For the following analysis, I am assuming bounded utilities. I will normalize all utilities to between 0 and 1.
What you are observing is not a bug. If your preferences are 100% preference utilitarianism, then there is no reason to think that it would pull in any direction other than what maximizes preferences of everyone else. If you have any selfish goals, that is not purely utilitarianism, but that is okay!
If we are not 100% utilitarian, then there is no problem. Let's say that my preferences are 90% utilitarian, and 10% maximizing my own happiness. This fixes the problem, because there is 10% of my utility function that is unaffected by my utilitarianism. In fact, my utilitarian side includes a term for my own happiness, so my happiness actually counts for something like 10.00000001%, depending on the population. This all works fine, as long as everyone has at least a little bit of selfish preferences.
Imagine if everyone had utility functions that were at least 1% terminal goals that do not reference other people. Then in calculating my utility in a given world state, I will have my utility function pointing to someone else's, which might point back at mine. However, with each level of recursion, 1% of the remaining undefined part of the function will become actually defined.
The only time we run into a problem is in situations like where my utility function is defined to equal yours and yours is defined to equal mine. As long as we avoid this 100% recursion, we are fine.
There is not even a problem if we have negative utility coming form other peoples utility. For example, if my utility was 50% my happiness and 50% your utility, and yours was 50% your happiness and 50% one minus my utility, we are still fine. If my utility is X and my happiness is x, your utility is Y and your happyness is y, then we get X=(x+Y)/2=(2x+y-X)/4, which simplifies to X=(2x+y)/3.
I am 100% utilitarian, but because others value me having my own preference, there is an isolated 0% sub-utility function that I can defer to for such times. In the presence of others, my utility function will perfectly match theirs. When alone, I am to advance and develop that zero-utility sub-function for those times when I'm confronted by agents that value my being myself. Of course, to truly do that, to be true to myself, this means that when I am alone, I am to work on the one thing that makes me the most happy: Maximizing the sum utilities of all age...
Thought of this after reading the discussion following abcd_z's post on utilitarianism, but it seemed sufficiently different that I figured I'd post it as a separate topic. It feels like the sort of thing that must have been discussed on this site before, but I haven't seen anything like it (I don't really follow the ethical philosophy discussions here), so pointers to relevant discussion would be appreciated.
Let's say I start off with some arbitrary utility function and I have the ability to arbitrarily modify my own utility function. I then become convinced of the truth of preference utilitarianism. Now, presumably my new moral theory prescribes certain terminal values that differ from the ones I currently hold. To be specific, my moral theory tells me to construct a new utility function using some sort of aggregating procedure that takes as input the current utility functions of all moral agents (including my own). This is just a way of capturing the notion that if preference utilitarianism is true, then my behavior shouldn't be directed towards the fulfilment of my own (prior) goals, but towards the maximization of preference satisfaction. Effectively, I should self-modify to have new goals.
But once I've done this, my own utility function has changed, so as a good preference utilitarian, I should run the entire process over again, this time using my new utility function as one of the inputs. And then again, and again... Let's look at a toy model. In this universe, there are two people: me (a preference utilitarian) and Alice (not a preference utilitarian). Let's suppose Alice does not alter her utility function in response to changes in mine. There are two exclusive states of affairs that can be brought about in this universe: A and B. Alice assigns a utility of 10 to A and 5 to B, I initially assign a utility of 3 to A and 6 to B. Assuming the correct way to aggregate utility is by averaging, I should modify my utilities to 6.5 for A and 5.5 for B. Once I have done this, I should again modify to 8.25 for A and 5.25 for B. Evidently, my utility function will converge towards Alice's.
I haven't thought about this at all, but I think the same convergence will occur if we add more utilitarians to the universe. If we add more Alice-type non-utilitarians there is no guarantee of convergence. So anyway, this seems to me a pretty strong argument against utilitarianism. If we have a society of perfect utilitarians, a single defector who refuses to change her utility function in response to changes in others' can essentially bend the society to her will, forcing (through the power of moral obligation!) everybody else to modify their utility functions to match hers, no matter what her preferences actually are. Even if there are no defectors, all the utilitarians will self-modify until they arrive at some bland (value judgment alert) middle ground.
Now that I think about it, I suspect this is basically just a half-baked corollary to Bernard Williams' famous objection to utilitarianism:
Anyway, I'm sure ideas of this sort have been developed much more carefully and seriously by philosophers, or even other posters here at LW. As I said, any references would be greatly appreciated.