pay—the amount of money that the individual would willingly pay to get a desired good, service, or state of the world (in total or at the margin,1 as the case might be)—expresses the individual's value of increments in goods and services, whereas willingness to accept—the amount of money that would induce the individual to willingly give up the good, service, or state of the world—expresses value for decrements.

Utilitarians seek to provide an ethical framework for society as a whole, not just for individuals. Bentham (1986) offered the criterion of ''the greatest good for the greatest number". In modern times, that has been put into use in the benefit-cost criterion: right action is whatever maximizes the excess of benefits over costs, where benefits and costs are aggregated (unweighted) across individuals.

The utilitarian criterion is related to markets in the following way: under ideal conditions, market prices are equal to marginal willingness to pay and to accept. Total willingness to pay and accept, however, includes also the consumers' surplus, which is seldom directly revealed by markets. In addition, markets often fail to reflect the full value of public goods and, for various reasons, can distort the value even of private goods. In the utilitarian system of valuation, preference satisfaction is fundamental, and market outcomes are of interest only to the extent that they provide a good account of contribution to preference satisfaction.

Two major problems with utilitarianism must be discussed. First, as Mill noted (1987), "Socrates dissatisfied should have more moral weight than a pig satisfied". That is, it is a weakness of utilitarianism that preferences are not subject to interpersonal review or substantive tests against principle or reason. It seems unreasonable to assume, as utilitarians do, that any set of preferences is as worthy as any other. Second, as Rawls (1972) noted, utilitarianism does not take seriously the distinction between persons. The criterion of the greatest good for the greatest number might be satisfied by an action that causes great harm to a few to provide relatively trivial benefit to many. Some commentators would prefer an ethical framework that evinced more concern for the effects of social choice on individuals.

Libertarianism and Contractarianism

Libertarianism takes the distinction between persons very seriously. Libertarians find fault with the utilitarian judgment that the welfare of society is the aggregate welfare of its members. Utilitarians might be comfortable with a policy that hurt some people while helping others even more, but libertarians


Typically, willingness to pay is thought of "at the margin", that is, to preserve the next unit under threat. One could think about willingness to pay for biodiversity in total, but it would be a very large number and irrelevant for most policy purposes.

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