In their 1972 paper "Is Growth Obsolete" (Economic Growth, Fiftieth Anniversary Colloquium V, National Bureau of Economic Research; reprinted in The Measurement of Economic and Social Performance, National Bureau of Economic Research, 1973), William D. Nordhaus and James Tobin turn their attention to trying to quantify, or better quantify, some of the qualities of life not usually (adequately) taken into account by various economic measurements or indicators. They specifically discuss the value of leisure, of health and education, of externalities such as police, defense costs, pollution, and the "disamenities of urban growth". They quote Paul Erlich's assertion that: "We must acquire a life style which has as its goal maximum freedom and happiness of the individual, not a maximum Gross National Product."

Their purpose is to devise a purely economic, and therefore objective or quantifiable, measurable, indicator of well-being, their MEW -- "measure of economic welfare". In this paper they construct a "primitive and experimental" MEW, that avoids the criticisms directed at the inadequacies of GNP. They believe in short that a dollar value can be put on values and qualities we believe important, and that such dollar values can then be factored into economic policies, taking into account important values that "GNP" leaves out. In particular they argue their MEW shows that maximizing economic growth is still a reasonable policy, but it is not that claim which I wish to consider here. I want instead to discuss some of the issues of quantifying values or quality of life.

I believe it is a mistake, though sometimes a useful mistake, to quantify these "intangibles" because the value of the intangible is subject to change; and unless the method of quantification is subject to change in the same way, the dollar value assigned will not do justice to the real value of the intangible under changed conditions. A few examples will make this clear. 

(1) An executive one time told me that his company has virtually identical business plants in Birmingham, Alabama and in Portland, Oregon. Wages paid are very similar and jobs performed are virtually identical. Yet leisure time has far different value to the employees in Birmingham from what it has to the employees in Portland. Birmingham employees like to work overtime and often prefer to work (for double pay) during vacation periods. (It costs the company the same whether they pay a worker his vacation pay and a salary for working or whether they pay his vacation pay and a salary to the person who substitutes for him while he is on vacation, so monetarily it does not matter to the company, but the company wants workers to take vacations and generally to spend weekends away from work.) Portland employees generally refuse to work any overtime at all. The highways around Portland are said to be bumper to bumper with campers and cars pulling boats or carrying canoes, etc. by 4:30 each Friday afternoon. People have a desire to use their weekends in Portland in ways that the people of Birmingham do not seem as concerned about. The value of leisure time, if quantified, would have to reflect a difference in Birmingham and Portland, even though the same money paid to workers in Birmingham and workers in Portland buys roughly the same products and services.

(2) The same would be true of any particular weekend in either city. If a Birmingham employee's child is getting married and there is a formal wedding planned, with relatives coming from all around, no reasonable amount of overtime pay might be adequate incentive for a last minute change of plans. Or if it is going to be dismal weather some weekend in Portland, employees might find some overtime pay adequate incentive to work, particularly if they have some extra bills or would like to purchase some luxury.

(3) In general, an hour of leisure time you really are looking forward to or really need to be able to do something that is important to you, is very different in value from an hour of leisure time that you have nothing interesting to look forward to doing with it. Oppositely, an hour of interesting work is worth far more than an hour of drudge work. And an hour of interesting work, assuming one does not need respite, might be worth far more than an hour of uninteresting leisure. 

I am not saying this cannot be quantified; but that any algorithm for quantifying it must take into account in the right way that not all hours of work or leisure -- purely in terms of time -- are equal. And this has nothing to do with the marginal value of the least desirable hour of leisure or of work; because these may not be precisely the 39th hour of work each week or the 47th hour of the weekend or the third week of vacation, or whatever. The "opportunity costs" of an hour of leisure or of an hour of work are different depending on the needs and opportunities available. I am self-employed with frequent requests to work weekends, and I set my week-end rates differently for different kinds of jobs (depending on their ease and pleasantness) and for different kinds of uses I am otherwise planning for a given weekend. I would not want to work for someone who told me what extra hours I would need to work and what the compensation would be for each of those hours, regardless of my opportunity costs for them.

(4) Anomalies occur in setting specific, quantified values to certain things, if those quantified values are not set correctly or if they are not correctly updated periodically. For example, under current law as this is written, because of health care costs and medical improvements in saving lives that are seriously injured, it proves cheaper for a company to have to compensate an employee's death than to pay for hospitalization and disability. Hence, an expensive safety program that turns otherwise probably fatal accidents into expensive non-fatal ones might be ones that employers would eschew. In essence it pays an employer, in purely economic terms, to tolerate conditions that make sure any accident is fatal rather than non-fatal, if preventing the accident altogether is more expensive than paying the death claim. Similar cases arise in law, where a company, like an automobile company, can lose less money by paying likely lawsuit death settlements or verdicts than by incorporating safety features to minimize those kinds of deaths. This kind of case is not an argument to show quantification of values, such as life, are not possible, but to remind that such quantifications are meant to be measures of the value of something, and are not meant to take on a meaning or end of their own, particularly one that might end up defeating the purpose for which they were intended.

What Tobin and Nordhaus want and what many other economists want, is to be able to attach a dollar value to all the burdens and benefits of a given product or service, so that its "true cost" can be charged. Tobin and Nordhaus write, "The consumers of automobiles and electricity should pay in higher prices for the pollution they cause, or for the higher costs of low-pollution processes. If recognition of these costs causes consumers to shift their purchases to other goods and services, that is only efficient. At present overproduction of these goods is uneconomically subsidized as truly as if the producers received cash subsidies from the Treasury." 

The problems I mentioned above are in establishing, and keeping current, appropriate dollar values. And there are two causes of these problems: (1) no objective formula or algorithm can guarantee the correct quantification of a non-objective quality. Quantification of this sort requires judgment, and as conditions change, judgment must be applied again to make certain that the procedure and end result reasonably reflects the kinds of issues, values, and understanding involved in regard to the new conditions. (2) the values assigned have to somehow reflect the importance of the values to the people who have a greater interest in them, not those with a lesser interest. If, for example, a value could be put on the life or safety of a child, one wants it determined by people who care about children's lives and safety, not by those who see them as mouths to feed or as investments in future labor. You do not want a car company making decisions about safety features based on the probable future earning power of children, but on that and the kind of grief families would have to suffer about the unnecessary incapacitation or death of a child. You do not want people who can afford to buy private security or enhanced plumbing filtration making decisions about the adequacy of police protection and city water purification standards for other citizens who cannot, if they will do so on the basis of costs acceptable to them to upgrade those services privately for themselves. Those standards need to be set on some sort of basis of what would, or should, be acceptable to the people who will be most affected, not those who will be least effected.

Now what Nordhaus and Tobin and others want to do, is to make prohibitive, by cost, what would be morally and socially unacceptable or prohibited by principle or by law. And they want to make expensive what is undesirable but not totally unacceptable. I prefer the direct prohibition by law or principle --as long as the law is a reasonable one-- because I think explicit and direct, verbal principles have more chance of performing what you want them to, and being amended when they go awry, than do buried and indirectly acting principles which, after a while, people forget are operating, and which take on a life of their own whether productive or not. Further, although laws tend to be too broad or too narrow or to allow unintended and undesirable methods of compliance (loopholes), at least the problems with such laws then are above board and able to be seen and dealt with if the legislature or courts so desire. Principles that act indirectly tend to be more difficult to see as causally operating, and they still face the apathy of courts and legislators if they are faulty anyway. Further, indirect principles tend to have more unintended, unexpected, and undesirable consequences. Some of these consequences then also seem intractable because people are loathe to change principles that have taken on a life of their own (as ends, rather than as means) after they have operated a while, especially when those principles seem some how objective or "fair" (impartial) on the surface.

But there is one additional and, I believe, crucial problem with the notion of trying to put a dollar value on the various kinds of aspects of life that are valuable to us even if it is originally just for some sort of technical economic variable. There are millions of things caring, decent human beings do for each other every day which are done without a thought for what the reward or payment might be, because we know that in the normal course of life others will do for us many such things as well. To quantify all this would be tedious work at best, and to try to keep some sort of record of it would be a moral-bookkeeping nightmare. Further, it would be even worse to begin to demand payment as we go along: what would you charge to pass the salt, please? to answer a question? to let me use your phone a second, please? to tell me the time? to call 911? to give your spouse a message when s/he gets home? to let me pull my car into the lane in front of you please, since I got into the wrong lane by mistake? to smile once in a while or just act a bit more pleasant or polite? to tell me the name of the plumber you used last month? to look at this weed and tell me whether you think it is poison ivy? 

There are already cases where people charge for things one might think should be free -- technical support for expensive software you have already purchased where the included directions are not as clear as they might have been, for example; or where you have to pay the shipping costs to return defective expensive, new merchandise; labor time for a repairman to go get a part he did not have with him, etc. 

When people are able to put a dollar value on some behavior that was previously monetarily unquantified, there will eventually be some who think they should then be monetarily remunerated for that behavior. Sometimes this is very disturbing because it makes people seem meanspirited or cheap. On the way home from a short trip one time, one of my children caught the very end of her finger in the car door as she was getting out of the car at a cafeteria-style restaurant. The restaurant people quickly gave us ice and everyone was very solicitous; people in line to order food quickly and willingly stepped aside when they learned I was just looking for ice to treat the hurt finger. My daughter's finger seemed okay and did not seem to be anything that required medical attention. But when we got home, it turned out that my wife had hurt her leg while we were gone and had gone to a hospital emergency room for an X-ray. When we went to see her, I asked the doctor attending her whether he thought he should look at my daughter's finger. He examined the finger a moment and then said I should sign her in as a patient. I did, assuming he was going to have it X-rayed. We waited (and waited) our turn. When it came time to see him, he quickly just looked at it again and recommended just keeping some ice on it. The fee for the second look, which was no different than the first look, was $85; $10 of which was for the ice the hospital "gave" us. Apparently it was a lot better quality ice than the restaurant people had donated. I called the hospital and my insurance company the next day since I thought the doctor's behavior was outrageous. I wanted the insurance company to refuse to pay; and I wanted the hospital to expunge the bill. I doubt either of those things happened. As more behavior becomes financially quantified in some way, I would think this sort of problem would be compounded.

I realize that when behavior is NOT quantified in terms of dollar amounts, it leads to some people's behavior being taken for granted, such as if one partner does significantly more housekeeping chores and the other considers him/herself to be the "real" wage earner and thereby the "real" "worker". And I realize that sometimes costs have to be accounted for, since time and even inexpensive materials can add up as burdens that need some sort of remuneration. Further, I realize that one might need to put a price on one's time in order to serve as what I call a "nuisance fee" in order to prevent others from simply taking advantage of you or wasting your time because it costs them nothing. However, I am not certain that paying a mate maid/chauffeur, etc. wages (or even quantifying how much one would have to pay IF one were to pay) would improve the lot of marriages, or allow many to even be possible. And I am not sure that we would be better off if we conducted all aspects of our lives as though they were part of doing business, requiring an immediate trade or monetary remuneration.

While Nordhaus and Tobin are not arguing that all activities and time be calibrated in dollar amounts, or that those which are should be actually paid as labor, I fear these would be natural and harmful consequences of trying to determine the financial value of things such as leisure time.