The part that is missing from your question is, in a parallel reality where you didn’t buy the PS5, how did you spend the extra money? Also, how did you get that money in the first place? Maybe the parallel reality we should look at is the one where you worked less, got less money, and therefore didn’t buy the PS5. Or maybe you worked equally hard, but was less successful at negotiating salary, so your boss bought one more PS5 for their kids instead.
I think the standard assumption is that the entire circle of “you do something useful to get money, then spend the money to buy PS5” is generating something positive for both you and the others. -- And the “magic of capitalism” is that this is actually not obvious from the perspective of entire human history, because some traditional alternatives are “you extort money from people at a gunpoint, then spend the money to buy PS5”, which do not generate so much positive value for the others.
Now a separate question is whether it would be better for others if instead of buying the PS5, you donated the money to an effective charity. Yes, it would be, obviously. But how many people actually do that? -- Here again, the “magic of capitalism” is that people generate good as a side effect of their selfish actions, which makes it way more reliable. (And this does not prevent anyone from creating even more good by donating.)
tl;dr -- (under some theoretical assumptions which are not necessarily true in the real world) participating in normal trade generates some good as a side effect, and of course donating to charity instead would generate even more good
The part that is missing from your question is, in a parallel reality where you didn’t buy the PS5, how did you spend the extra money
Correct, and intentionally so. This is why I compare to setting the money on fire instead. Maybe I have the wrong framing, but it seems valuable to me to look at the marginal value of a single spending act in isolation. I might do many things with the money (like invest, spend, or donate it in various ways), and it would be interesting to know each of their values independently so I could compare them on even footing.
Maybe the parallel reality we should look at is the one where you worked less, got less money, and therefore didn’t buy the PS5
Maybe! I think if you’re trying to influence social policy, you should definitely think about that. But as an individual, I’m curious about the separate positive/negative effects of more work vs more spending.
some traditional alternatives are “you extort money from people at a gunpoint, then spend the money to buy PS5”, which do not generate so much positive value for the others.
Thanks for bringing this up, it hadn’t occurred to me.
I basically agree with the rest of your answer but, I’m still on the hunt for quantification!
Burning the money would… create a microscopic deflation, I guess. Everyone else’s money just got 0.0000000001% more valuable. I suppose that could count as a very inefficient form of charity. Like, if rich people own X% of all the money on Earth, then X% of the money you burned was in effect donated to them.
The part that is missing from your question is, in a parallel reality where you didn’t buy the PS5, how did you spend the extra money? Also, how did you get that money in the first place? Maybe the parallel reality we should look at is the one where you worked less, got less money, and therefore didn’t buy the PS5. Or maybe you worked equally hard, but was less successful at negotiating salary, so your boss bought one more PS5 for their kids instead.
I think the standard assumption is that the entire circle of “you do something useful to get money, then spend the money to buy PS5” is generating something positive for both you and the others. -- And the “magic of capitalism” is that this is actually not obvious from the perspective of entire human history, because some traditional alternatives are “you extort money from people at a gunpoint, then spend the money to buy PS5”, which do not generate so much positive value for the others.
Now a separate question is whether it would be better for others if instead of buying the PS5, you donated the money to an effective charity. Yes, it would be, obviously. But how many people actually do that? -- Here again, the “magic of capitalism” is that people generate good as a side effect of their selfish actions, which makes it way more reliable. (And this does not prevent anyone from creating even more good by donating.)
tl;dr -- (under some theoretical assumptions which are not necessarily true in the real world) participating in normal trade generates some good as a side effect, and of course donating to charity instead would generate even more good
Correct, and intentionally so. This is why I compare to setting the money on fire instead. Maybe I have the wrong framing, but it seems valuable to me to look at the marginal value of a single spending act in isolation. I might do many things with the money (like invest, spend, or donate it in various ways), and it would be interesting to know each of their values independently so I could compare them on even footing.
Maybe! I think if you’re trying to influence social policy, you should definitely think about that. But as an individual, I’m curious about the separate positive/negative effects of more work vs more spending.
Thanks for bringing this up, it hadn’t occurred to me.
I basically agree with the rest of your answer but, I’m still on the hunt for quantification!
Burning the money would… create a microscopic deflation, I guess. Everyone else’s money just got 0.0000000001% more valuable. I suppose that could count as a very inefficient form of charity. Like, if rich people own X% of all the money on Earth, then X% of the money you burned was in effect donated to them.