A pauper WOULD NOT necessarily get greater utility from money than a millionaire who gives the money to the pauper -- it's subjective. RIGHT?THE POOR MAN MIGHT VIEW THE MONEY AS THE SOURCE OF...

A pauper WOULD NOT necessarily get greater utility from money than a millionaire who gives the money to the pauper -- it's subjective. RIGHT?

THE POOR MAN MIGHT VIEW THE MONEY AS THE SOURCE OF ALL EVIL WE DON'T KNOW IF THE POOR MAN WILL RECEIVE GREATER UTILITY BECAUSE HE MIGHT THINK MONEY IS THE SOURCE OF ALL EVIL. RIGHT?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

You are absolutely right here.  It is certainly possible that a pauper would have some sort of aversion to money and therefore get less utility from it than a rich man.

Economists do not claim to know how much utility any particular person gets from any particular good or service.  That is a matter of taste, which is impossible to predict accurately on an individual level.

All economists can do is to look at how individuals go about trying to satisfy their individual tastes.  Economists assume that they can predict that even though they cannot predict the tastes themselves.

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

This question is talking about personal preferences of individuals. Because of this it is quite possible that utility of money for a pauper would be zero.

But there are a few additional interesting issues that should be clarified. First, the millionaire who gives away money to a pauper or anyone else in charity is also spending, and in the process is deriving some utility. This utility may come in the form of self-satisfaction for having done something good, or in form of some added prestige, or some other benefit of similar kind. Also if the pauper accepts the money from the millionaire, then he or she also expects to receive some utility, whether or not the pauper describes this money as evil. If there was no expectation of gain, the pauper has no other motivation for accepting the money. The utility to pauper can be more than, equal to, or less than the utility for millionaire depending on personal preferences of the pauper, but some utility has to be present.

It is interesting to note how the same money is providing utility to more than one person. Also this means that total utility is increased when money is transferred voluntarily from one person to another.

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