Someone should write a book listing the various popular and folk economics definitions of “utility” in neoclassical economics. I recently read a good one: “fleeting feelings of happiness.” Next they’ll be telling me it’s the name of an old, old wooden ship. I know I talk about it often enough, but for a field that touts its own supposed rigor, it’s just very comical to see so many people so confused about such a fundamental concept. “So, what’s our theory about, anyway? Hmm. Not quite sure. Is it fleeting feelings of happiness?”
In neoclassical welfare economics, the only two definitions of “utility” that work in the context of the normative argument presented in that theory are preference ranks and inaccessible internal perceptions of satisfaction from preference fulfillment. That’s it. Those are the choices. Just choose one or do parallel discussions addressing both. It isn’t, and can’t be, just anything, whatever one likes, whatever some other people, philosophers, economists happen to be talking about at any given moment. Why only those? The ethical half-theory is predicated on the impossibility of resolving interpersonal conflicts of preferences on the basis of “utility,” implying one must go outside that normative theoretical framework and take up exogenous ethical ideas to address that issue. That serves as the basis of the entire normative discussion of “economic efficiency” relating to “utility,” of Pareto optimality relating to “utility,” of perfectly competitive markets maximizing something called total social “utility,” etc. Neoclassical welfare economics is a defined normative or ethical theory, or as I say, half-theory, since some normative issues are very purposefully set aside. It’s not positive economics, a content-free toolbox, a funny way to refer to mathematics or logic, etc.
In a more general philosophical context, there are a great many other potential definitions of “utility.” Indeed, that’s what a great deal of real utilitarian ethical philosophy is about; how to define “utility” so it makes sense in an ostensibly full ethical theory. That’s fine. Philosophy is interesting and fun. However, when one is working with neoclassical welfare economics, one is working with a defined normative or ethical theory. One isn’t just doing open ended ethical philosophy, deciding terms and concepts on the fly.
In so-called “general welfare analysis,” one can either incongruously manipulate one of those two types of “utility” to reflect some other type of “utility” or random ethical theory or, what the heck, if one is doing that, I suppose one could just redefine it however one likes. That’s also fine. “General welfare analysis” is basically economists doing what one supposes is often rather dodgy ethical philosophy. However, it’s not neoclassical welfare economics, which is a defined normative or ethical half-theory with defined concepts and terms.
Why am I always on about neoclassical welfare economics, per se? Because it’s been around a long time and has filtered into popular culture in the form of anti-democracy bad economics in the conservative style and related forms of unhelpful, misleading folk economics. Economists would do well to stop talking nonsense to generate supposedly intuitive understandings of opaque, recondite, mysterious concepts. They’re not Yoda discussing The Force. They’re economists talking about “utility.” Be rigorous. Define it properly, then stick to it. A great deal of anti-democracy bad economics in the conservative style involves blabbing on about conclusions generated in neoclassical welfare economics involving “utility” without any clear, consistent understanding of what those conclusions actually mean.
Want an example? Contrary to what many seem to suppose, one cannot make interpersonal comparisons of “utility” using money or “willingness to pay.” Money is not “utility” or a measure of “utility.” Everyone gets that, right? Willingness to pay (an amount of money) might indicate preference rankings for a given individual, but comparing the willingness to pay of two different people tells one nothing about “utility,” that is, nothing normatively relevant to neoclassical welfare economics. Willingness to pay is often used in bad economics in the conservative style in a misleading way designed to blur the distinction between intrapersonal and interpersonal “utility” comparisons. Markets do not allocate resources to those who get the most “utility” from them. When speaking about resolving interpersonal conflicts of preferences in markets, it’s much more sensible, much less misleading, to talk about relative economic power combined with at least a modicum of desire, rather than willingness to pay, and oh yes, almost forgot, ability to pay. In a market, interpersonal conflicts of preferences over possession or use of scarce resources will be handily won by those with vast economic power over those with little or no economic power. Their relative level of desire, want, need, etc., is irrelevant. Moreover, even if economic power were equalized, we could still not compare “utility” based on relative willingness to pay because we cannot make interpersonal comparisons of “utility” defined in either of the two ways relevant to neoclassical welfare economics. One may say that’s what one had in mind by relative desire, want, need, whatever, but that’s a different ethical theory, requiring concepts and propositions exogenous to the ethical half-theory in neoclassical welfare economics. That’s the point.
I’ve argued before serious economists may want to simply stop using the word “utility” and refer directly to either individual preference ranks or inaccessible internal perceptions of satisfaction from preference fulfillment to avoid confusion. If not that, at least have a care. If one wants to fight anti-democracy sentiment by helping people differentiate real neoclassical welfare economics from misleading anti-democracy bad economics in the conservative style, pay attention to words, concepts, particularly in normative contexts. Try to be rigorous.
