Suppose I can spend $10 on a widget that I want or
invest the $10 at the best possible rate. The
invested money will grow to, let's say, $100 in some
period of time. But that $10 isn't worth $100 today,
it's only worth $10 today. The widget and the
investment have the same** value today, right? Even
though I won't be able to resell the widget for $100
in the future, I do get the use of the widget, as
opposed to my invested $10 which doesn't do anything
for me until I cash it in. So the $225,000 you could
obtain on your death-bed is only worth $250 today, the
same as the plane ticket. And if you buy the ticket,
you get to go to Hawaii, to boot. That's not to say
that one shouldn't plan for the future, but one
shouldn't sell out the present for the benefit of the
future, either.
If someone is willing to make a bet with you, you
should wonder if maybe she knows something you don't.
I don't think the same is true with sales & bargains.
Hal Varian briefly mentions his theory of sales in
this paper: www.sims.berkeley.edu/~hal/Papers/how.pdf
. I don't have the resources to locate the Theory of
Sales paper itself.
--jsh
**Okay, okay. They won't have the same value if I'm
not the marginal purchaser, or whatever.
--- Jonathan Kalbfeld <[EMAIL PROTECTED]>
wrote:
> I recently obtained my series 7 license, but during
> the six weeks of
> studying, a great deal of my material involved
> economic impact of various
> fiscal and monetary policy, and also of course the
> laws of compounding
> interest.
>
> I think I figured out the problem with society
> today. Business prays on
> countless individuals who can not distinguish the
> difference between cost
> and price. Of course there's no need to define
> those terms on here, but
> it occurred to me that while I can spend $250 on a
> plane ticket now, I
> will have paid $225,000 for that plane ticket by the
> time I am dead.
>
> This has become a very big problem for me, because I
> don't want to spend
> any money. Not one red cent. I don't enjoy
> anything because all I can
> see any more is opportunity cost. I have gotten to
> the point in my life
> where I can't enjoy anything--probably not even a
> weekend in Hawaii
> because I see it as a missed investment opportunity.
>
> I look at every single "bargain" or "sale" with the
> eyes of a skeptic,
> knowing that the counter-party in the transaction
> must have a reason for
> what they are doing. They must see this item as
> worth less than what they
> are selling it for so why should I buy it for the
> sale price?
>
> I feel much like the main character of Flatland who
> is suddenly bumped
> into the third dimension by a strange object, gets
> catapulted above the
> normal 2-dimensional plane, and can never look at
> his world the same way.
>
> Does anyone else feel like this?
>
> jonathan
>
> --
> Jonathan Kalbfeld M268@>6]U('!L87D@=&AI<R!M
> ThoughtWave Technologies LLC
> (v) +1 415 386 UNIX 97-S86=E(&)A8VMW87)D<RP@:
> UNIX, Networking, Programming
>
>
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