Consume Now Lest Ye Die Young
From PhysOrg:
You only live once. Carpe diem. You can't take it with you. As often as we hear these clichés, they might include some real economic wisdom for some, according to research led by Princeton University's Woodrow Wilson School. The researchers argue in the Journal of Mathematical Economics that some people might want to spend more and work less – just in case their time runs out.
Marc Fleurbaey, the Robert E. Kuenne Professor in Economics and Humanistic Studies and professor of public affairs, and his collaborators – Marie-Louise Leroux from the University of Quebec and Gregory Ponthiere from the Paris School of Economics – examined an inequality that is not often under the spotlight: those who live long, fruitful lives and those who die early.
The researchers argue that a premature exit from life is a serious loss that should imply compensation beyond just relatives but also to the deceased person. But how – when the person is dead?
To evaluate compensation, the researchers first determined the economic losses associated with living too short of a life. They constructed a mathematical model that measured the loss of an early death in terms of an equivalent loss in income or consumption. By analyzing these measures, the researchers could compare the usual economic inequalities to the inequalities due to premature deaths.
To test their model, the researchers used data on income and longevity and France to examine four socio-professional groups: executives, professionals, blue-collar workers and clerks from age 20 to 100. Under the assumption that each individual lived the same amount of time, the researchers found that, unsurprisingly, those with the lowest income (clerks) are the worst off in terms of financial losses – for instance, their income is 30 percent lower than the professionals. But, across the four groups, those who die at age 55 lose, on average, the equivalent of 40 percent of income compared to those who live until age 85. In sum, short lives result in big losses, comparable to the gaps between socio-economic groups....MORE
