I have no problem with accepting the axiom of equivalence for a usefully large subset of all preferences. It just seems that there may be some preferences which are ‘priceless’ as compared to chicken vs. cake.
It just seems that there may be some preferences which are ‘priceless’ as compared to chicken vs. cake.
There are definitely signalling reasons to believe this is so. If I work at a factory where management has put a dollar value on my accidental death due to workplace hazards and uses that value in decision-making, I might feel less comfortable than if I worked at a factory where management insists that the lives of its employees are priceless, because at the first factory the risk of my death is now openly discussed (and management might be callous).
I’m not sure there are decision-making reasons to believe this is so. The management of the second factory continue to operate it, even though there is some risk of accidental death, suggesting that their “priceless” is not “infinity” but “we won’t say our price in public.” They might perform a two-step optimization: “ensure risk of death is below a reasonable threshold at lowest cost,” but it’s not clear that will result in a better solution.* It may be the risk of death could be profitably lowered below the reasonable threshold, and they don’t because there’s no incentive to, or they may be spending more on preventing deaths than the risk really justifies. (It might be better to spend that money, say, dissuading employees from smoking if you value their lifespans rather than not being complicit in their death.)
*For example, this is how the EPA manages a lot of pollutants, and it is widely criticized by economists for being a cap rather than a tax, because it doesn’t give polluters the right incentives. So long as you’re below the EPA standards, there’s no direct benefit to you for halving your pollution even though there is that benefit to the local environment.
Vaniver & Toby,
I have no problem with accepting the axiom of equivalence for a usefully large subset of all preferences. It just seems that there may be some preferences which are ‘priceless’ as compared to chicken vs. cake.
There are definitely signalling reasons to believe this is so. If I work at a factory where management has put a dollar value on my accidental death due to workplace hazards and uses that value in decision-making, I might feel less comfortable than if I worked at a factory where management insists that the lives of its employees are priceless, because at the first factory the risk of my death is now openly discussed (and management might be callous).
I’m not sure there are decision-making reasons to believe this is so. The management of the second factory continue to operate it, even though there is some risk of accidental death, suggesting that their “priceless” is not “infinity” but “we won’t say our price in public.” They might perform a two-step optimization: “ensure risk of death is below a reasonable threshold at lowest cost,” but it’s not clear that will result in a better solution.* It may be the risk of death could be profitably lowered below the reasonable threshold, and they don’t because there’s no incentive to, or they may be spending more on preventing deaths than the risk really justifies. (It might be better to spend that money, say, dissuading employees from smoking if you value their lifespans rather than not being complicit in their death.)
*For example, this is how the EPA manages a lot of pollutants, and it is widely criticized by economists for being a cap rather than a tax, because it doesn’t give polluters the right incentives. So long as you’re below the EPA standards, there’s no direct benefit to you for halving your pollution even though there is that benefit to the local environment.