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Money as a measure of Value

When you have a set of Pros and Cons, you need to set some weight (importance level) on each Pro and Con in order to perform an analysis.

Money is a universal medium of exchange. Apart from some extreme emotional context, a price can be assigned to almost anything. Therefore, we can use the money to price out a Pro and Con and perform better numerical analysis for a decision problem.

Measure a Pro

The idea is that, when you consider a Pro, think about 'How much money you are willing to pay, just to get this Pro in an option'. Say, you are given an option and that 'Pro' is not available to that option. How much money you are willing to Pay just to get that option.

Let's give an example: So, you have 2 choices for selecting an apartment for rent. Location A and Location B. There is a good school around location A, but there is not a good school around location B.

Now, when evaluating location A, think that there were no good schools around the location A. Someone comes up and ask you "Hey, if you pay me some X dollar amount, I can bring a good school around Location A, (like a Magic).". How much money are you willing to Pay to that magician to get that good school around location A.? Maybe you care too much for your kid's education, over anything. You may say, well, I can pay 20000$ to you, give me the school in Location A. If that will be your priority, you can use 20000$ as the value (or importance) of the Pro "Good school".

There is another way you can price out a Pro. Think that you have chosen an option which comes with the pro. Now, you can sell that specific pro to someone. After you sell out, you will not have that pro in your option. How much money will you take to sell out that pro?

Measure a Con

Same like a Pro, when you evaluate a Con, ask yourself a question "How much money you are willing to pay, Just to get rid of this Con ?"

Think about the same Location choice problem for your apartment. Say, Location A has an Ice Cream truck sticking around all the time, that you do not like. Because, the Ice Cream truck makes annoying notice, play loud Jingles all the time which can drive you crazy when you plan to sleep.

Now, say, someone shows up and offer you a deal, "Hey, I can convince the ice cream truck owner to move out from your place to another location. But you need to give me some money for that." - How much money are you willing to pay to that agent to get rid of that ice cream truck? This amount will vary for different persons. For example, some people have a high level of annoyance tolerance. They think, well, I can pay at most 500$ to get rid of that noisy ice cream truck. Nothing more. Maybe, someone else who is writing a book, or doing a scientific research, may like to avoid all kind of noise and stay in peace all the time. He may say, "I can pay 10,000$ just to get rid of that truck.". So, you can use that monetary value when evaluating the Con 'Noisy Ice Cream Truck'.

When you do such an evaluation, just think about only that Pro. Nothing else. Evaluate One Pro (or Con) at a time.

If you do that for every pro and con, you will get a better picture of the decision context and your options. When every pro and con has a price, you can add up all the prices and estimate the net worth of an Option.

In order to facilitate such measurement, you can choose the following option in the start screen and then click OK.

Money Value Measure Selection

Now, add as many options as you want and under each option, you can add as many Pros / Cons as you want.

Money In Options Page

The result (total price worthiness of an option) is always calculated instantly and updated in the Result Panel.

Last updated on 23 September 2018, Sunday, 10:22:23 AM
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