“What’s the right way to think about how much to give to charity?” My answer: how much better a place do you want to make the world? Do you want to make it a little better, a medium amount better, or a lot better? And how does this goal trade off against your other goals? How much would you sacrifice by making the world a lot better? Keep in mind that money is not a good way to buy happiness. So you sacrifice surprisingly little. But giving up things that you already have is painful due to the endowment effect. Try to fight status quo bias and avoid anchoring on your current amount of giving. If you think for a while, I’ll bet you’ll be able to find a budget that does a smashing job of achieving both your personal and altruistic goals.
I gave ~$20K to FHI last year, which was over a third of my pre-tax income, but I see my major altruistic sacrifices as being time & energy ones (largely related to acquiring skills and doing independent projects in order to increase my long-run earnings capacity). I still buy most of what I want. I like living with roommates and I have little need for a car. And despite my time and energy “sacrifices”, I suspect I’m happier now that I have a clear, obviously important goal in life, relative to the aimlessness I felt in my pre-altruism days.
Furthermore, while technically paying for school tuition and medical expenses are “buying happiness” in the sense that if you don’t pay for them you won’t be very happy, the arguments against using money for happiness don’t apply well to alleviating specific needs.
Note that both graphs have a log scale as their x-axis. It’s pretty standard for economists, psychologists, etc. to suggest that humans have a logarithmic utility for money (i.e. your happiness is proportionate to the number of digits in your bank balance, so giving away 90% of your capital and reducing that number of digits by 1 has only a marginal impact on your happiness level). I think the statement “money is not a good way to buy happiness” captures the intuition behind logarithmic utility for money fairly well.
(Also note that the article does not dispute my claim that money is not a good way to buy happiness. It just notes the lack of an asymptote in the utility curve.)
What does it mean for humans to have logarithmic utility for money?
Do we have a measurable quantitative concept of utility that’s natural enough that it would be silly to pull stuff like “utility2= log utility1, now humans have linear utility2 for money”!
The main ways to get a handle on this are to use subjective well-being scores (which is what those graphs do, and is somewhat questionable as to whether it’s a natural unit), or to ask people about trade-offs or gambles they’d make (to elicit preferences as in a vN-M utility function). Both approaches lead to data saying it’s approximately logarithmic, and there are also some theoretical reasons to think this is roughly right.
“What’s the right way to think about how much to give to charity?” My answer: how much better a place do you want to make the world? Do you want to make it a little better, a medium amount better, or a lot better? And how does this goal trade off against your other goals? How much would you sacrifice by making the world a lot better? Keep in mind that money is not a good way to buy happiness. So you sacrifice surprisingly little. But giving up things that you already have is painful due to the endowment effect. Try to fight status quo bias and avoid anchoring on your current amount of giving. If you think for a while, I’ll bet you’ll be able to find a budget that does a smashing job of achieving both your personal and altruistic goals.
I gave ~$20K to FHI last year, which was over a third of my pre-tax income, but I see my major altruistic sacrifices as being time & energy ones (largely related to acquiring skills and doing independent projects in order to increase my long-run earnings capacity). I still buy most of what I want. I like living with roommates and I have little need for a car. And despite my time and energy “sacrifices”, I suspect I’m happier now that I have a clear, obviously important goal in life, relative to the aimlessness I felt in my pre-altruism days.
Yes it is.
Furthermore, while technically paying for school tuition and medical expenses are “buying happiness” in the sense that if you don’t pay for them you won’t be very happy, the arguments against using money for happiness don’t apply well to alleviating specific needs.
Note that both graphs have a log scale as their x-axis. It’s pretty standard for economists, psychologists, etc. to suggest that humans have a logarithmic utility for money (i.e. your happiness is proportionate to the number of digits in your bank balance, so giving away 90% of your capital and reducing that number of digits by 1 has only a marginal impact on your happiness level). I think the statement “money is not a good way to buy happiness” captures the intuition behind logarithmic utility for money fairly well.
(Also note that the article does not dispute my claim that money is not a good way to buy happiness. It just notes the lack of an asymptote in the utility curve.)
What does it mean for humans to have logarithmic utility for money? Do we have a measurable quantitative concept of utility that’s natural enough that it would be silly to pull stuff like “utility2= log utility1, now humans have linear utility2 for money”!
The main ways to get a handle on this are to use subjective well-being scores (which is what those graphs do, and is somewhat questionable as to whether it’s a natural unit), or to ask people about trade-offs or gambles they’d make (to elicit preferences as in a vN-M utility function). Both approaches lead to data saying it’s approximately logarithmic, and there are also some theoretical reasons to think this is roughly right.