I like exercising daily. Some days, I want to exercise more than others—let’s suppose that I actually benefit more from exercise on that day. Therefore, I have a higher willingness to pay the price of working out.
Consider the population of TurnTrouts over time, one for each day. This is a population of consumers with different willingnesses to pay, and so we can plot the corresponding exercise demand curve (with a fixed price). In this idealized model, I exercise whenever my willingness to pay exceeds the price.
But suppose there’s some pesky inconvenience which raises the price of exercise. I want to model this as a tax on exercise. As usual, the deadweight loss is quadratic in the size of the tax. Here, the deadweight loss is the lost benefits of exercise on the days I don’t work out due to the inconvenience.
So, I lose benefits of exercise quadratically with respect to the “size” of the inconvenience. But how is this “size” calculated?
One problem with trivial inconveniences is that empirically, I’ll avoid working out even if it would still be worth it. Objectively small inconveniences impose large taxes and therefore large deadweight loss for the population-of-TurnTrouts.
I don’t know how useful this frame is. It just seems interesting.
The costs of (not-so-trivial) inconveniences
I like exercising daily. Some days, I want to exercise more than others—let’s suppose that I actually benefit more from exercise on that day. Therefore, I have a higher willingness to pay the price of working out.
Consider the population of TurnTrouts over time, one for each day. This is a population of consumers with different willingnesses to pay, and so we can plot the corresponding exercise demand curve (with a fixed price). In this idealized model, I exercise whenever my willingness to pay exceeds the price.
But suppose there’s some pesky inconvenience which raises the price of exercise. I want to model this as a tax on exercise. As usual, the deadweight loss is quadratic in the size of the tax. Here, the deadweight loss is the lost benefits of exercise on the days I don’t work out due to the inconvenience.
So, I lose benefits of exercise quadratically with respect to the “size” of the inconvenience. But how is this “size” calculated?
One problem with trivial inconveniences is that empirically, I’ll avoid working out even if it would still be worth it. Objectively small inconveniences impose large taxes and therefore large deadweight loss for the population-of-TurnTrouts.
I don’t know how useful this frame is. It just seems interesting.
Can you give some clarifications for this concept? I’m not sure what you mean here.
https://en.wikipedia.org/wiki/Deadweight_loss#Harberger’s_triangle