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.” 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.