> To me, the assumption should be something like the amount of money as a percentage of my total wealth that I'm willing to pay is equal to the utility of the good.
I think you raise a good objection, but this metric overlooks the concept of leisure as consumption.
Say Alice doesn't like working and chooses to only work 10 hours a week. Whereas Bob really likes material goods and doesn't mind working a lot, so he works 80 hours a week. Bob will have eight times as much money as Alice, and therefore much more money to spend on things like coffee.
But this disparity really does reflect different utility levels for coffee (and other consumer goods). Alice does have less money to buy coffee but that's a downstream manifestation of the result that she genuinely prefers leisure over coffee.
To really get into it you have to start figuring out which wealth disparities are due to genuine differences in preferences (like higher savings rates, longer hours worked, studying harder in school, compensation for stressful or unpleasant jobs, more risk-taking, etc.), and which are due to exogenous factors (like higher intelligence, more opportunities, getting lucky in some endeavor, etc.)
I think you raise a good objection, but this metric overlooks the concept of leisure as consumption.
Say Alice doesn't like working and chooses to only work 10 hours a week. Whereas Bob really likes material goods and doesn't mind working a lot, so he works 80 hours a week. Bob will have eight times as much money as Alice, and therefore much more money to spend on things like coffee.
But this disparity really does reflect different utility levels for coffee (and other consumer goods). Alice does have less money to buy coffee but that's a downstream manifestation of the result that she genuinely prefers leisure over coffee.
To really get into it you have to start figuring out which wealth disparities are due to genuine differences in preferences (like higher savings rates, longer hours worked, studying harder in school, compensation for stressful or unpleasant jobs, more risk-taking, etc.), and which are due to exogenous factors (like higher intelligence, more opportunities, getting lucky in some endeavor, etc.)