A popular joke tells us that the winner of a $100 million lottery who died miserable and broke said, "I spent half the money on prostitutes, booze, and gambling, but the rest I just squandered."1 The lottery winner, like the rest of us, has a right to spend his money as he pleases; his preferences are his business. Is the satisfaction of those preferences somehow also our business? According to many environmental and welfare economists, if an individual is willing to pay for something, it is valuable to that extent not just from his or her perspective but also from that of society. These economists define societal "well-being," "benefit," "welfare," "utility" and other ostensibly normative concepts as a function of the satisfaction of preferences weighed according to the maximum amount the individual is willing to pay to satisfy them. According to this view, the economic value of an environmental policy is defined in terms of the aggregate willingness to pay (WTP) of everyone affected by it.
The purpose of this chapter is to raise doubts about whether preference - or more precisely the WTP that accompanies it - has any connection with value either for the individual or for society. The proposition that an individual S prefers state a to state b does not entail, as I shall argue, that S is better off with a than with b in any meaningful sense. Having a preference may give the individual a reason to try to satisfy it -although in many instances, such as that of the unhappy lottery winner, not so much a reason as a motive. That he or she should be free in the general case to try to satisfy his or her preference under rules that secure the similar liberty of others is a platitude I do not question. I accept the common wisdom that as a general rule, society should structure competitive markets and deliberative political processes to enable people as far as possible to make and to coordinate their own choices. These pieties, as I shall argue, do not imply that welfare or utility defined in terms of WTP has any normative significance. This chapter argues that WTP has no normative significance; concepts that are defined on it, such as "economic value," "benefit," and "consumer surplus," lack normative significance as well.
Society has reason to support the satisfaction of certain preferences -those associated with basic needs (according to a theory of justice), security (according to any political theory), and merit goods (if it wishes). Society has reason to promote the performance of the economy and to seek reforms in its institutions so that people better understand and trust each other. This chapter argues that the purpose of society is not to seek to satisfy preference weighed by WTP and taken as it comes -to maximize aggregate WTP as an intrinsic good - but "to maintain a framework of rules within which individuals are left to pursue their own ends."2
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