Measurements of utility

Abstract

Utilitarianism’s objective to maximize aggregate utility necessitates the use of cardinal and interpersonally comparable measures. While the shift toward ordinal utility in modern economics successfully streamlined consumer demand theory through the principle of Occam’s razor, it proves inadequate for addressing complex social choice, welfare economics, and optimal population issues. Individual preferences possess inherent intensities that ordinal rankings cannot capture, making cardinality essential for meaningful social evaluation. Although monetary indicators like consumer surplus offer approximations of benefit, they fail to provide sufficient data for determining optimal distribution or tax policies. Consequently, alternative measurement strategies are required, including the derivation of utility indices from risk aversion patterns and the direct assessment of subjective happiness. Despite traditional economic skepticism toward self-reported data, happiness surveys reveal that significant increases in national income often fail to raise aggregate well-being due to factors such as relative income competition, hedonic adaptation, and irrational preferences. These findings suggest that public policy should pivot away from a primary focus on GDP growth toward investments in public goods—such as education, environmental protection, and research—where the utility gains likely outweigh the ultimate costs of public financing and the inefficiencies of private consumption. – AI-generated abstract.