"The concept of utility in economics refers to the pleasure, or relief of pain, associated with the consumption of goods and services" writes economist John Quiggin. Another economist, Robert Frank, suggests that it is closer to the idea of satisfaction. In Luxury Fever he writes: "The analogous construct in the psychological literature is subjective well-being, a composite measure of overall life satisfaction." This kind of talk outrages the philosophically trained Will Wilkinson who writes:
Conceptually, happiness has nothing to with utility in economics, nor does subjective well-being, or subjective satisfaction. Utility is way of representing an ordering of preferences. It simply isn’t a psychological concept, nor a value concept, nor does it imply either. A utility function is just a little machine in which you can put an ordering of preferences, a pair of alternatives, and have something that somebody decided to call a “utility” assigned to each alternative, the most preferred getting the greater utility.
Wilkinson complains that economists talk about "in a most confusing and haphazard fashion". And it’s true. Some economists who are extraordinarily fastidious about their formal work become careless and sloppy when talking in words or discussing the policy implications of their work. I don’t think this is true for Quiggin, but it’s certainly true for others.
Quiggin argues that a cardinal concept of utility is necessary for the analysis of behaviour under uncertainty and in game theory. But this is different from saying that the concept of utility this analysis needs is the same thing as pleasure or subjective well-being. It’s not the same as saying that people are motivated only by the pursuit of pleasure and the avoidance of pain. And it doesn’t suggest that more utility is better in than less utility in a normative sense. Who knows, perhaps the world would be a better place if there was less utility.
But still, Quiggin is happy to link the idea of utility to the idea of pleasure. Wilkinson, on the other hand, insists that the two concepts are separate:
… economists qua rigorous appliers of utility theory, don’t think that being wealthier ought to make you happier. They think that a bigger budget gets you a more preferred bundle of goods, and more preferred means, by definition, more utility. But since utility is a not a subjective psychological state (since semantic satisfaction is not), no one should be surprised that having more utility won’t make you more anything, subjectively. The world could be exactly the way you prefer it, and you could be miserable, because you could prefer to be miserable.
If economics is to have any influence over policy, then these arguments matter. As Edward Mariyani-Squire points out, more and more economists are returning to the idea that utility is a psychological state. Economically trained happiness researchers like Richard Layard not only argue that utility is a cardinal variable, but that utility can be measured and the results compared between individuals. (apparently Edgeworth’s Hedonimeter has arrived!)
But economists like Layard leap to conclusions about the ethical and political implications of their theories. Layard argues that "happiness is the ultimate good and that all other goods are good because of the way they contribute to happiness". Will Wilkinson once suggested to Layard that people didn’t always want to pursue happiness. And it’s a good point. Why is happiness the only thing worth pursuing in life? For thousands of years philosophers have argued over the nature of the good life and grappled with problems like incommensurability, but many economically trained happiness researchers seem to think that this was all a waste of time. To them it’s obvious that maximising happiness is the only thing that’s worthwhile.
I’m curious about happiness research, but I’m far from convinced that happiness is the only thing that matters in life. And unless happiness researchers like Layard stay out of the policy recommendation game, they ought to make a stronger case for happiness as a policy goal.
Update: On reflection, I think my last paragraph is unfair to Richard Layard. He doesn’t avoid philosophical arguments for his position and has engaged with other thinkers like Amartya Sen (and Sen with Layard). What bothers me about the happiness debate is that there is so much focus on empirical issues such as the link between income and GDP and so little on normative issues like the role of the state in promoting well-being. There’s a huge difference between Layard’s concept of well-being and Martha Nussbaum’s — a difference that has implications for policy. But too often economists wade into normative disputes with the assumption that improving utility is a good thing and then refuse to explain what utility is or why we should care about it.