Money Talks: The Rise of Willingness to Pay Without Apology

Willingness to pay (WTP) has become the dominant tool for measuring aggregate welfare, yet its history has not been written. This article demonstrates that economists’ embrace of WTP as a foundational measure of subjective value, efficiency, and welfare was not a foregone conclusion. The early neoclassical economists who first developed the concept voiced serious stipulations regarding its use due to the existence of class inequality: The rich might be willing to pay more for something than the poor, not because they value it more, but because they have more money. These caveats not only led to skepticism among mid-century economists regarding WTP as a metric of welfare but also the ability of the free market—which allocates goods to those who are willing to pay the most for them—to maximize welfare. Only beginning in the 1970s, when economists downplayed inequality, did these caveats dissipate and WTP became an institutionalized metric for welfare and efficiency.