A life well spent: Consume now (in case you die early)

Jun 10, 2014
An early death constitutes a serious loss that should imply compensation to the deceased person. But how -- when the person is dead? A team of economists led by the Wilson School's Marc Fleurbaey argues that a "life well spent" might entail consuming more and working less earlier in life. Credit: Ticiana Jardim Marini

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 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 associated with living too short of a life. They constructed a mathematical model that measured the loss of an 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 – 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.

"The only way in which inequalities between short- and long-lived can be attenuated is by having everyone spend a little more and work a little less early in life," said Fleurbaey. "That way, for those who are unlucky and die prematurely, their life is not as bad economically as it would be if they had planned to enjoy more consumption and leisure later."

While the authors do not argue that savings should be curbed – savings are famously low in the United States – they claim that the usual concern about under-saving may be partly assuaged by considering the problems that come with an early death. Decades ago, programs like Social Security and public pensions came about so that a person's declining years were not spent in grinding poverty, which, in the 18th and 19th century was an issue; people literally landed in the poorhouse. Now, thanks to growing affluence, there is an opposite risk: not living long enough to enjoy all that money squirreled away.

"Through economics and psychology, we've learned that people are not rational when it comes to money, leading people to save too little. But saving a little less may be good for some, as it curbs the that exists between the short- and long-lived," said Fleurbaey. "Likewise, the tradition of encouraging savings, which comes from an era of scarcity but remains strong today, appears somewhat ill-adapted in the context of affluence. Suppose you spend your whole life saving and saving for retirement, but you die the year before you retire. On an individual level, you might have been better off if you consumed more, earlier in ."

Explore further: Not just the poor live hand-to-mouth

More information: The paper, "Compensating the dead," was published in the March 2014 issue of The Journal of Mathematical Economics.

add to favorites email to friend print save as pdf

Related Stories

Not just the poor live hand-to-mouth

Apr 23, 2014

When the economy hits the skids, government stimulus checks to the poor sometimes follow. Stimulus programs—such as those in 2001, 2008 and 2009—are designed to boost the economy quickly by getting cash ...

If you become poor can you ever be happy again?

Mar 14, 2014

(Medical Xpress)—Becoming poor makes people feel unhappy immediately due to the loss of income and status and this does not improve, even over the long term. This was the key finding of research* by University ...

Affordable housing linked to children's test scores

Jun 09, 2014

It's long been accepted – with little science to back it up – that people should spend roughly a third of their income on housing. As it turns out, that may be about how much a low-income family should spend to optimize ...

Poorer people more likely to get and die from cancer

May 30, 2014

The poorer you are, the more likely you are to get and die from cancer, with more than 19,000 cancer deaths every year linked to lower levels of income according to new research published today (Thursday).

Recommended for you

How financial decisions are made

7 hours ago

Jayant Kale didn't grow up dreaming of becoming a leading expert in corporate finance and mutual fund investment. But he's happy he invested in that market early in life.

Less is more in lap of luxury

8 hours ago

Chandeliers, gold taps and ornate drapes are classic hallmarks of the world's most luxurious hotels, right? Wrong, according to Flinders University sociologist Eduardo de la Fuente.

Has microfinance lost its moral compass?

13 hours ago

The industry that provides financial services for people on low-incomes and without access to traditional banking services is morally reprehensible according to new research from The University of Manchester.

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

tadchem
5 / 5 (4) Jun 10, 2014
"Life's short - eat dessert first." - Seen on a T-shirt (XXL)
"We are spending our children's inheritance" - Bumper sticker on a motor home.