Suppose you think the world would be a better place if there were no Walmarts in your town. Then the next question is, suppose you could live in the world where Walmart was not allowed, but you had less money.
Start with $1 less. Are you happier in that world (one less dollar but no Walmart) than this one? OK, now increase the dollar amount until you are no longer sure that you are happier. In other words, at what point of income loss are you indifferent between having the income and losing Walmart? You’ve now revealed your “willingness to pay” to get rid of Walmart.
You can do it the other way too. Suppose you keep your current income and get rid of Walmart. Now how much more money would you need to be paid to make it worth having Walmart?
This sort of thinking can be used to think through whether any policy is worthwhile. If you find that people who hate Walmart are willing to give up more income than the people who love Walmart need to get in order to give up Walmart, it would make the world a better place to transfer the income around per those revealed “willingness’ to pay” and get rid of Walmart. Everybody has now agreed that such a change leaves them happier.
Of course, this is not an income redistribution program, it is simply a way of efficiently allocating things based on the current income distribution. Also, it is often more of a thought-experiment than an actual policy tool. It is pretty hard to actually transfer around all that income, and even harder to get people to truthfully reveal their willingness to pay. Also, you have to include absolutely everybody who is affected in order to make it work.
But as a thought experiment it is great. So here are a few. How much less income would you be willing to have in order to (or in order to not):
1. Get rid of Walmart in your town.
2. End gender specific language
3. Understand Isaiah
4. Go to the temple at your convenience
5. Make sure your children never see pornography
6. Save an unseen child from dying of malnutrition
7. End public sector unionization
8. Raise the minimum wage by $1.
9. Get rid of First Class on airplanes.
10. Make your neighbor mow their lawn more regularly.
11. Have John Kerry win the last election.
12. Prevent drilling in the ANWR
13. Have the Priesthood
14. Eat a Snickers bar
15. Get rid of Times and Seasons
16. Abolish sugar tariffs.
17. Have Provo’s Geneva Steel re-opened.
18. Have an extra hour by yourself each day for doing whatever you wished.
19. Install a succesful democracy in Iraq.
20. Get married
21. Never see another Times and Seasons post on SSM again.
22. Add a healthy year to your life.
23. Never wash dishes by hand.
Some of these tradeoffs are actually easily do-able on your own (Snickers bars cost around fifty cents, less in bulk. Dishwashers run $200-$500 dollars plus soap and occasional maintenance). Others are utterly infeasible, Simon the Magician discovered he couldn’t buy the Priesthood.
You may not be able to plunk down some cash to instantly understand Isaiah, but “time is money”, and you could probably understand it much better if you put in the time. Personally, I wouldn’t pay a dime to raise the minimum wage because I think it hurts poor people. Maybe you aren’t so sure, but still don’t know that you’d actually want to pay for it.
Either way, it can be a useful way to think about not just what matters to you, but how much it matters. Are your observed actions in line with your stated willingness to pay?
As for Walmart, I might pay a few bucks to keep it around. But I’m a Costco and Target guy. To have Costco I would (and do!) pay a great deal.
_______
Note on comments: Looking over this post, it may just scream as an opportunity to go off on whatever political tangent you wish. Please do not take that opportunity. Well focused statements about your willingness to pay for something, or the whole idea of willingess to pay, are very welcome. Unfocused screeds should look elsewhere. .
Computer . . . $500
Internet service connection . . . $25
“Never see another Times and Seasons post on SSM again.” . . . Priceless.
The church has spent millions to preserve the legal status of traditional marriage and to thwart SSM.
Church funding priorities are an interesting area. The Church spends a phenomenal amount on education (and quite a bit on temples and buildings). Since the budget is not open, it’s hard to say for sure, but they must believe BYU, BYU-I and BYU-H are huge net positives in order to put so much money into them. It seems wildly implausible that they could recoup a significant fraction of it through increased tithing, since most BYU students probably would have :
1. gone to college anyway and
2. paid tithing anyway
I’d write a post on how I find the belief that the process of reasoning can be adequately covered by the assignment of numerical values to one’s preferences and their subsequent comparison and calculation to be a positively charming little ideology, really one of the neatest ever conceived, but I won’t.
Russell, would you write it if it made your income double?
Aren’t there secondary effects of getting rid of Walmart that aren’t being considered?
In any case, isn’t this how lobbying congress works? It just isn’t stated as being such.
Russell: We do use the procedure that Frank describes to allocate a sizable portion of all of the material goods in our society. I suspect that you yourself use it when figuring out what bundle of goods to purchase at the supermarket. (Or is there something on grocery shopping that I missed in my admittedly very cursory study of Hegel?) Calling it an ideology is a cute philosophers way of dismissing it as intellectually vacuous. If it is a mere ideology, however, how ought we to make sense of grocery shopping, capital markets, or any other part of our society that uses the price mechanism to distribute goods?
The low cost at Wally World helps to rationalize the detriment they are to a large portion of society. I would say that over the last year we’ve saved about a grand when comparing shopping at Wally World to other comparable places, Target for example. Groceries are what gets us the most, their prices are extremly low.
Its their business practices we would like to deter. Moving manufacturing jobs over seas and a mockery of social responisbility are two cases where they fail to do good. But Wally World does have a lot of positives.
We have actually started buying groceries at Wild Oats, an all natural no preservative kind of store. Its more expensive but far better for us and better tasting than anything at WalMart. I’d probably be willing to be without one and it wouldn’t change my pocket book much.
Maybe you can’t buy the priesthood, but apparently you can buy eternal life.
I have only been in a Walmart once in my life, so from a personal perspective it wouldn’t matter much to me. My highest priorities on the list would be 6 and 16, while I actually enjoy washing dishes by hand (23).
“Aren’t there secondary effects of getting rid of Walmart that aren’t being considered?”
As I mentioned, you have to consider the effects on all agents affected. So I think the answer is no, there aren’t secondary effects that aren’t being considered..
As for lobbying congress, there is definitely an element of this, although the problem is then the money is not going to the injured parties, but to congress. It is sort of funny because the gains and losses to businesses and individuals from legislation usually swamp the amount of lobbyist money that goes into getting those benefits or avoiding those costs.
Derek, you are welcome to give it a shot!
While willingness to pay makes for a nice thought experiment, it’s a seriously flawed method for basing actual policy (personal or government) decisions on. Since the exercise is entirely theoretical, I can give any amount and declare that my price for getting rid of (or keeping) Wal-Mart. While the larger (or smaller) the dollar value I offer does say something about how much I value it, the exercise doesn’t do so in a *real* way. That is, because the exercise is entirely hypothetical, I may not actually be willing to cough up the money should somebody knock on my door and say “How much would you be willing to pay to eliminate Wal-Mart?” followed by a command to pay up the aforementioned amount. In tests and studies (I’m afraid citations are buried on a disk someplace), there is little correlation between what’s said and what people will actually do.
Bill, if I had known about your fondness for dishwashing, I would have exploited it for all I could when I had the chance.
Frank, I agree that this kind of thought experiment can be useful. Could you explain how this approach to allocation deals with income inequality? Does it bracket it out of the equation entirely? Does it assume that wealth is distributed roughly evenly, or assert that a roughly even distribution would be a good thing? Or does it see nothing wrong with a one-to-one mapping of personal wealth onto political significance? How does it analyze the Widow’s Mite?
Okay, this is sexist, but I think it’s kind of funny all you men writing about Wal-Mart or shopping. In my experience, it’s the women doing all the shopping, which I loathe. I would pay a million dollars, if I had it, for somebody to shop for me for the rest of my life. I think Wal-Mart is a tool of the devil, which unfortunately, I find myself buying into because the Charmin and the Puffs Plus are cheaper there.
I would pay, or give up money, or rather, my husband would pay, big bucks to have 10 hours of sleep every night.
annegb,
My wife and I often shop together. If only one of us goes to the grocery store, it is me. I find you assertion that this discussion is sexist to be a stereotype that doesn’t apply, at least in my case. It is funny to see you get in a huff over what I might say without knowing what happens in my household. I don’t shop at WalMart because it is the tool of the devil. :) I do shop at Costco, which I justify because they pay good starting wages to their employees.
Frank,
You assumption is that all actors are able to accurately calculate the benefits of the secondary effects, and make their determination of how much to pay based on that, right? I could be just as wrong as annegb is about who shops in my household, so please let me know.
the problem is then the money is not going to the injured parties, but to congress.
Just to clarify, it goes to members’ campaign funds. It is not available for public purposes, not for member’s private (i.e. noncampaign) use. (Not that it would make much of a dent in the former).
This may seem obvious to all the lawyers, but an amazing number of people seem unable to distinguish between congressional spending, congressional campaign spending, and the personal expenditures of members.
Anybody else read Thomas Sowell? It’s opportunity cost that we’re really discussing. The money one uses to buy X could have been used to buy Y or Z. To get X one gives up getting Y or Z with the same money. A town can have a new fire engine or it can buy a huge fireworks show for the Fourth of July. A family can have new insulated windows and doors put in, or it can treat termites, or it can go to Disneyworld.
Nothing, however, can kill Wal-mart except Wal-mart.
No, I didn’t think the topic was sexist, I think I am sexist because I think mostly women do the shopping. I was thinking men are talking about shopping the way men might talk about having a baby. No clue. I wasn’t in a huff. I think it’s funny.
My husband is a Costco fan, as well. I can’t let him go there unless we have extra money.
Frank wrote that “it can be a useful way to think about not just what matters to you, but how much it matters.”
In my world, the very act of affixing dollar amounts to some of the things on this list would immediately degrade their value.
Economics disturbs me.
Putting dollar amounts on everything?
I can only shrug.
Anna: Economics is the science of making choices. What is disturbing about making choices? Whether your unit of analysis is the dollar or an hour…wouldn’t it be useful to examine how individuals & groups make choices?
You aren’t alone in being disturbed though. One (perhaps urban legend) famous quote involves how economics is “the dismal science.” Of course, that was because it predicted the end of slavery.
Chris, as I said in my post, I’d have to agree. People will not accurately reveal their willingness to pay if they think they’ll have to pay it. Even if they don’t have to pay, their complete lack of experience in some things makes them very poorly informed “consumers”. Thus I may say I’m willing to pay $5,000/year to know that deer romp freely in the wild, but once I actually start paying it, I may well reconsider. In real markets, this stuff gets ironed out by actual experience.
Jonathan,
I had a section on this in the post but I trimmed it. Basically this tool takes the current allocation as given and asks how to make everybody better off. As you note, it is not particularly a method for helping the poor. It values people much the same way a market does. If you redistribute money and then run the numbers again you will get different policy answers. Thus, as a policy tool, it can be distributionally neutral. This is a good thing, because then one can marry it to a distribution program of one’s choice without being tied to the distributional impact of a policy.
As for the widow’s mite, it was so valuable because in her poverty, losing it meant she lost a great deal of food or shelter.
To all, in case it wasn’t clear, this mechanism has no particular moral component. “Worth” here does not mean eternally valuable, rather it means what will you sacrifice. Our goal is to make sure that what we find to be of worth is morally valuable. The tools don’t impose that though. This is a good thing, because then the tool is not very dependent on particular set of values. The tool can then be used by people of many different values to organize their thinking.
ARJ,
I suppose it depends on what you mean by �secondary effects�. If those secondary effects are the effects on other people, then what we need to do is include those people in our calculation, because for them the effects are �primary�. Anne’s question about shopping is relevant here. To me, shopping is largely a secondary effect because it more directly affects my wife. She bears the primary effect and so the problem is dealt with by including her in the analysis. And including the stockholders, other businesses, employees, etc.
Also, there is apparently this bizarre impression that Costco employees are interchangeable with Walmart employees in terms of their productivity. My personal experience is that this is not the case, but I admit I may be biased by the fact that economic theory predicts that higher wages attracts more qualified and higher productivity workers. Thus Costco and Walmart may both be paying employees on average according to that person�s productivity (although there will always be individual errors). If that is the case, and you are concerned for the poor, you may wish to shop at Walmart, because doing so encourages a model that is able to make use of the very unproductive among us.
Of course, I do not know the ability level of workers at the two firms. Such a thing has to be measured to make sure the theory fits. Perhaps Walmart exhibits some bizarre market power in the unskilled labor marker that lets it exploit workers. Nevertheless, in general there is no particular reason to think that a firm paying less is more exploitive or worse then one paying more, if worker ability is not held constant.
As for the degradation of assigning dollars to things,
this may be more illusory than some think. King Lamoni said he would give all he had to know God. That is a dollar value. God asks us to pay tithing, which is a specific percentage of income. The decision to do so is the decision that obedience is more important than that sum of money. I promise that if the amount were 100%, some people would not think it was worth it, so we know they valued obedience between 10 and 100% of their income. Some things we say we will give all we have for. That’s fine, but we often do not act that way.
If King Lamoni gave all he had to know God, it wouldn’t be a dollar value but a senine value.
Seriously, though, a specific dollar value is finite. Although you might be able to measure the market value of all your possessions with some finite dollar value, being willing to give everything is essentially infinite. Moreover, “all I have” connotes not just material possessions, but really everything–all your doubts, hopes, shortcomings, talents, everything. In fact, I believe the actual phrase Lamoni’s father uses is “give away all my sins.” Try putting a finite dollar amount on that.
I think I would pay at least $10,000 for No. 20 on your list (get married). That’s about half of my income right now. But I would do that, I think. A few years ago, to figure out whether or not I could/should/would marry a girl with whom I had a long-distance relationship, I spent about 3 or 4 thousand dollars. It didn’t work out, but I consider that money well spent. And so I am pretty sure I would pay a lot more than that to actually get married.
In a related note, two of my roommates have laid out thousands of dollars on engagement rings in the last few months. I wonder: how fair is it to say that such expenditures are a measure of how much they would pay to get married?
JDP,
try marrying someone who has massive debt from college. :)
Anna,
Thanks for correcting the quote. I think I see the misunderstanding. Perhaps you think that I am assuming there is a finite dollar amount for everything. Inifinity is not a problem for math! If there is no dollar amount that would leave you indifferent, then the appropriate value is infinite dollars. That”s great!
But it simply is not true that most people are willing to make infinite sacrifice (in dollars, time, or any metric) for much of anything. When push comes to shove, sometimes we sell our inheritance for as little as a mess of pottage. Tithing is one example. Or consider the young rich man who came to Christ and was told to sell all he had. Or the covenant of consecration that was and is so hard for many people.
And I still think tithing is a pretty explicit divider for some people.
random John – I will make inquiries on my singles ward email list. :)
What’s wrong with Walmart anyway?
I would pay five dollars to not hear an impassioned answer to Trenden’s question.
Ok, I’ll retract my bate.
Frank, thanks for responding kindly to my idiosyncrasies. I think you’re right that most people aren’t willing to make infinite sacrifices for very many things. And clearly, if after honest self-assessment you think you would spend 50 cents on a Snickers bar, $500 never to do dishes again, and $5000 to get married, then those relative amounts help reveal the relative worth of those things to you.
I guess I’m also of the mind that even a finite dollar amount can’t fully capture what something will really *mean* to you. Even if you’re only willing to sacrifice $5000, no more, to get married, that sum doesn’t adequately represent what the experience of getting married will be like. If I read you correctly, you already made this point (or a variant of it) in your #22 when you warned against conflating worth with eternal value. Unfortunately, I think it’s easy to lose sight of such distinctions, and to start thinking that the *only* value goods or services have is that which the market imputes to them.
I would probably get in less trouble if I weren’t so enamored of the ineffable.
Lyle said: “Economics is the science of making choices. What is disturbing about making choices?”
Actually, I hate making decisions, so quite a lot.
So, Trenden, shall I paypal you the money?
JDP said the P word!!! and it’s a VERB now?!
Who said the what now?
I’d be willing to accept $1,483,628.03 to allow you to delete all the Wal-Marts in the world. ^_^ In lieu of that, I’ll just keep buying stuff there as long as it’s around.
More seriously, I’d likely be willing to give up… say, everything I made in the last year (about $9,000, I think — though Disney still hasn’t sent me my W-2, so I’m not positive) to meet a worthy young man with whom I was compatible, who was willing to get married to me (and vice versa.) In lieu of that, I suppose I ought to work about 1400 hours (I was a part-timer for all but 3 months, and I didn’t have a job from July 17th to September 12th) towards actually meeting such a young man and preparing myself for such a marriage proposal. ^_^
This is always a fun exercise, for me… it kind of helps me put things in perspective, and realize what aspects of my life I ought to be paying more (or less) attention to. For instance, instead of paying $250 to some unknown entity to keep people from talking about things that upset me while they’re around me, I could devote 40 or 50 hours towards making myself more loving, more tolerant, more patient, and more wise in regards to choosing which people to be near and which message boards/blogs to read. Instead of paying $750 to get rid of all these distractions around me (for instance, my sister’s addictive copy of Sid Meir’s “Pirates!” or a forty-second viewing of the twenty-odd hours of bonus material on my extended version LOTR DVDs), I could devote 120 or so hours towards improving my discipline and focus.
Perhaps these numbers seem quite low to you attorneys in private practice, but after taxes I basically make $6.50 an hour (a little less at Disney, thanks to union dues — a little more at Steak n’ Shake, thanks to tips), so I value an hour of work at around $7. I probably won’t actually save a million and a half dollars over my lifetime shopping at Wal-Mart — in part because I don’t buy all that much from anyone at any given time, and in part because if things weren’t as cheap as they are there, I’d probably go without, or just shop big sales at other stores. But I’m factoring in convenience there; the value of being able to get tomatoes on my way home from working second/third shift, or the value of not having to drive 20 miles to the nearest _insert specialty store here_. As it is, after the Dairy Mart/gas station (about a mile from my house), the nearest store is 3 miles away — that last mile to Wal-Mart isn’t nearly as far as the drive to the nearest Michael’s (9 or 10 miles away, I believe.) Wal-Mart is a life-saver in small towns… especially in really small towns, like Bucyrus, OH, where everything other than Wal-Mart and the Wendy’s/Taco Bell/KFC shuts down at noon on Wednesday and reopens at 10am on Thursday. Also, their new Wal-Mart finally killed off the gross, dirty K-Mart that had been struggling along for years beforehand.
Unfortunately, we have to drive to the next Wal-Mart over (about 15 miles from here) late at night, because it’s the kids’ hang out and we don’t feel entirely safe surrounded by bored teenagers. Actually, I’d pay $50 for them to have someplace to hang out that was nowhere near where I want to be late at night…
And PayPal has been a verb around my circle of confederates for at least three years. Probably longer; my PayPal account has had its start date reset twice due to whatever it is that makes them reset everyone’s account start dates. It’s also still associated with an email address I haven’t used regularly since 2000…
Anna,
The problem with the ineffable is that there is just nothing to say about it.
Sarah, you seem to have this down pat! John is currently offering $10,000 for a good marriage. Your $9,000 though, is probably more impressive since it’s your whole annual income.
I will (and have) sacrifice a great deal of income to be a tenured professor instead of a wall street finance guy.
And I have sacrificed a great deal of income to not be an economist. Just ask Frank.
John has sacrificed happiness in order to not be an economist. What more can you ask than that?
I called the ex-CEO of Vlasic. He said he’d give a full years crop harvest to eliminate Walmart.
It’s funny how time gives things a different perspective. How much did I pay to get married? Well…. a lot less than I have to stay married.
For those cynics among you, let me explain. As we finished our taxes this year, I found that our unreimbursed medical expenses–ones that I could claim–last year were more than I made our first year of marriage. Add those related but “unclaimable” expenses, and keeping her around took more dollars out of my pocket than marrying her. Was it worth it? I think so.
Also after today’s news on the NHL I’d pay $1000 for a hockey season. In SoCal it’s the closest thing we get to Canada!
Frank, thank you for explaining patiently to a non-economist.
I remember now that I recently had a similar thought about tithing. Every so often I’ll compare the cost of the short, very reasonable list of electronic toys that I’d like to have with how much I pay each month in tithing. In three or four months, I really could afford everything on it, if I stopped paying tithing. Sometimes my testimony of tithing is not absolute. On the other hand, there is the question, “How much would I pay for building up the kingdom of God, harmony in my marriage, the knowledge that I am keeping at least one commandment perfectly, and the sense that the financial blessings I imagine myself to have consistently received will not be cut off?” So far the answer has always been: at least as much as I’m paying in tithing.
I still don’t care!!! I will see the destruction of Walmart before I die. I hate them and I refuse to shop at them. They am 17 years old and I hate them because they are putting all of my favorite mom and pop game stores out of business. I’d tell you this!!! I’d rather pay a lot more money for a bunch of items, then saving money at Walmart. The customers don’t even have a background check so does Walmart even care about their personel? I really don’t think so. I believe Walmart should be cut back and unionize all their personel. All Walmart is, is money hungry and that is very very wrong in my eyes.