…

…and the amount of happy (or contentment (=”Zufriedenheit”), as always happy seems unrealistic) time that you spend in your life. No matter where the happiness or contentment comes from, be it consumption, hanging out, listening to good music, having sex, travelling or just starring at a wall…whatever you like.

The second mistake is that most people, and surprisingly many economists as well, forget about the above mentioned law of decreasing marginal utility.

Thus they incorrectly assume that a lot more money will give them a much better life.

Correct would be:

Money is not bad, but it comes with a cost. Thus is depends if more money (and the associated costs) is better or not.

Let’s discuss this in post #6.

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4 comments on “#5 The meaning of life

  1. Yes! Engaging one’s rationality, in the narrow sense that economists consider it, is not the ultimate goal of life, but one of many necessary means to that end.

    There’s a difference, however, between leisure and free time. Money can earn you free time, but your free time isn’t happiness. Like money, you can use your free time for whatever you want, whether it be on things that bring you ruin or things that help you become a better person. Happiness certainly doesn’t consist in things that bring you ruin. So, happiness can’t merely be free time, even if having free time is a necessary condition for attaining happiness.

    Also, re: the question in the caption, I believe The Hitchhikers Guide to the Galaxy is the correct answer. 🙂

    • mrwoodpecker says:

      Thats right! Glad to have some people around who still know that book 😉
      If you wish to write a guest post, let me know, you are more than wellcome!

      On your comment: Obviously you are right, maximizing free time without a plan what to do with it is as meaningless as maximizing money or income without a plan what to spend it on.
      In the end I think it depends on understanding what acutaly makes you happy and try to maximize this elements in your life. Anyhow, as you said, very often free time is a necessity for doing so.

      Cheers,
      Woodpecker

  2. Bernhard says:

    A thought on decreasing marginal utility

    …I sometimes feel that decreasing marginal utility also applies to one’s leisure (happy) time/activities. “Next time I’ll climb an even higher mountain” and such.
    This would suggest, that you want to alternate between longer phases of work and longer phases of leisure – being in one of these states till you almost forget the other one. Then when changing, the contrast itself might be what you would perceive as “happiness of square one” each time.

    • mrwoodpecker says:

      Bernhard, this is an interesting point.

      I think the challenge with having a lot of leasure time is indeed filling it with meaningful activities. I agree that only climbing mountains would sound boring in the long run (although I love mountains).
      On the other side, there are thousands of hobbies, activities, charity, social things etc. out there, so with a bit of creativity and openness it will be difficult to get really bored plus sooner or later you will start to engange for society.

      But then, jobs are not only negative but bring some positive aspects as well.

      So, yes, I fully agree with you that the optimum would be alternating work / free time.
      After e.g. my parental leave last year for 5 months, I really enjoyed starting work again. Now, one year later, I’d be more than ready for another break. 😉

      Thats why I am not so much into early retirement.

      In my dreamworld I would work 4 days a week for 8 months a year.
      I’d have no problem to subscribe to a contract until age of 80 under this conditions. Let me know if you hear of that kind of job! 😉

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