| Do you think lightning never strikes twice? Everybody | | | | offered a third glass of water he may drink it but it |
| dreams of winning the lottery despite astronomical | | | | would not offer the utility that the first two glasses |
| odds. But what about the very few that have hit the | | | | offered. In short, the more he gets the less usefull it |
| jackpot twice? It has happened, but the odds of | | | | is to him. This is the law of diminishing marginal utility. |
| winning the jackpot twice are even more | | | | So, what happens when you hit your first $5 million |
| astronomical. | | | | dollar jackpot? Your life is completely changed! You |
| Don't bet on it happening to you. But you can dream. | | | | can buy material things: exotic cars, house, boat, |
| Let's say you beat the odds and win a megamillions | | | | electronics, whatever you want! You can quit your |
| jackpot, say $5 million. That would make you | | | | job. You can travel. In other words, $5 million dollars |
| super-happy, right? Of course it would! Now, let's say | | | | can make you super happy. |
| that lighting struck again and you win the jackpot a | | | | If you are one of the lucky few that win the |
| second time. Would that make you twice as happy? | | | | jackpot twice and get a second $5 million winfall, it |
| No! | | | | would be nice but it wouldn't make you twice as |
| To explain why, consider the economics principle of | | | | happy. For example, let's say you quit your job after |
| the law of diminishing marginal utility. The law of | | | | your first lottery win to have all the time in the world |
| diminishing marginal utility, as stated in Wikipedia, | | | | to do whatever you want. A second lottery win |
| implies that marginal utility from one additional unit is | | | | cannot buy you any more time; time is finite and you |
| inversely related to the number of units already | | | | already have it. Maybe a second lottery win allows |
| owned. | | | | you to purchase more items like a few more exotic |
| As an example, consider a very thirsty man that is | | | | cars. Sure, this can make you happier, but only |
| offered a glass of water. The glass of water would | | | | marginally. You can only drive win car at a time even |
| quench his thirst and would be very useful to him. | | | | though you may now own ten. |
| Let's say, now, that he is offered a second glass of | | | | That's the law of diminishing marginal utility. Think of it |
| water. That second glass of water wouldn't be as | | | | this way: Nothing beats the enjoyment you get from |
| useful as the first glass (it wouldn't offer as much | | | | the first time you get something or get to do |
| utility) because the first glass had already quenched | | | | something you've always wanted to do. |
| his thirst, but it could still help to hydrate him. If he is | | | | |