Haute Lumière
Commerce · III.11 · MMXXVI · daylight
ASSESSMENT · Chapter III.11 — What Money Cannot Do
Three instruments: a ten-point quiz, eight reflection questions, five essay prompts. The quiz checks comprehension rather than recall. The reflections are private and first-person. The essays are arguable from more than one side.
THE QUIZ — ten points
Four on recall.
1. State the three claims the chapter separates, and say which of them does not follow.
One: paying for a thing sometimes reduces its supply. Two: a stated price for an unpriced good is sometimes a number with no referent. Three: therefore some things should not be priced. The third does not follow. One mark for the three, one for identifying that a refusal to price is itself an allocation rule with an incidence rather than an abstention.
2. What happened in the Haifa day-care study when the fine was withdrawn, and why is that the load-bearing result?
Lateness did not return to baseline. It is load-bearing because it shows the fine did not fail to deter — it replaced an unpriced obligation, and removing the price did not restore the obligation. The fine was 10.00 NIS against a monthly fee of 1,400.00 NIS, or 0.714 percent of it; late collections ran from roughly 8.0 a week to roughly 20.0, a multiplier of 2.50.
3. State the operational test that distinguishes a difficult shadow price from an absent one.
Does the interval narrow as the method improves? Two independent, honestly applied methods: if their answers converge, the good is priceable and the argument is about the number. If the ratio between them stays at orders of magnitude — 903.2 times in the chapter's language example, against a value of a statistical life where two methods land within a deflator of 1.556 of each other — the shadow price is absent, not merely contested.
4. Name the five non-price instruments and one case for each.
Quantity (the sulphur dioxide allowance market); standards (the lead phase-out); rights with a clearing mechanism (kidney paired donation); rationing (Cape Town); deliberation (Oregon's prioritised list, and Porto Alegre's participatory budget). Full marks require a cost named alongside at least one of them.
Four on application.
5. Your board wants to raise volunteer hours at a community programme and proposes a £5 per hour honorarium. What does the evidence say, and what do you propose instead?
The Swedish blood result is the relevant one: a small payment converted a gift into a sale and cut women's donation from 52.0 percent to 30.0 percent, a 42.3 percent relative fall — and the effect vanished when the money could be assigned to charity. So propose a recognition that is not convertible into cash, or a donation made in the volunteer's name. The stronger answer notes the opposite finding — gift-card incentives raised blood-drive turnout at scale — and distinguishes the two cases by whether the target population was already acting from duty.
6. A colleague dismisses a valuation study because "you can't put a price on a wetland." Answer them.
The alternative to a contested number is not a better number; it is zero, entered silently, which is a far stronger claim than the survey makes. Then apply the test: run a split-sample scope test. If the scope elasticity comes back near the 0.0207 of the birds study, they are right and you should reach for a quantity instrument or a standard. If it is materially positive, you have a valuation and should defend it.
7. A municipality proposes to keep bus fares at zero on equity grounds. What do you ask for before the vote?
An incidence table. Who currently rides, by income decile; who cannot ride because the frequency is capped by the revenue that free travel forgoes; and what the excluded population pays instead, in fares to informal operators or in hours walked. Credit any answer that names the general form: a refusal to price favours whoever is already inside the system, so the question is always who is outside it.
8. Why is a matching mechanism, not a price, the right response to an inalienable good?
Because the prohibition removes the clearing device without removing the allocation problem. Kidney paired donation clears roughly 1,000 transplants a year with no money changing hands, at a saving of $56,000 per patient-year — dialysis at about $94,000 against a functioning graft at about $38,000. The exchange does the work the market would have done.
Two that require the arithmetic to be done.
9. A valuation study doubles the size of the good on offer and stated willingness to pay rises by 4 percent. Compute the scope elasticity and say what you would do.
ln(1.04) / ln(2) = 0.03922 / 0.69315 = 0.0566. An elasticity of 0.06 fails any scope test worth the name — the respondents are valuing the category, not the quantity. Do not aggregate. Report the elasticity, report the protest rate, and move the decision to a quantity instrument or a standard. Credit any answer computing between 0.05 and 0.06 and reaching the same conclusion.
10. A city of 1,000,000 households holds its water tariff at $0.35/m³ against a cost of $0.90/m³. Connection rates by quintile are 35, 50, 70, 85 and 95 percent; connected use is 9, 11, 14, 18 and 24 m³ a month. Unconnected households buy 4 m³ a month from vendors at $2.80/m³. Who receives the subsidy, and what does the poorest quintile actually pay per cubic metre?
Subsidy per m³ is $0.55. Q1: 200,000 × 0.35 × 9 × 12 × 0.55 = $4,158,000. Q5: 200,000 × 0.95 × 24 × 12 × 0.55 = $30,096,000. Against a total of $74,646,000 that is 5.6 percent and 40.3 percent — a ratio of 7.24.
Q1's blended unit price is
(0.35 × 9 × 0.35 + 0.65 × 4 × 2.80) / (0.35 × 9 + 0.65 × 4)= $1.458 per m³, against Q5's $0.371 — 3.93 times as much. Both quintiles spend almost the same money, $8.38 against $8.54, and Q5 receives 4.00 times the water.The strongest answer states the conclusion in the right register: the refusal to price is not the absence of a tariff, it is a tariff levied in connection status, and at a flat rebate of $6.22 a month the reform leaves Q1 +$4.49 a month better off and Q5 −$6.32 worse off.
REFLECTION — eight questions, for one person and a pen
These are not for a room. Write the answers by hand if you can; the slowness is the point.
- What do you give freely that you would stop giving if somebody started paying you for it? Name it precisely, and then ask what exactly the payment would be destroying.
- Where have you used the word priceless about something you have in fact been making trade-offs about all along? What would it cost you to say the trade-off out loud?
- Recall a time you paid a small fine or fee and felt the obligation lift. What had you owed, and to whom, before the charge existed?
- Think of something you refuse to put a number on. Apply the convergence test honestly: name two methods, estimate two answers, look at the ratio. What did you find?
- Where in your own life does a policy of not charging quietly benefit you because you are already inside the system? Write down who is outside it.
- When have you been offered money for something and found the offer made you less willing rather than more? What was the offer describing you as?
- What is the queue you have been standing in for something free, and what has the waiting actually cost you in the currency you are shortest of?
- Who in your working life does something valuable that has never been counted — and what would counting it do to them? Answer that second part honestly before you count anything.
ESSAY PROMPTS — five
Each is arguable from more than one side. Each requires at least one source the chapter cites and at least one it does not.
1. Titmuss, forty years on. Mellström and Johannesson found a 22.0 percentage point fall among women; Lacetera, Macis and Slonim found incentives raising blood supply at scale. Argue either that these results are consistent — a dose-response with a restricted domain — or that one of them is measuring something the other is not. Use Titmuss and at least one source on donor motivation the chapter does not cite.
2. Is some number better than no number? Diamond and Hausman say no; Carson says yes. Take a position on whether contingent valuation should be admissible in damages proceedings, given a scope elasticity that can come back at 0.0207 and a protest-coding decision worth $311,083,011 on a claim of that size. Engage both Journal of Economic Perspectives pieces directly and at least one court's reasoning the chapter does not cite.
3. The refusal as a regressive act. The chapter computes a water subsidy in which the richest quintile takes 40.3 percent and the poorest 5.6 percent. Argue either that this generalises — that non-pricing systematically favours incumbents — or that the case is an artefact of a network good with a connection barrier and does not travel to housing, health or education. Use Komives et al. and one empirical study of a non-price allocation the chapter does not cite.
4. Incommensurability: finding or excuse? Anderson and Raz argue that some goods are not commensurable in principle. The chapter offers an operational test — does the interval narrow — which converts a philosophical claim into an empirical one. Argue whether that conversion is legitimate or whether it smuggles in exactly the assumption the philosophers deny. Use Anderson or Raz, and one source on cost-benefit practice the chapter does not cite.
5. What rationing costs afterwards. Cape Town cut consumption 58.3 percent and carried a revenue shortfall whose midpoint works out at R6.654 per cubic metre saved. Argue either that this is the correct price of resilience and should be budgeted as such, or that it reveals a design fault — that a utility whose solvency depends on consumption cannot be the body that restricts it. Use the chapter's Cape Town material and one source on utility tariff design the chapter does not cite.