It’s not so much a screwed up way as a potentially misleading way of looking at things. It’s fair to ask, “what would you give up to get the hour at the beach?” But that just tells us the subjective value, relative to the resources at their disposal, that each person assigns to the hour at the beach. It does seem that value is subjective. It’s only when you try to generalize that individual assignment of value that you get into trouble. If a school offers you a $50 gift card to Chili’s to give a one hour speech and you accept, it’s clear you valued that hour at $50 or less. If a bankers’ association offers you $1000 cash for a one hour speech and you decline, it’s clear that you valued that hour at more than $1000. This doesn’t mean that you value all hours at more than $1000 (or less than $50). If the requests were for the same day at the same time, then we have a plausible explanation for what determined your valuation. The hour speaking in front of students plus $50 was more valuable to you than the hour speaking in front of bankers plus $1000. Or maybe you didn’t care about either and let a coin flip decide.
So, if a banker is willing to forgo hundreds of thousands of dollars for an hour at the beach (assuming that was the only hour the banker could get those hundreds of thousands of dollars), then that hour at the beach was worth hundreds of thousands of dollars to that banker. And note, my caveat is pretty big. I actually imagine you’d have some difficulty finding a banker capable of selling every consecutive hour of his or her life for hundreds of thousands of dollars, particularly once sleep deprivation sets in. There seem to be several implicit caveats in the value of the banker’s hour.
The values assigned by others should have very little to do with the value you assign to something, unless you are talking about something like an ounce of gold, where the option to turn around and sell it to others might influence your value.
As another example, if there was some broken down Honda Civic being offered for $3,000, you might think it isn’t worth it. If you found out that it was Kobe Bryant’s first car, and he suddenly felt some sentimental reason to offer you $50,000 for it, suddenly his valuation impacts your valuation (positively or negatively, depending on your willingness to deal with Kobe).
Particularly with non-mutually exclusive things (both the banker and the gardener can spend the hour at the beach), it doesn’t make much sense to compare the dollar amounts and think one is more valuable than the other. For some comic value, let’s turn it around: how much would you pay to have all the Senate Republicans relocate to the bottom of the ocean beach, and how much would you pay to have all the Senate Democrats relocate to the beach? You might value an hour of a Republican at the beach more than an hour of a Democrat (particularly during campaign/election time). Or, let’s assume you were feeling charitable. Would you contribute more to a gardener’s vacation jar than to a banker’s? If so, then you value the gardener’s hour at the beach more than the banker’s.
Subjective value is a wacky thing. People have preferences that don’t always make sense. An individual’s subjective value assigned to something might not even be constant from one day to the next. It’s very hard to make comparisons between two alternative scenarios involving two different people. Many economists, particularly those trying to influence policy, like to pretend that it doesn’t exist. They attempt to assign an objective value to things. Of course, if you do assign an objective value to everything, then optimal economic transactions must be zero-sum. In a world of objective value, there’s no such thing as a win-win exchange. What’s even more spooky is that many modern macroeconomic models simultaneously assume subjective and objective value, and that each person is both 100% rational and irrational.
