If I had two buttons, to give me $1000 of consumption today, or $1001 of consumption in thirty years (inflation adjusted of course), I would press the second button.
This sounds nuts to me. Firstly, what about risk? You might be dead in 30 years. We might have moved to a different economy where money is worthless. You might personally not value money (or not value the kind of things you can get with money) as much. Admittedly there’s also some upside risk, but it’s clearly lower than the downside.
We’re ignoring investment possibilities, of course. But even then, in any case, if you have £1000 now, you can use it to buy something that would last more than 30 years and benefit you over that time.
The risk is a good point given some of the uncertainties we’re dealing with right now. I’d estimate maybe 1% risk of those per year (more weighted towards the latter half of the time frame, but I’ll assume that it’s constant), so perhaps with a discounting rate of that it would need to be more like $1400. That’s still much less than the assumption.
Looking at my consumption right now, I objectively would not spend the $1000 on something that lasts for more than 30 years, so I believe that shouldn’t be relevant. To make this more direct, we could phrase it as something like “a $1000 vacation now or a $1400 vacation in 30 years”, though that ignores consumption offsetting.
This sounds nuts to me. Firstly, what about risk? You might be dead in 30 years. We might have moved to a different economy where money is worthless. You might personally not value money (or not value the kind of things you can get with money) as much. Admittedly there’s also some upside risk, but it’s clearly lower than the downside.
We’re ignoring investment possibilities, of course. But even then, in any case, if you have £1000 now, you can use it to buy something that would last more than 30 years and benefit you over that time.
The risk is a good point given some of the uncertainties we’re dealing with right now. I’d estimate maybe 1% risk of those per year (more weighted towards the latter half of the time frame, but I’ll assume that it’s constant), so perhaps with a discounting rate of that it would need to be more like $1400. That’s still much less than the assumption.
Looking at my consumption right now, I objectively would not spend the $1000 on something that lasts for more than 30 years, so I believe that shouldn’t be relevant. To make this more direct, we could phrase it as something like “a $1000 vacation now or a $1400 vacation in 30 years”, though that ignores consumption offsetting.