If I spend the $1000 on popcorn, rather than investing it, the $1000 doesn’t evaporate, it merely moves to someone else. And then that person can do something useful with it. I don’t know why this should create less value then long term investment, but then my Economics 101 is lacking too.
IANAE, but it seems to me that if you want to think about whether value was created or lost, you shouldn’t focus on whether the dollars evaporated or not. Whether there should be more or fewer dollars is a question about the optimal money supply, and it’s not clear that more is always better.
Instead, it seems to me that one should think about money as a communication tool. Whenever money is spent or invested, it tells the economy, “More of this, please!”
So if you spend $1000 on popcorn, you’re incentivizing more popcorn. If you invest it in a speculative venture, you’re saying, “More of this kind of speculative venture.”
Alternatively, you could ignore all the money, and look at what’s happening in the physical world—ah, this person got food, this person got a car, etc.
So if you want to know whether $1000 is better spent on popcorn, or long-term investments, it seems to me that you’d want to ask which is better for the world: a marginal increase in the supply of popcorn, or a marginal increase in long term projects. I think the answer to that question is not trivially obvious—it depends on how much new popcorn you get for a marginal $1000 spent, and on how much new long-term planning, and also on what the supply of those things was like when you started, compared to what would be optimal.
But my guess based on the existence of instant gratification bias is that long-term projects are generally underinvested in, and so the additional long-term investment is better for the world, on the margin. (I do like popcorn though.)
If you invest it in a speculative venture, you’re saying, “More of this kind of speculative venture.”
And if you invest into a company that makes popcorn, presumably you’re also saying “more popcorn please”.
I think the answer to that question is not trivially obvious <...> But my guess based on the existence of instant gratification bias is that long-term projects are generally underinvested in
I also think it’s non obvious. I’m not saying that consumption is better than investment. And I understand why we could expect less investment than optimal, but still I suspect that the difference between the two is very small.
It’s not well thought out, but I have an intuition that there should be some efficiency in this regard. If investment was a low hanging fruit, in terms of value creation, then a few rich people could invest until it isn’t a low hanging fruit any more.
you shouldn’t focus on whether the dollars evaporated or not.
Oh, yes, I didn’t mean to imply that destroying money destroys value, it was just a lazy metaphor for, I don’t know what, whatever people think is wrong with consumption. Indeed I can’t say that bruning my money, is necessarily a bad thing (although there is some waste, if it causes new money to be printed).
Alternatively, you could ignore all the money, and look at what’s happening in the physical world—ah, this person got food, this person got a car, etc.
IANAE, but it seems to me that if you want to think about whether value was created or lost, you shouldn’t focus on whether the dollars evaporated or not. Whether there should be more or fewer dollars is a question about the optimal money supply, and it’s not clear that more is always better.
Instead, it seems to me that one should think about money as a communication tool. Whenever money is spent or invested, it tells the economy, “More of this, please!”
So if you spend $1000 on popcorn, you’re incentivizing more popcorn. If you invest it in a speculative venture, you’re saying, “More of this kind of speculative venture.”
Alternatively, you could ignore all the money, and look at what’s happening in the physical world—ah, this person got food, this person got a car, etc.
So if you want to know whether $1000 is better spent on popcorn, or long-term investments, it seems to me that you’d want to ask which is better for the world: a marginal increase in the supply of popcorn, or a marginal increase in long term projects. I think the answer to that question is not trivially obvious—it depends on how much new popcorn you get for a marginal $1000 spent, and on how much new long-term planning, and also on what the supply of those things was like when you started, compared to what would be optimal.
But my guess based on the existence of instant gratification bias is that long-term projects are generally underinvested in, and so the additional long-term investment is better for the world, on the margin. (I do like popcorn though.)
And if you invest into a company that makes popcorn, presumably you’re also saying “more popcorn please”.
I also think it’s non obvious. I’m not saying that consumption is better than investment. And I understand why we could expect less investment than optimal, but still I suspect that the difference between the two is very small.
It’s not well thought out, but I have an intuition that there should be some efficiency in this regard. If investment was a low hanging fruit, in terms of value creation, then a few rich people could invest until it isn’t a low hanging fruit any more.
Oh, yes, I didn’t mean to imply that destroying money destroys value, it was just a lazy metaphor for, I don’t know what, whatever people think is wrong with consumption. Indeed I can’t say that bruning my money, is necessarily a bad thing (although there is some waste, if it causes new money to be printed).
Yes, I’d like more of that.