Bill Gates and Warren Buffet are two of the richest men in the world. Does the concept of scarcity apply to them?
Wealth of Bill Gates
In 2011, the wealth of Bill Gates is estimated at $56 billion. This comes from a variety of sources, but his 6% share in Microsoft provides the bulk of his wealth.
Wealth of Warren Buffet
The wealth of Warren Buffet is estimated at $47 billion in 2011. In 2009, after donating billions to charity, he was ranked as second richest person in the world.
I think that it is fair to say that Bill Gates receives money quicker than he can spend it. For many consumer goods, Gates is sufficiently rich to avoid having any feeling of scarcity. If we wants a bigger house, more cars, private aeroplanes, his own island he can buy them.
There is a theoretical point when he wouldn’t be able to afford to buy any more cars, but this number would be so high, that in practical terms it is meaningless. Using indifference analysis we could also assume that Bill Gates would be indifferent between having 2,000 cars and 3,000 cars. The marginal utility of owning an extra 1,000 cars is zero (unless you get joy from collecting cars or something). Therefore, in practical terms he can buy as many cars as he wants to maximise his own welfare.
By the way, it is interesting to note that Bill Gates, even when rich, used to travel second class as he didn’t think first class was ‘worth the money’ This is an interesting insight into the mind of the world’s richest person.
