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Old 09-19-2010, 02:14 PM   #21
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If you drink too much, you get drunk.
The engine won't start
if you're always tinkering with it.
If you hoard wealth,
you fall into its clutches.
If you crave success,
you succumb to failure.
Do what you have to do,
then walk away.
Anything else will drive you nuts.

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Somethings have been known for a long, long time.
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Old 09-19-2010, 08:56 PM   #22
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[QUOTE[/QUOTE]

This graph is probably vaguely familiar to many here as it is a simplistic graphic form of the economic principle of the law of diminishing utility. Hermann Gossen and the topic of marginal utility is a central topic of modern Microeconomic theory.

From a microeconomic perspective, the graph is technically incorrect in that the curve should not be so extremely parabolic as it should be a measure of total fulfillment accumulated rather than an actual literal plot of the additional marginal utility for each additional value expended or spent. The total fulfillment curve will generally appear to something like the left half of the parabola and then a flat line from that point on after the point when additional fulfillment is nil. The actual marginal utility curve will then be the plot of points of the first derivative of the total fulfillment curve - that powerful rate of change thing that will go to zero at the point where the total fulfillment curve turns flat. (Yes, the total fulfillment graph will actually turn technically parabolic at the point where the additional marginal consumption creates negative utility.)

Anyway, the Happiness at $75k study merely concludes that in the aggregate, $75k appears to be the level at which point the common or average person has their total fulfillment curve turn flat or the point where the marginal utility curve goes to zero.
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Old 09-19-2010, 09:19 PM   #23
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[QUOTE=GusLevy;979659 This graph is probably vaguely familiar to many here as it is a simplistic graphic form of the economic principle of the law of diminishing utility. Hermann Gossen and the topic of marginal utility is a central topic of modern Microeconomic theory.
.[/QUOTE]

Diminishing marginal utility clearly applies to consumption of discrete articles or personal services. I.e. you can only eat so many hot dogs or wear so many cashmere sweaters or use so many prostitutes. . But when you apply it to expenditures rather than articles it is not so clear. It does not account well for the increased base cost of activities. i.e. planes instead of cars, unique objects etc. I.e. does it apply to owning a Rembrandt? Owning 5 Rolls Royces one thing, but 5 Rembrandt paintings is another. As a final note it does not apply to non consumption expenditure i.e. spending money on charity etc.
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Old 09-19-2010, 09:36 PM   #24
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Really, really short synopsis of
‘Transforming your relationship with money and achieving financial independence’
by Joe Dominquez
How much have you made and what is the used value of all you own
Record spending, totaling into personalized categories, dividing by real hourly wage
(net income - work costs) / (work + commute + wind down time)
Too many hours spent in some categories, not enough in others?
Repeating monthly identifies misplaced spending leading to a more fulfilling lifestyle
Work is for income, not socializing. Look to increase your income
Invest directly in long term Treasury bonds for stable long term income
Treasury bond yield x investment = income
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Old 09-19-2010, 09:37 PM   #25
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the (as far as I know) original fullfillment curve ended with a tombstone at the right hand end, signifying your limited time available.
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Old 09-19-2010, 09:54 PM   #26
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GusLevy said mostly what I wanted to say.... that the curve after "Enough" should not be going down so fast... and in NO way should it go back to the base line...

What that implies is that if you consume a LOT more than enough, you are worse off than someone who is living under a bridge going to the soup kitchen to eat.... this is NOT happening...

And I can tell you that IF I were a billionaire, that peak "enough" would be a lot higher than it is for me now.... Emeritus pointed it out that you can do a lot of things that you would not do... (for me, cars would be like paintings for others...)... I for one would be flying a lot more to many interesting destination around the world... and maybe in my own private jet.. and I can tell you that my fulfillment would not be dipping down like the graph shows...
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Old 09-20-2010, 06:46 AM   #27
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I think this is a great curve. Everyone has their own "optimum".

I've overconsumed in a certain hobby, stuff got too complex, I got miserable. Pare back, simplify, get back to optimum.

I also think this curve "shifts" as you get older - older I get, the less "stuff" I want to handle, pare back to stay on the curve.

Different societies have their own curves - I think the US excels at "excessive stuff" and people make themselves miserable "swimming in crap". I sense Europeans keep consumption more trim and manageable.
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Old 09-20-2010, 06:55 AM   #28
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the (as far as I know) original fullfillment curve ended with a tombstone at the right hand end, signifying your limited time available.
Do you mean something like this?
Attached Images
File Type: gif WhyRetire.gif (60.0 KB, 103 views)
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Old 09-20-2010, 06:59 AM   #29
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A problem also arises when you yourself are satisfied; however you are expected to contribute to somebody else’s "overconsumption curve".

(It's a long story )...
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Old 09-20-2010, 11:20 AM   #30
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What that implies is that if you consume a LOT more than enough, you are worse off than someone who is living under a bridge going to the soup kitchen to eat.... this is NOT happening...
A good friend of mine, business owner w/ a big house, new motorhome, and many other toys, continually jokes that he would rather go live under a bridge somewhere. I know that he's only half joking.
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Old 09-20-2010, 12:29 PM   #31
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Before or after Harry died.
He just dropped in to see what condition his condition was in...
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Old 09-20-2010, 12:33 PM   #32
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...you can only...use so many prostitutes...
The angle of the dangle is proportional to the heat of the, er, uh, never mind...
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Old 09-20-2010, 06:47 PM   #33
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Sorry Masterblaster if this curve has already been discussed in other places or even on this board. As mentioned, I am very new here and to the concept of FIRE. I thought this curve was interesting, just wanted to share it for discussion purposes.

I agree with your comment re: income and happiness.

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That curve is straight out of "Your Nobey or Your Life". These type curves are discussed ad nauseum in that book.

And it's not the income that limit's your happiness. It's what you have to give up and what you have to do to get that income that limits you happiness
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Old 09-20-2010, 06:51 PM   #34
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Thank you GusLevy for your post. Sorry but I am not an economist and I got lost with your sentence "Yes, the total fulfillment graph will actually turn technically parabolic at the point where the additional marginal consumption creates negative utility." Please could you kindly elaborate futher ? Thank you kindly

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(Yes, the total fulfillment graph will actually turn technically parabolic at the point where the additional marginal consumption creates negative utility.)
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Old 09-21-2010, 01:17 AM   #35
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http://2disbetterthan3d.files.wordpr...al-utility.png

Greetings. I hope that the link above works as it is a graph that shows the basic story of the law of diminishing utility ("ldu"). The chart has two graphs: 1) total utility (red), and 2) marginal utility (blue). TU represents the fulfillment that is accumulated for each value spent, consumed or used. MU is simply then the graph of the first derivative of TU which equates to the marginal value added from each value spent.

The graph that you initially presented makes the mistake of confusing the concept by actually mixing both TU and MU in a sense. As TexasProud notes, it is nonsensical to have the fulfillment curve be perfectly parabolic - or even remotely so - since, in the aggregate, once we reach the point of negative MU it wouldn't take long before we figure that out and stop. So the TU curve would reach the "top" of the curve and then basically flatten out at a slight downward curve - the slight downward curve technically makes the TU curve parabolic but practically not. MU will be zero at the point where the TU curve reaches the maximum high point and goes to disutility - negative MU - from there.

....as for the other fellow's comment about using "ldu" for prostitutes or for high end art it would not apply in either situation as both are too far removed from having commodity-like attributes for the aggregate population or are too expensive or unique per unit value. Now, if the commentator meant that he uses only one prostitute rather than a new one at each occasion throughout his lifetime then this would lead to the special case in "ldu" theory where the TU curve does indeed display perfectly parabolic attributes as total fulfillment would probably reach zero given the extreme negative MU at some point.
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Old 09-21-2010, 11:59 AM   #36
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Quote:
Quote:
Originally Posted by MasterBlaster
That curve is straight out of "Your Nobey or Your Life". These type curves are discussed ad nauseum in that book.

And it's not the income that limit's your happiness. It's what you have to give up and what you have to do to get that income that limits you happiness

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Sorry Masterblaster if this curve has already been discussed in other places or even on this board. As mentioned, I am very new here and to the concept of FIRE. I thought this curve was interesting, just wanted to share it for discussion purposes.

I agree with your comment re: income and happiness.
I must appologize for the typo. The book that discusses these (Contentment versus Money) issues is "Your Money or Your Life" by Dominguez and Robin. There is some timeless advice putting money and what you want out of life in perspective in that book, as well as some dated investment suggestions.
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Old 09-21-2010, 07:05 PM   #37
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Thank you GusLevy for clarifying.

Quote:
Originally Posted by GusLevy View Post
http://2disbetterthan3d.files.wordpr...al-utility.png

Greetings. I hope that the link above works as it is a graph that shows the basic story of the law of diminishing utility ("ldu"). The chart has two graphs: 1) total utility (red), and 2) marginal utility (blue). TU represents the fulfillment that is accumulated for each value spent, consumed or used. MU is simply then the graph of the first derivative of TU which equates to the marginal value added from each value spent.

The graph that you initially presented makes the mistake of confusing the concept by actually mixing both TU and MU in a sense. As TexasProud notes, it is nonsensical to have the fulfillment curve be perfectly parabolic - or even remotely so - since, in the aggregate, once we reach the point of negative MU it wouldn't take long before we figure that out and stop. So the TU curve would reach the "top" of the curve and then basically flatten out at a slight downward curve - the slight downward curve technically makes the TU curve parabolic but practically not. MU will be zero at the point where the TU curve reaches the maximum high point and goes to disutility - negative MU - from there.

....as for the other fellow's comment about using "ldu" for prostitutes or for high end art it would not apply in either situation as both are too far removed from having commodity-like attributes for the aggregate population or are too expensive or unique per unit value. Now, if the commentator meant that he uses only one prostitute rather than a new one at each occasion throughout his lifetime then this would lead to the special case in "ldu" theory where the TU curve does indeed display perfectly parabolic attributes as total fulfillment would probably reach zero given the extreme negative MU at some point.
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