Quadratic Payments: A Primer
Great article; very interesting and well written.<p>A bit of a tangent, but something that bothers me is the assumption in economics that the amount of money one is willing to pay for a good is equal to the utility provided by that good. And then it follows that if I am willing to pay €2 for a coffee and another person is only willing to pay €1 for that same coffee, then I value the coffee twice as much as the other person.<p>But to me that doesn&#x27;t make much sense. What if I am a billionaire and the other person is very poor? It could very well be that the other person values the coffee a lot more than I do, but because I have so much more disposable income than they do I am willing to pay more for it. To me, the assumption should be something like the amount of money <i>as a percentage of my total wealth</i> that I&#x27;m willing to pay is equal to the utility of the good.<p>And because this assumption is so fundamental to economics, it determines the conclusions that the field reaches. For example, the definition of an &quot;efficient market&quot; or the optimal level of production of some good both embed this assumption that willingness to pay equals utility. And then one can imagine that policy decisions and such are influenced by this assumption. (And in fact the article itself mentions this problem: &quot;Another challenge is that quadratic payments, being a payment-based mechanism, continues to favor people with more money.&quot;).<p>So I&#x27;m wondering if anyone has looked into an alternative formulation of economics with a different fundamental assumption (perhaps something closer to the one I proposed above). If so, do certain things that are determined to be &quot;optimal&quot; in classical economics turn out not to be optimal in this alternative formulation (and vice-versa)? Apologies if this is a bit of a naive question; Econ 101 is the most I&#x27;ve ever studied the subject.