​The best part of making a fortune: Giving it away

In this web exclusive, economist and Nobel laureate Robert Shiller says aspiring to riches is not as inspiring as what charity affords the giver:

There has been a lot of talk about the fact that the top one percent, the top one-tenth of one percent, and the top 100th-of-one percent of the population is getting rapidly richer, relative to the rest of us.

Oxfam International recently issued a study indicating that the richest 80 people in the world (with more than $20 billion in wealth, on average) own the same amount of wealth as the bottom 50 percent of the world population COMBINED -- that's 3.5 BILLION people.

You might as well forget about the possibility of advancing yourself by hard work to become one of the world's 80 richest people. The probability that you could do that is negligible, because the number of people in that group is so small.

But I don't think you should feel bad about it.

Think about it: Is there any reason to want that?

What would you possibly even do with a mere billion dollars?

You could spend it on expensive cars, and perhaps have 10,000 of them. Or on mansions; you could maybe have 500 of those. But what good would that do you? You could drive a different car every day, and you wouldn't come back to the same car in almost 30 years. What fun is that?

Researchers have looked at the relationship between wealth and happiness, and found only very weak connections. The largest effect of greater wealth is found around the income level where basic needs are met. After that, the influence of income on happiness has been shown to drop off sharply.

Solid social relationships contribute significantly to happiness. Isn't it more rewarding just to be part of society, part of the swirl of activities around all of us? Isn't life about caring for others and being appreciated by others?

But the very rich may get caught up in "Keeping up with the Joneses" (or, might we say, "Keeping up with the Rockefellers").

There has been a lot of talk recently about taxing high incomes at a higher rate, to correct for inequality. Unfortunately, simply taxing money away gives people no credit for their achievements. Taxes take money away anonymously.

But the government CAN encourage people to give money away themselves, and receive credit for it. With charitable deductions for income taxes, people can get recognition and credit for their contributions.

The government would often use the income to do the same things you might do with your charity. By making contributions to improve the lives of those around them, a billionaire might then become a pillar of the community (think Bill Gates or Warren Buffett).

Some of my students tell me, "It's fun to try to make a fortune, isn't it?" But giving it away when I am old doesn't seem part of that story.

My advice: Most of the pleasure of making a fortune is in the striving to get it, living the story. Try to get used to a version of that story which ends -- in the extremely unlikely outcome that you do get very rich -- with your giving it away.

Believe me, this is a better life story, and living it will be even more fun.

For more info:

• Robert J. Shiller, Yale University