Dear Economist,
I’m planning to take a sabbatical to travel around the world with my partner for eight months. But we have a dilemma: should we cut our trip short after four months and return to England for a best friend’s wedding? It would mean that we would miss out on New Zealand (and four more months off work) - but maybe it would be worse to miss the wedding?
Paula Marvin, London
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Dear Paula,
Your choice would be simple if one of these plans was Pareto-superior to the other.
A Pareto-superior plan is one that makes at least one person better off and, critically, makes nobody worse off.
I can only presume that your best friend would prefer you to attend her wedding, while it’s perfectly obvious that your partner would rather cavort in the antipodes for another four months. There is no way to make one of them better off without making the other worse off, so unfortunately, neither option is Pareto-superior.
How, then, are you to choose?
I recommend the Hicks-Kaldor compensation test. If you could (in principle) offer your best friend enough cash to assuage her feelings for your absence, and still feel that you were ahead on the deal, then the Hicks-Kaldor test is satisfied and you should stay the course for eight months.
Fortunately, you do not actually need to bribe your friend to excuse you from the wedding - which is good news, since the bribe might be misinterpreted. All you need to know is that four months of fun and frolics together for you and your partner is worth more than the fleeting pleasure your friend will get at noticing you amid the crowds at her wedding. Put like that, your choice is obvious.
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