Wealth Is Defined By More Than Just Money

One of the hallmarks of a bad economist is when they define things in terms of actual money, rather than marginal benefit or marginal utility. You hear it every so often, where people claim that the “rational person” will always take a higher paying job or will always “want something for free,” when the reality is quite different. Economics really looks at marginal benefit or marginal utility, and even though it’s often defined in monetary terms, that doesn’t mean that it just counts actual money. After all, money is just one way of measuring and/or transferring value. That’s why it’s always interesting to see stories that demonstrate the difference between marginal benefit and direct money, such as this post by Peter Friedman, which highlights the situation where law firms — that asked law students they hired to take a temporary “fun” job to wait out the recession (while having the law firm pay part of their salary) before joining the law firm for their “real” job — are discovering many of those students are no longer interested in law firm jobs:

But as newly barred lawyers have taken this public interest option, many have found jobs they like and enjoy. They picked up some ethical sense in school and enjoy doing work that connects with their values. They sympathize with their classmates who ended up at firms and are working long hours doing work they dislike, but they don’t want their jobs. They calculate how much they are making per hour, and find that they are better paid — at least at first — than those at firms.

Law firms wanted a reserve workforce committed to them to be on call and ready to go should the market pick back up. What they may be getting, however, is quite different. A lot of these associates are trying to find a way to stay in their public interests jobs, or at least a related field, and may have given up on law firm work forever.

These new lawyers have found that their new jobs are more fulfilling and more interesting, and — more importantly — they’ve seen that they can live on a smaller salary. As one of my classmates put it, “Add up the hours I worked this week and add up the hours my friends at law firms worked. Divide our salaries by the amount of hours and you’ll see — I’m rich.”

And that, right there, is a perfect example of the difference between money and marginal benefit. Some will argue, incorrectly, that these associates are making a non-rational decision, but that’s not correct at all. The marginal benefit to these recent law grads is much higher at the public interest jobs, and, as that one classmate notes, he’s “rich.”

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