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The Difference Between Utility and Utility

8 Post author: Matt_Simpson 02 December 2009 06:16AM

Recently I argued that the economist's utility function and the ethicist's utility function are not the same.  The nutshell argument is that they are created for different purposes - one is an attempt to describe the actions we actually take and the other is an attempt to summarize our true values (i.e., what we should do).  I just ran across a somewhat older post over at Black Belt Bayesian arguing this very point.  Excerpt:

Economics (of the neoclassical kind) models consumers and other economic actors as such utility maximizers... Utility is not something you can experience. It’s just a mathematical construct used to describe the optimization structure in your behavior...

Consequentialist ethics says an act is right if its consequences are good. Moral behavior here amounts to being a utility maximizer. What’s “utility”? It’s whatever a moral agent is supposed to strive toward. Bentham’s original utilitarianism said utility was pleasure minus pain; nowadays any consequentalist theory tends to be called “utilitarian” if it says you should maximize some measure of welfare, summed over all individuals... Take note: not all utility maximizers are utilitarians.

There’s no necessary connection between these two kinds of utility other than that they use the same math. It’s possible to make up a utilitarian theory where ethical utility is the sum of everyone’s economic utility (calibrated somehow), but this is just one of many possibilities. Anyone trying to reason about one kind of utility through the other is on shaky ground.

 

Comments (16)

Comment author: AndrewKemendo 02 December 2009 07:45:55AM *  0 points [-]

As I asked in response to your other argument: Who has given utility this new definition?

I think perhaps there is a disconnect between the origins of utilitarianism, and how people who are not economists (Even some economists) understand it.

You as well as black belt bayesian are making the point that utilitarianism as used in an economic sense is somehow non-ethics based, which could not be more incorrect as utilitarianism was explicitly developed with goal seeking behavior in mind - stated by Bentham as greatest hedonic hapiness. It was not derived as a simple calculator, and is rarely used as such in serious academic works because it is so insanely sloppy, subjective and arguably useless as a metric.

True, some economists do use it in reference and it is introduced in academic economic theory as a mathematical principal but I have yet to see an authoritative study which uses expected utility as a variable, nor as it was introduced in my undergrad (Economics) as a reliable measure - again, why you do not see it in authoritative works.

You both imply that the economics version utility is non normative. Again as I said before, it was created specifically to guide economic decision making in how homoeconomicus should act. Does the fact that it can be both used normatively and objectively in economic decision making change the definition? No, because as you said, they use the same math. People forget that political economics was and is still normative whether economist want it to be or not.

Which leads me to what I think the root of this problem is in understanding what economics is. At it's heart economics is both descriptive, prescriptive and normative. Current trends in economics are seeking to turn the discipline into a physics-esqe discipline which seeks to describe economic patterns. Yet, even in these camps they must hold natural rate of employment as good, trade as enhancing, public goods as multiplicative good etc... Lest we forget than Keynesianism was hailed as the next great coming and would revolutionize the way that humans interact. Economics without normative conclusions is just statistics.

I realize it is a semantic point, however if we want to use a term then let's use it correctly. I know Mr. Yudkowski has posted before about the uselessness of debating definitions, however we are talking about the same thing here.

All of this redefining utility discussion smacks of cognitive dissonance to me because it seems to be looking to find some authority on the use of the term utility in the way that people around here want to use it. If you want to use normative utilitarianism then you'll have great fun with Bentham's utilitarianism as it is and has always been normative. The beef seems to lie between expected and average utility - which are both still normative anyway so it is really a moot point.

I have thought of making a separate post on utilitarianism, it's history and errors, mostly because it is the aspect I have been most interested in for the past decade. However I doubt it would give any more information than what exists on the web and in text for any interested parties.

edit: Here is a perfect example of my point about the silliness of expected utility calculation in empirical metrics. The author uses VNM Expected utility based on assumed results of expected utility in terms of summed monetary and psychic income. There are no units, there is no actual calculation. There are however nice pretty formulas which do nothing for us but restate that a terrorist must gain more from his terrorism than other activities.

Comment author: wedrifid 03 December 2009 02:04:55AM 0 points [-]

Economics without normative conclusions is just statistics.

No it isn't. It is just economics that is less irritating. Economics can conclude "If you want X then you should do Y". This is obviously most useful for people who have consequentialist ethics and happen to desire Y but these preferences are best considered to be attributes (probably) held by the economists and not by economics itself.

A trap I have noticed some economists falling into is reasoning "Z is something that probably will happen therefore Z is something that should happen". This tends to invoke my contempt, particularly since it is seldom applied consistently.

Comment author: AndrewKemendo 03 December 2009 02:27:43AM 0 points [-]

Economics can conclude "If you want X then you should do Y".

This is what economists are trying to do now. Yet, implicit in their advice are normative economic principals that comprise the set list of X: Full employment, lower inflation, lower taxes, higher revenue etc...Obviously whoever wants x is normatively seeking a solution. As a result the analysis must then also and it is implicit in the formulation.

The economists themselves may have no feelings one way or another but they are using the economic and statistical principals toward normative ends, even if they are not their own. This is why I found the economic discipline so frustrating. Everyone want's to be a human calculator, forgetting that they are being used to solve someone else's philosophical dilemma.

Z is something that probably will happen therefore Z is something that should happen. This tends to invoke my contempt, particularly since it is seldom applied consistently.

As well it should. What you described is still normative, only it applies a naturalistic fallacy spin on the normative conclusion.

Comment author: wedrifid 03 December 2009 02:41:56AM 0 points [-]

This is what economists are trying to do now. Yet, implicit in their advice are normative economic principals that comprise the set list of X: Full employment, lower inflation, lower taxes, higher revenue etc...Obviously whoever wants x is normatively seeking a solution. As a result the analysis must then also and it is implicit in the formulation.

I can mostly agree with you. How one chooses to a discipline is inevitably normative. This leaves only a slight difference in how we describe the process, which side of definition we put the 'normative' on.

The economists themselves may have no feelings one way or another but they are using the economic and statistical principals toward normative ends, even if they are not their own. This is why I found the economic discipline so frustrating. Everyone want's to be a human calculator, forgetting that they are being used to solve someone else's philosophical dilemma.

I share that frustration. Economists in particularly should be expected to be able to trace how the motives play out through a system. That more or less is microeconomics.

Comment author: Matt_Simpson 02 December 2009 04:36:21PM *  0 points [-]

Note that allowing a murderer to, well, murder, improves his economic welfare - it increases his economic utility. Yet murdering is a net negative in the ethicist's utility function.

Economics makes normative claims because economists typically have some relatively uncontroversial normative assumptions - like maximizing economic welfare is a good thing. This is by and large true, but see my counter example above. Also, economists aren't trying to prove that the values they assume are the correct ones. They are assuming certain ethical values and proposing policies that maximize these values.

The two types of utility functions look very similar - the math is the same, both describe goal seeking behavior, etc., but the difference is the preference sets that each describe. Murder can increase utility in the economist's utility function, but not in the ethicist's (under normal circumstances).

Comment author: AndrewKemendo 03 December 2009 02:13:29AM -2 points [-]

Murder can increase utility in the economist's utility function

That is really immaterial though and computationally moot. Ok so his "utility function" is negative. Is that it, is that the difference? Besides, I would argue that reevaluating it on those terms does a poor job of actually describing motivation in a coherent set.

Yet murdering is a net negative in the ethicist's utility function.

It isn't in the economists? These things aren't neutral.

The broader aspect that economists seek is normative. You said it yourself in the economists assumptions. Assumptions are not exogenous when calculating value, try as they may.

Most good studies in their presentation will explain why their methodology is as it is, and why understanding their paper will solve a problem or lead to a conflict resolution. That was the purpose behind applied economic game theory, optimizing equilibrium in previously zero sum outcomes and eliminating dominated strategies for competition. One cannot successfully separate economics from ethics ( I would argue for all but the explicitly classifying sciences (Chemistry, Cladistics etc...) this holds true).

If we are simply talking about mathematical notation, then feel free to slap a negative sign on the expected utility portion for terrorists in the "aggregate worldwide utility" formula. It still won't make any sense in practice.

Comment author: wedrifid 03 December 2009 02:33:51AM *  0 points [-]

That is really immaterial though and computationally moot. Ok so his "utility function" is negative. Is that it, is that the difference? Besides, I would argue that reevaluating it on those terms does a poor job of actually describing motivation in a coherent set.

No. His utility from murder is greater than his utility from not-murder. Cops describe this as 'motive'.

One cannot successfully separate economics from ethics ( I would argue for all but the explicitly classifying sciences (Chemistry, Cladistics etc...) this holds true).

Yes one can. It is much like chemistry. We can say "GDP should be increased" just was we can say "electricity should be produced". But it is better to just let chemistry say "if you put a plate of lead peroxide and a plate of lead metal in sulfuric acid you can generate electricity" and much the same for economics.

If we are simply talking about mathematical notation, then feel free to slap a negative sign on the expected utility portion for terrorists in the "aggregate worldwide utility" formula.

If you want to. But if your intention is to understand or predict the behaviours of terrorists you don't want to consider that 'aggregate worldwide utility formula'. That's useless. You want to consider the utility of the terrorists, at the appropriate level of detail.

It still won't make any sense in practice.

Huh? Yes it will. You mean "you will still find it undesirable and or hard for you to understand".

Comment author: AndrewKemendo 05 December 2009 05:18:35AM *  1 point [-]

See my response here

You want to consider the utility of the terrorists, at the appropriate level of detail.

Huh? Yes it will. You mean "you will still find it undesirable and or hard for you to understand".

What are the units for expected utility? How do you measure them? Can you graph my utility function?

I can look at behaviors of people and say that on this day Joe bought 5 apples and 4 oranges, on this day he bought 2 kiwis, 2 apples and no oranges etc...but that data doesn't reliably forecast expected utility for oranges. There are so many exogenous variables that the data is reliably unreliable.

I have yet to see a researcher give a practical empirical formula mapping the utility of a person or group. I argue it is because it is impossible (currently), thus trying to do so doesn't make sense in practice. I have however, as demonstrated in the link previously, seen formulas which imply weighted preference set's. Those aren't any more useful or descriptive than saying that Joe prefers apples to oranges.

Comment author: Technologos 03 December 2009 07:51:19PM *  0 points [-]

I did separate undergrad degrees in Economics and Philosophy precisely because they speak to different questions.

Economics tell us what is possible; philosophy tells us which outcome we should choose.

I think you were closer to the mark when you said

At it's heart economics is both descriptive, prescriptive and normative

I would simply drop the normative part. Economics certainly attempts to describe the world, and in so doing it offers conclusions such as wedrifid's: to get X, do Y.

The lack of the normative part can be seen in e.g. Steve Levitt's finding that the availability of abortion caused a lagged decrease in crime. Is Levitt arguing that abortion should be more extensive? No--just describing the relationship.

In the same way, the actual science of economics doesn't say X is good, whether X is the natural rate of (un)employment, free trade, public goods, whatever. Individual economists certainly do espouse these positions, for a variety of reasons. The actual claims of the science, however, take the form "X will allow people to move higher on their individual value scales."

Whether these individual scales are "right" or even whether they are the only consideration in moral decision-making is the concern of philosophy, not economics.

Comment author: AndrewKemendo 04 December 2009 10:15:09AM *  0 points [-]

The description you gave of economic theory completely ignores the origins of micro and macro economics, price theory and comparative economics.

The assumptions that underlie these disciplines are normative.

Steve Levitt's finding that the availability of abortion caused a lagged decrease in crime.

Actually that is descriptive statistics. Just as I pointed out before - economics without normative conclusions is statistics.

Doubtful, but in your undergrad you might have read one of the following:

Adam Smith's Theory of Moral Sentiments

John Maynerd Keynes' General Theory of Employment

John Kenneth Galbraiths Affluent Society

Marx' Kapital

Even more doubtful Friedman or Rothbard

These are all philosophical works and serve as the foundations for the economics discipline. All detail first theories about how markets form and work, and second how to make these markets more efficient based on their own unique goal seeking behavior.

More than likely however you predominately used the Baretto Howland Econometrics, Joe Mankiw's Microeconomics, Paul Krugman's International Economics or some other such text which does not describe the assumptions which developed the theories behind standard economic concepts. Yes, full employment is in fact a normative conclusion.

I do not dispute that there is a significant descriptive aspect to economics, especially at the undergraduate level - Once you start to actually do economic analysis in real life, and public policy is a blatantly example, it becomes clear that it is indeed normative.

This discussion got off track however. What we are discussing now does not really add to the discussion at hand, and that is arguably of my own doing because I brought the point up. My reply originally was an attempt to refute a false dichotomy and perhaps I did not do a well enough job of pointing that out. So let me do that now.

Utilitarianism as developed and introduced by Bentham was devised as a way to measure the unitless "utility" for the ends of driving normative change towards hedonistic goals. It is possible to divorce the method from it's origins and use the formulaic theory to simply describe a preference set. Doing this however only gives us a statistical metric firmly in the realm of mathematics, something which requires little knowledge of markets. Economists have used utility in both manners, more heavily using the latter in recent decades. Thus if you are using utilitarian theory normatively you are truly using the original economic theory, not simply the statistical methodology which was birthed from it.

People around here seem to use the terms interchangeably without proper context. When I see someone here say "maximize utility" either you you using Bentham's hedonistic calculation method in which the goals are implicit and you mean maximize hedonistic happiness, OR you are using the divorced economic mechanization and are incoherent because you have not defined your goal seeking terms.

Comment author: Technologos 04 December 2009 03:01:31PM 0 points [-]

However interesting the question of origins in economics is, I was under the impression that we were talking about how it currently works, not how it was conceptualized decades and centuries ago.

I'd be fascinated to hear why you thought it doubtful that I've read those books (most happen to be included in the University of Chicago's core reading requirement, and Friedman and Rothbard are obviously connected to the school); perhaps I'm insufficiently aware of the quality of economics education elsewhere. It's just that none of those are being used in modern research, with the exception of Friedman's technical papers--and the modern foundations of economics do not depend on them in the slightest. See e.g. Gary Becker's 1962 paper which discusses how even the normal assumption of rationality on the part of consumers is unnecessary to the basic functioning of markets.

As an important note, the efficient functioning of markets, while often spoken of as a terminal value, has never in my experience actually been other than instrumental: efficient markets quite by definition are allowing greater progress along individual value scales than inefficient markets, though not necessarily as much progress as some further refinement (like regulation).

I suspect, however, that we are just using different definitions of the subject. It seems that you are primarily interested in the economics of public policy and in the value judgments that drive it. Indeed, you define out the very kind of economics that is most prevalent in modern departments (Berkeley perhaps excepted): mathematical models that seek to understand and predict how humans will act.

In short, I, and much of the modern profession of economics, hold little attachment to the origins of economic theory (though I am surprised that you didn't include Smith's Wealth of Nations in your list, being more directly foundational for economics through the 19th century). If you really wanted to get into it, economics goes back to Xenophon's Oeconomicus, but surely we aren't to believe that modern economics bears any similarity to ancient Greek household management theory. Economics, to match your phrasing, is statistics plus insights about how humans actually behave.

Finally, my thoughts on the dichotomy were expressed in a previous article here.

Comment author: AndrewKemendo 05 December 2009 05:06:59AM 0 points [-]

efficient markets quite by definition are allowing greater progress along individual value scales than inefficient markets, though not necessarily as much progress as some further refinement

Inefficient markets are great for increasing individual wealth of certain groups. I think Rothbard would disagree with the second point (regulation) - as would I.

In short, I, and much of the modern profession of economics, hold little attachment to the origins of economic theory (though I am surprised that you didn't include Smith's Wealth of Nations in your list, being more directly foundational for economics through the 19th century).

The wealth of nations was built on the philosophical foundations set in TMS it is even referenced as such with Smith labeling economics as the study of the nature of morality.

Indeed, you define out the very kind of economics that is most prevalent in modern departments (Berkeley perhaps excepted): mathematical models that seek to understand and predict how humans will act.

Explain to me how that is different than statistics. You cannot do economics without good statistics, but if it stops there, then you are a statistician; by definition. Just because you are discussing markets is irrelevant.

As I said in other responses, modern economics seeks to be little more than advanced statistics as you mentioned. You undoubtedly took econometrics so you will know what I am referencing. Masters level economics might as well be a masters of statistics currently.

The reason this is the case is because political economy was getting a bad rap around the time of the first U.S. depression (1893) and was being marginalized to the point of extinction. The result was that Thorsten Veblen, Alfred Marshall and others formed what we now call neoclassical economics in the late 19th century. At that point the basis' and market theories implicit in the assumptions in each of the Smith/Marx/Mises camps. Further study from there revolved around either supply and demand, labor theory of value or time preference assumptions. The first example taking the broadest foothold.

Again, this is the stuff that economic philosophers debate and really has no relation to the original topic at this level.

Comment author: Jayson_Virissimo 03 December 2009 10:32:17AM 1 point [-]

All of this discussion misses the point that the ethicists who created Utilitarianism were economists.

Comment author: josephjah 02 December 2009 07:48:10AM 0 points [-]

I think the last block of text is key.

If the ethicist's utility function is broad enough in scope to subsume (or at least recognize) that what is good for the economist is ultimately good for the rest of the system (if that were the case), then there might not necessarily be a need for distinction of utility functions.

It is possible the economist's utility function might hold some underlying (and unintentional) positive ethical effect.

Comment author: Matt_Simpson 02 December 2009 04:39:59PM 1 point [-]

It is possible the economist's utility function might hold some underlying (and unintentional) positive ethical effect.

Indeed it does, but the two are not identical. See my response to Andrew above.

Comment author: wedrifid 03 December 2009 01:52:32AM 0 points [-]

If the ethicist's utility function is broad enough in scope to subsume (or at least recognize) that what is good for the economist is ultimately good for the rest of the system (if that were the case), then there might not necessarily be a need for distinction of utility functions.

The subsumption operates in the other direction. Utilitarian ethicisists can alway be modelled as rational agents with a specific set of preferences. Purely selfish agents can only be described using the language utilitarian ethics in the counter-factual world where purely selfish behavior gives perfect utilitarian outcomes.