But chances are you consider yourself better off than someone who was a millionaire in an previous era—and you may even be better off than someone who had a million dollars in the bank in the 1970s or 1980s.
Don’t believe me? Then ask yourself this question: How much is [technological advance X] worth to me?
That’s not an easy question to answer since there’s no exact way to put a dollar figure on the subjective value of various technological improvements. But let’s think of it this way.
The average life expectancy in the United States is 78 years. For the sake of this experiment, let’s assume you can expect to live at least that long. Subtract your current age from 78 to get your remaining life expectancy. (My age is 47 so I have 31 years.)
Now take four monetary amounts—$100,000, $250,000, $500,00, and $1 million—and divide each by your number. (Mine are: $3,225, $8,084, $16,129, and $32,258.)
Now imagine you are offered $100,000 to give up air travel, $250,000 to give up TV and movies, $500,000 to give up all automotive travel (even riding with others or taking a bus), and $1,000,000 to give up all access to the internet—all for the rest of your life. Would you take that deal? Would you take any subset of that deal?
If you gave me the total of those sums ($1.8 million) I could invest it in the stock market and, based on the four percent rule, collect an annual salary of $72,000 a year. I’m rather frugal so I could easily live off that amount for the rest of my life. Yet would it be adequate compensation for what I’d be required to give up?
I might be tempted to give up air travel since I don’t like to travel anyway (though I suspect I’d regret that choice within a decade). However, I don’t think I could give up TV and movies. Even though I spend a few hundred dollars a year on those types of media, I get more than $8,084 dollars worth of value a year. I also wouldn’t give up riding in cars for a mere $16,129 a year. And since I make my living on the internet, there is no way I’d agree to give it up for $32,258 a year (even if it’d allow me to retire today).
It may seem odd that I’d be unwilling to give up something that I’ve only had for half my life (I’ve only had access to the web since 1992 when I got a Compuserve dial-up account). But the value added to my life from using the internet far exceeds what I’ve had to pay. The same is even more true for auto travel, the value of which has far exceeded the cost I’ve incurred.
This shows why I should consider myself better off today (with a much lower net worth) than if I had a million dollars and none of these technologies. And I’d be much worse off if I had a million dollars cash and had to live with the technology of the 1970s. (While you may be willing to trade any of these particular goods for the cash, there is likely another basket of common technologies that you’d rather have than the money. People in Houston, for instance, might be willing to forego several million to keep their air conditioning.)
The importance of consumption is rather obvious when you think about. Yet almost all debates about economic well being focus on income or wealth rather than consumption. It’s not that income and wealth or unimportant, and they are often correlated with consumption. But overall consumption is more important than either income or wealth. That’s why, as I’ve written before, keeping an eye on consumption—and how the goods and services are obtained—helps us to better determine the type and level of need our neighbors may have.
In this video by the Fund for American Studies, we also see why the rich—who are often the first adopters of technology–essentially subsidize technology in a way that makes us all better off.