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I am trying to develop a framework that a person can use to help them decide where to live. The idea is to assign a dollar value to various attributes (e.g. work opportunities, cost of living, climate, access to parks and recreational facilities, pollution) of each potential location, and sum all the benefits and costs. (This question is obviously subjective, but the goal is to bring some objectivity to the parts that can be quantified.)

Is there a name for the theory of how to assign dollar values to intangible costs and benefits? Is there a place I could go (textbook, website, journal) to learn more about this theory?

For example, you can set up some upper / lower bounds on the dollar value that someone assigns to something based on their stated preferences. An individual can establish these bounds through thought experiments of the form "would I rather have bundle X or bundle Y".

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  • $\begingroup$ You seem to raise two distinct issues here, one ("assigning dollar value to intangible costs and benefits") about value to people generally, ie market value, and one ("framework that a person can use to help them decide where to live") about value to a particular person. As I read their answers, 1muflon1 addresses the first issue and Flynt the second. It's worth adding that someone buying a property will probably have regard to both, ie how well it meets their needs and preferences, and also, in case they eventually need to sell it, its potential market value. $\endgroup$ Commented May 8, 2023 at 21:21

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In applied economics there is hedonic pricing which is what you describe more or less although it’s not used only for intangibles but also for hard to value tangibles.

Hedonic pricing method is based on concept of revealed preferences (your actions reveal how you value something). So for example from data on how much people bid on beach property you can discover how much people value intangibles such as good view or access to beach, through hedonic regression that reveals the value of the beach compared to properties without one. It is actually quite common method for estimating property values.

However, hedonic pricing can be use for various other things such as estimating values of saved time or how much people value quiet area etc. Depending on how cleverly you set up your identification strategy and data availability you can use it to find value of anything.

If you want to learn hedonic pricing you first have to master at least the basics of statistics, so you need something like Wooldridge Introduction to Applied Econometrics or some other statistics textbook.

Once you have basics of statistics covered you don’t need special textbook for hedonic pricing, rather you just need have look at some other applied papers to get the gist of the method. Just look at any paper on google scholar. Some examples are here and here. If you want some textbook almost any environmental or policy economics textbook will have short treatment of hedonic pricing.

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Developing a framework to help a person decide where to live based on quantifiable attributes can be a complex task, but here are some steps to consider:

  • Identify the key attributes: Begin by identifying the key attributes that are important to the individual. This can include factors such as job opportunities, cost of living, climate, access to parks and recreational facilities, pollution, safety, and proximity to family and friends.

  • Assign weights to each attribute: Once the key attributes have been identified, assign weights to each attribute based on their relative importance to the individual. For example, if job opportunities are the most important factor, this attribute should be assigned a higher weight.

  • Score each location: Score each location on each attribute based on available data. For example, job opportunities can be scored based on the number of job openings in the area, cost of living can be scored based on the cost of housing, and access to parks can be scored based on the number of parks and recreational facilities in the area.

  • Assign dollar values to each attribute: Once each attribute has been scored for each location, assign dollar values to each attribute based on their importance and the scores assigned to each location. For example, if job opportunities are assigned a weight of 50% and the score for a particular location is 8 out of 10, this attribute would be assigned a dollar value of 4 out of 5.

  • Sum all the benefits and costs: Finally, sum all the dollar values assigned to each attribute for each location to determine the overall value of each location. The location with the highest value would be the most desirable location based on the quantifiable attributes considered.

It's important to note that this framework is not the same as the hedonic price method, which is based on the concept of revealed preference. The hedonic price method uses actual market prices to estimate the value of different attributes of a location. The framework described above, on the other hand, is based on assigning subjective weights and scores to different attributes to help an individual make a decision based on their own preferences and needs.It may be interesting to link my suggested answer to the notion of time, in the sense that the qualities recognized in an attribute may disappear in the short or medium term, in the absence of simple and cheap access to energy. The expression of energy being the capacity to modify one's environment over a certain unit of time, if the way of life selected for attributes is intimately dependent on energy, then access to energy conditions the sustainability of these attributes.

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