Tuesday, 17 July 2007

Affirming Mankiw's First Principle of Economics

At Why Delayed Gratification is a False Dichotomy, I am told that you don't have to sacrifice today to gain tomorrow:
Often we’re told that we have to suffer now — give up what we want — in order to succeed later, that in order to save we must sacrifice. Give up instant gratification to get delayed gratification.

But you can do both.

For years, I was confused about this, as I read books and websites that sent me two different messages:

1. Pleasure later. The first message was that in order to be successful, in order to build wealth, you have to delay gratification. You can’t have instant gratification and be successful.

2. Pleasure now. The second message was usually from other sources on happiness, but sometimes from the same source: enjoy life now, while you can, because it’s short and you never know when your last day will come. Live every day like it’s your last.

Trouble is, I agree with both messages. And if you read this site often, you’ll see that I send both messages: Live frugally and simply! But also enjoy life!

That’s because I’ve reconciled the two philosophies into one: Live life now and enjoy it to the fullest — without destroying your future. The key to doing that? Find ways to enjoy life completely, utterly, maximally … that don’t cost your future very much.
The only way I think this will be possible is if you love your job. The author goes on to give examples of how you can have fun and save money:
Find free or cheap pleasures. Frugality does not have to be boring or restrictive … if you use your imagination. Be creative and find ways to have fun — loads of it — without spending much money. Have a picnic at the park, go to the beach, do crafts, board games, fly a kite, make art, bake cookies...
The problem is that there is no such things as a free lunch. These things cost time because you could be working. If you spend one hour going to the beach, you don't do this for free. You waste one hour's wage. Mankiw's second principle of economics: "The cost of something is what you give up to get it."
Make people a priority... If you give “stuff” a priority — stuff like gadgets, nice furnishings, nice clothes, shoes, jewelry, etc. — then you will spend a lot of money. But if you make people a priority — the people you love most, you close friends and family — you don’t need to spend a dime to enjoy life. Make some time to visit with friends, or your parents … and have a conversation with them that doesn’t involve eating out or going to the movies. Just sit, have some iced tea or hot cocoa (depending on the weather), and talk.
This could work, but you have to remember that you need to travel to friends. It also depends on what kind of friend you have. If you have friends who enjoy going to movies, pubs, football games, then they'll want to bring you along. Also, when you have friends you have an audience and if you have an audience you naturally want to show off, so the more people you know the more the pressure to buy status symbols like luxury cars increases. If you were a loner you wouldn't bother because no one cares about you.

Further Study: Mankiw's Ten Principles of Economics

No comments: