An aggregate measure of what? A reply to Zerbe, Bauman, and Finkle

Zerbe, Bauman, and Finkle require that “any good for which there is a willingness to pay or accept [WTP] count as an economic good.” Having thus defined economic value as WTP, these authors must explain what makes WTP or its stipulated equivalent, economic value, valuable, absent a tie to personal welfare or expected benefit. This reply argues that they cannot explain how one can get from personal or private preference orderings to a social welfare function absent a reference to welfare. Preference qua preference (or WTP qua WTP) has no normative content or significance. Having a preference gives the individual a reason to try to satisfy it, and he or she should be free to do so in ways consistent with the like freedom of others. Society in contrast has no reason to try to satisfy that preference except in view of the reason for that preference, for example, personal well-being, basic need, meritorious objective, or some other socially-recognized goal or good. Zerbe and co-authors propose an expansive Kaldor-Hicks com pensation test to include choices people make not to improve their own position but in response to moral principles or in view of goals that have no relation to their own well-being or to what they believe will benefit them. If based on expected advantage of benefit, WTP remains relevant to welfare maximization and thus to cost-benefit analysis but it excludes choice that responds to moral commitment. If WTP includes choice based on moral commitment, as Zerbe and co-authors recommend, it is no longer relevant to welfare maximization. Rather, WTP embraces everything for which there is a WTP-and this tautology tells us nothing about social choice, economic value, or the public good.