I was talking with someone online the other day about some of the funny ideas people have about “utility” in the context of neoclassical welfare economics and it occurred to me, probably for the tenth time or so but every time seems as fresh as the last, that a simple fix that would do a lot to clear up some common points of confusion in bad economics would be for economists to just stop talking about “utility” altogether and confine their commentary to “preferences,” which is what “utility” as defined in modern neoclassical welfare economics comes down to anyway. I felt rather like the monkey boy in the original Jumanji film using an axe to break into a shed to find an axe. Why do I spend so much of my valuable time explaining what “utility” is in economic theory, differentiating it from utility in proper utilitarian economic philosophy, when the concept really adds nothing in the context of neoclassical welfare economics anyway, as I discussed in my previous post on the topic Preference Utility and Fake Utilitarianism, from April 15, 2020?
What exactly am I saying? Well, it’s perfectly simple. Instead of talking about “utility” functions, talk about “preference” functions that give preference rankings or orderings indexed by the individuals holding or expressing those preferences. Instead of talking about the faux behavioral assumption that people “maximize utility” talk about commonplace observation that people “express preferences.” Instead of talking about the normative goal of “maximizing total social utility” talk about “generating situations consistent with certain normative propositions about the expression of preferences.”
That simple change would cause no loss in the content of neoclassical welfare economics while doing a lot to reduce confusion caused by equivocation on terms involving, on the one hand, the unique “utility” defined in a funny way in neoclassical welfare economics to be irrelevant in most ethically controversial situations, that is, situations involving interpersonal conflicts and needs, wants, and desires, and, on the other hand, more common and familiar forms of “utility” defined in utilitarian ethical philosophy to address exactly those situations.
It would also help people make sense of the origin and importance within neoclassical welfare economics of the inability to make so-called “interpersonal utility comparisons,” that is, distributional indifference. Indeed, one wouldn’t have to expend time explaining the concept at all. If we’re talking about preference rankings or orderings for particular individuals who would even be tempted to suppose one could make an interpersonal comparison of those preference rankings across individuals? Think of the time savings alone.
In the arena of positive, scientific, predictive economics, it would help people appreciate the tautological nature of the faux behavioral assumption that people “maximize utility” in favor of what is really being expressed, the simple observation that people express preferences, and hence reduce the possibility that people will fall into the “greed is good” fallacy, which comes from mistaking the faux behavioral assumption for a real one and then attaching unwarranted content to the term “utility” presumably under the influence of similar sounding terms from certain older versions of utilitarian ethical philosophy. Modern neoclassical welfare economics doesn’t propose people are greedy, self-centered, or simple minded. Someone basing his or her preferences on a concern for others is just as much “maximizing” his or her “utility” as someone basing his or her preferences on selfish desires alone. Why? Because all we’re talking about is expressing preferences. In neoclassical welfare economics, we don’t have to worry about the intellectual content of the term “utility,” as we do in proper utilitarian philosophy. In economic theory the term “utility” is superfluous. It adds nothing. We’re really just talking about preference rankings or orderings for particular individuals.
I must be some sort of economic genius, right? To think of such a simple fix for such a ubiquitous source of confusion? I guess that would be one explanation why academic economists haven’t hit upon this approach for eliminating so much of the confusion and conflict associated with bad economics these past several decades. Of course, I suppose there may be other, rather more plausible explanations as well. Like what? Well, maybe academic economists aren’t interested in this simple change because the rhetorical power of neoclassical welfare economics in the normative arena depends on misinterpretation and errors from little tricks like confusion caused by redefining utility in a peculiar way then conflating it with the same term defined in different ways in other contexts. Maybe that’s the whole point. Maybe neoclassical welfare economics is a theory that was purpose built to be misinterpreted in certain predictable ways so people holding certain normative or ethical views relating to distributional and other issues could promulgate their views in a confusing, intellectually underhanded manner. Just a little theory of mine. Something to consider anyway.
