What should the levels of consumption and savings be?

By Vasco Grilo @ 2022-12-18T10:44 (+12)

I have the impression discussions about donations are often more focussed on the amount donated as a fraction of the net income than on levels of consumption and savings. The focus should arguably be on what is kept instead of given^[1]. To illustrate, the following correspond to quite different situations:

Donating 10 % of a net annual income of 10 k$, 100 k$, or 1 M$.
Donating 10 % of a net annual income of 10 k$ while having savings of 10 k$, 100 k$, or 1 M$.

The adequate levels of consumption and savings would of course vary a great deal from person to person. However, in the same way that donating at least 10 % of net income has emerged as a common giving norm^[2], it should still be possible to come up with some default reasonable levels for what is kept. For example, on a per person basis^[3]:

For the annual consumption, 2 times the real global GDP per capita, i.e. 41.3 k$^[4].
- This is enough to be among the 9 % richest people in the world according to this calculator from Giving What We Can.
For the total savings, 4 times the real global GDP per capita, i.e. 82.7 k$^[4].
- This is enough for 2 years (= 4/2) considering the aforementioned annual consumption. Such a runway matches the upper bound of the interval of 6 to 24 months suggested here by 80,000 Hours (to its readers).

Answers and comments are welcome!

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In addition, I believe donations are better expressed as a fraction of the net income since birth, which would account for unearned income.
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About 9 k people have signed the Giving What We Can Pledge. I am happy to be one of them!
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For x people, the levels of consumption and savings would be multiplied by x. So, for example for a family with 2 parents and 2 children, the suggested annual consumption and total savings as a fraction of the real global GDP per capita would be 8 (= 2*4) and 16 (= 4*4).
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Calculated based on the real global GDP per capita in 2021 of 17.081 k 2017-$ from The World Bank, and the ratio between the value of 1 $ in 2017 and now of 1.21 from in2013dollars, whose product is 20.668 k$.

Charles Dillon @ 2022-12-18T10:56 (+11)

I think a compelling reason for not doing this is mostly that it is past what I would guess the optimal level of demandingness would be for growing the movement. I would expect far fewer high earners would be willing to take on a prescription that they keep nothing above that sort of level than that they donate a substantial fraction.

I for one would find it too demanding, and I think it would be very bad if others like me (for context, I will be donating over 50% of my income this year) bounced off the movement because it seemed too demanding.

Vasco Grilo @ 2022-12-18T11:15 (+4)

Thanks for answering, Charles!

I think a compelling reason for not doing this is mostly that it is past what I would guess the optimal level of demandingness would be for growing the movement.

I guess the demandingness can be adjusted (downwards or upwards) by adapting the annual consumption and total savings. The numbers I provided are not supposed to be an iron rule. As I said:

The adequate levels of consumption and savings would of course vary a great deal from person to person.

I tend to agree with you that:

far fewer high earners would be willing to take on a prescription that they keep nothing above that sort of level than that they donate a substantial fraction.

However, maybe a small minority happy to do it would gradually build momentum over time.

I for one would find it too demanding, and I think it would be very bad if others like me (for context, I will be donating over 50% of my income this year) bounced off the movement because it seemed too demanding.

Happy to know you will be donating over 50 %! It would indeed be sad if people bounced off because of that. That being said, I would expect people to continue to see donation norms as non-binary. In the same way that it is fine to donate less than 10 %, it would be fine to have an annual consumption per person greater than 41.3 k$ (or other), or total savings per person greater than 82.7 k$ (or other).

Charles Dillon @ 2022-12-18T11:30 (+7)

"However, maybe a small minority happy to do it would gradually build momentum over time." This seems possible, but if the goal is to maximise resources, I would be quite surprised if e.g. the number of billionaires willing to give away 99.99%+ of their wealth was even 1/10th as high as the number willing to give away 90%. Clearly nobody truly needs $100m+, but nonetheless I would be very wary of potentially putting off a Bill Gates (who lives in a $150m house ) due to being too demanding, when 99% of his wealth does approximately 99% as much good as all of it would (maybe even more, as he serves as an example to other billionaires which they might be more likely to follow than if he gave it all away).

Ben Millwood @ 2022-12-18T20:14 (+6)

Something to be careful not to do here is: if you have people who are either earning a lot or doing equivalently valuable non-earning work, consumption can boost productivity, both:

in very obvious direct ways, e.g. if you order takeaway, you don't have to spend time on meal prep, if you can improve your sleep by buying a fancy bed that might be worth it, etc
in a more indirect sense, being frugal is hard work and will wear you down. If you find that attention or mental effort is a limited resource for you, trying hard to minimise costs may be false economy. In general, it may be easier to get $X of value by increasing your income / useful work by $X than by decreasing your costs by $X. All else equal, you should prioritise these two things the same.

I'm not saying this is obviously incompatible with the levels of consumption or saving that you suggest, just that the best level of consumption is dependent on local circumstances, and I don't think there's any particular reason to expect it to line up with per capita GDP particularly well.

Vasco Grilo @ 2022-12-19T10:01 (+4)

Hi Ben,

Thanks for raising those points! I definitely agree they are important. Ultimately, the goal is equalising the marginal utility of the resources going towards consumption, savings, and donations.