The Money Genie

I came across this article on http://dilbert.com/blog/entry/the_happiness_genie/

Suppose a genie appears and gives you two choices. The first option is that he will give you $10 million dollars, but everyone else you know will get $20 million apiece.

Choice two: You get $5 million, but no one else gets anything.

As a bonus, the genie offers to erase your memory of having made the choice, so guilt will never be a factor. You will simply wake up the next day in the new situation.

Which option do you choose to maximize your personal happiness?

This might seem like an easy choice. You take the $10 million and your friends will get $20 million each. Everyone wins. Unfortunately, I don’t think humans are wired that way. Happiness is based on the direction your life is heading (better or worse), and what you have compared to what you think you should have.

If you take the genie’s $10 million option, over time you will start feeling like the poorest person you know, since everyone else has $20 million apiece. You will wonder what you did in a past life to deserve this shabby treatment from the universe. The ugly truth about humans is that your happiness might be maximized by screwing everyone you know while screwing yourself half as much.

If you buy this premise, it has interesting implications for personal relationships. For example, it means that one way to cheer up an unhappy friend is to put yourself in a bad situation, thus resetting the reference point. The splinter in your finger only makes you unhappy when you’re not talking to someone who has a railroad spike through his head.

According to Adam Smith – “Everyone acts in their own self interest”; so people who follow Adam Smith economics will take the $10m and not care about what everyone else gets.

According to John Nash; a Nash equilibrium is reached when everyone acts in their own self interest AND the interest of the whole group as well. Even in that case people will take $10m. The “genie will erase your memory” makes sure that no one has the incentive to cheat.

So, really there is no conflict here. Think a step further and distill this down to reality. Would you really give up the extra $5m, just because everyone else has more money than you have? You could always invest yours and they could spend theirs – having different situations in the future.

So if someone offers you $10m, would you really give up your possibility of enjoying the money, just by looking at someone else and their money? Would you really buy a worthless product just because then everyone else will have more worthless products. And since the Genie erases the memory – everyone would assume that this is the way they were born anyway. So where is the problem?

The question really is that would you sacrifice your own enjoyment, just because of everyone else’s perception? If you would, you’re not even living a life. And if you ask me, Naaaaaaaaaaaah.