Utility theory from Jeremy Bentham to Daniel Kahneman

Abstract

A standard model of motivation is that a person has a desire Y, and if they believe that by doing act X, they can achieve Y, then (assuming there is no barrier to doing X or some stronger desire than Y) they will choose X.The normative problem of rationality concerns what choices and desires people should have.The most wellestablished approach to this problem is rational choice theory, which prescribes the most effective ways to achieve given desires (Sugden, 1991).The only constraints rational choice theory puts on desires is that they be consistent.Many observers are dissatisfied with such a purely structural definition of rationality, and want rules of rationality to say something substantive about what desires are best.Dennett (1981), for example, voiced this concern when he included as one of his principles of rationality, that 'a system's desires are those it ought to have, given its biological needs and the most practical means of satisfying them.' Less formally, we would like our account of rationality to answer such questions as: is it rational for a smoker to smoke, for an obese person to overeat, or for an employee to undersave?While we might think not, rational choice theory does not put constraints on what these people ought to want.The utilitarian philosophers, including Bentham, Mill and Sidgwick, did put forward substantive rules that can be treated as rules of rationality.Roughly, they proposed that people ought to desire those things that will maximise their utility, where positive utility is defined as the tendency to bring pleasure, and negative utility is defined as the tendency to bring pain.This utilitarian viewpoint, especially as advocated by Jeremy Bentham, had a significant impact on 19 th century economics.But Bentham's utilitarian project was eventually abandoned in favour of structural accounts of rationality and formal definitions of utility such as rational choice theory.A major reason for this abandonment was that Benthamite utility was deemed impossible to measure.Since Bentham's time, however, the social sciences have developed greatly, and armed with more sophisticated methods, Daniel Kahneman and his co-workers have proposed that we go 'Back to Bentham' (e.g., Kahneman, Wakker & Sarin, 1997) i .The result is an economic psychology based on the measurement of experienced utility.Kahneman's ambitious program is in its early stages, but if successful, it promises to alter our understanding of rationality, by allowing us to assert not only that X is the rational way to achieve Y, but also that Y the rational thing to want to achieve.Or, that not only is the smoker annoying, he is also irrational.The purpose of this paper is to sketch out the history of the idea of utility in its circuitous path from Bentham to Kahneman, and then to consider the problems and challenges that still remain.We begin with the history. A selective history of utility theory iiJeremy Bentham's (1748-1832) moral philosophy centred on two assumptions: the goodness or badness of experience is quantifiable, and the quantities so obtained can be added across people.The first assumption is exemplified by the following famous passage:To a person considered by himself, the value of a pleasure or pain considered by itself, will be greater or less, according to the four following circumstances: 1.Its intensity; 2. Its duration; 3. Its certainty or uncertainty; 4. Its propinquity or remoteness.(IV, 4, italics added).

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