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. .