Money To Live

October 20, 2008

Relative and Absolute Wealth

Filed under: Uncategorized — by moneytolive @ 5:00 am

Absolute wealth is a measure of how much money I have, and relative wealth is a measure of how much I have compared to my neighbor or friend.

Economists have published lots of papers about these ideas, and here is a recent article summarizing recent research using brain scans:

A brain scan study has shown that no matter how wealthy you are, money is most rewarding if you have relatively poor friends, peers and colleagues. [emphasis added]

When I was 6 and my brother 9, our father had us play a game. There was a chessboard with two chess pieces, one for each of us.

Each time I moved my piece to the opposite side of the board, my father would give me a dollar. Same thing for my brother (each time his piece crossed the board, he got a dollar).

We had to take turns moving our piece, and standard chess rules applied, which meant that we could capture the other person’s piece, thereby ending the game.

My brother, being the older and wiser child, immediately figured out that we could each earn an “unlimited” amount of money by cooperating. He even let me go first to show good faith.

I, being the younger, greedier, and less cooperative child, did not see the big picture. I saw that by going first I could get a dollar before my brother could. Then, I could capture his piece and end the game.

When the game was over, I had $1 and he had $0.

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2 Comments »

  1. I remember that day. Ethan was astounded that you could not grasp the full meaning of the game. Of course, any good developmentalist would point out that you were just shy of the “developmental age 7” (not necessarily the same as a chronological 7, meaning that it doesn’t matter when the birthday falls) at which point children can grasp the concept of time, of money, and other abstract ideas. Prior to that development, they just want to get their brother.

    Comment by Mary Bold — October 20, 2008 @ 10:55 am |Reply

  2. Ha!

    Comment by katherine — November 4, 2008 @ 7:52 am |Reply


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