Money, Freedom and the Art of Happy Living

	Woao, this is a hell of a title for a post, isn’t it? Maybe a bit too big shoes to walk in? Maybe, but however, I just had no other idea to introduce what I am trying to write: What the hell are the important things in life? Well, lets start out with a bit of economic theory:
(First one to tell my the title of the book referred to gets a free guest post!)

Background: I turned to economics some years ago to learn better how to live a good life. I learned a lot there, and certainly improved massively in handling my money and better understand economic affairs (happy to share this if anyone requests), but no, they could not help me with the way to live your life. Reason is that modern economics is really on the wrong path (they are starting to understand that only slowly).

However, what does economic theory say?

The part of economic theory that’s dealing with the individual is called Microeconomics, in contrast to Macroeconomics.

(The first one to eat 5 of those gets...well, nothing. Stupid enough.)

Classical (more that 100 year old) Microeconomics measure everything you do in so called “utility” (=well being or “Nutzen” in German), meaning the “utility” you derive from certain actions or consumption. Basic utility theory comprises things like decreasing marginal utility (e.g. the first burger gives you a lot of utility if you are hungry, the second a bit less, and the 5th probably no more additional utility at all…well, probably – I don’t know your eating habits though…).

This is a fairly vague concept but it makes a lot of sense and is worth studying.
Problem is that it’s difficult to measure utility. But economic mainstream since the 90s somehow lost track of common sense and one of the results were that very often utility was set equal to money, and economic output or GDP became the measure for “successful politics”.

This is the first mistake regarding the value of money:

Many people (and politicians and consultants and managers) think that maximizing money equals having a good life.

This is incorrect. Correct would be:

Happiness is key…
…and therefore the amount of happy (or content =”Zufriedenheit”, as always happy seems unrealistic) time that you spend in your life. No matter where the happiness or contentment comes from, be it consumption, hanging out, listening to good music, having sex, travelling or just starring at a wall…whatever you like.

The second mistake regarding the value of money

The second mistake is that most people, and surprisingly many economists as well, forget about the above mentioned law of decreasing marginal utility.

Thus they incorrectly assume that a lot more money will give them a much better life.

Correct would be:

Money is not bad, but it comes with a cost.

Thus is depends if more money (and the associated costs) is better or if the effort to obtain that money is to high, so that you'd rather sty with less.
This sounds easy and logically, yet it ist surprising how often this fact is ignored by people when they are dealing with money.
And one must be very careful not to fall in the "more money is always better"-trap as well.

We will discuss this in post #6.