Posts Tagged ‘utilitarianism’

Today’s economic orthodoxy is heavily dependent on the idea of utilitarianism, because it is a convenient mechanism that allows economics to be taken more seriously as a natural science. It allows economists to bypass all the inconvenient complications that arise when delving into deeper considerations of ethics and human behavior. The adoption of utilitarianism allows for the use of an additive system that fits well into an economics that is based on mathematics, as we have today.

Before going further, it’s worth briefly exploring who Jeremy Bentham was, and what we mean by utilitarianism.

Utilitarianism, or the “greater good” argument, is the belief that is the idea that the “right” course of action is the one that maximizes the overall “good” of a situation. So actions should be judged right or wrong depending on whether they increase or decrease human happiness, or utility. In economic-speak, utilitarian is used as the rationale behind the crucial assumption of rationality of consumers – that agents (i.e. people) consume so as to maximize their “utility”. Bentham put it thus: “Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do.”

On the face of it, utilitarianism has some appeal. But a simple thought experiment, first articulated by American philosopher Robert Nozick in 1974, puts the simplicity of utilitarianism in stark focus. Nozick hypothetically proposes the “experience machine”: a machine that would give you any experience you so desire. So if you wanted to experience the thrill of climbing Machu Picchu, so be it. But all the while you would be hooked up to this machine, not knowing that you were there. In other words, you would actually believe you were climbing Machu Picchu. Would you plug yourself into the machine? As long as you’re living your hearts desire, does it matter whether its real or not?

Nozick believes that most people would choose not to be plugged into this experience machine. This implies that it is somehow important whether these experiences are real or not. The reality of life is important: people want to actually do certain things, achieve certain goals, rather than simply feel the pleasure associated with it. However, if utilitarianism held strong, then the pleasure associated with actions would be all that mattered, and we would choose the machine. It is clear then, that there are other things besides simple pleasure that people consider intrinsically valuable.

While different forms of utilitarianism have attempted to come to grips with this and other complications, this was not so for Jeremy Bentham. He proposed a form of ‘felicity calculus’, where the pleasure and pain that arises from different actions could be quantified and and determined by addition and subtraction. This sort of simplistic rationale is too tempting to resist for orthodox economists. For Bentham, different pleasures vary only in their intensity and duration, and not quality. He even said himself, “the game of push-pin is of equal value with the arts and sciences of music and poetry.” Reductionism at its finest. This form of thinking has given rise to “homo economicus”: economic man. Homo economicus, meant to represent each and every one of us, is a narrow, self-interested individual who’s only concern is to maximize his or her consumption of goods and services. In physical terms, the assumption that we are all homo economicus is akin to the assumption that, for practical purposes, all cows are spheres.

The concept of utility is core to understanding economic orthodoxy today, and yet the assumption of rationality is based on an outdated and unrealistic form of utilitarianism that is not, and has never been, applicable to real life. Luckily, we have fields of economics, such as behavioral economics, that have attempted to move beyond this mode of thinking, and incorporating knowledge from other fields such as psychology in altering models to be more realistic. But neo-classical economic theories are still based on this idea, and despite strong attempts from many directions to reform the discipline, it clings stubbornly to such discredited beliefs.