interpersonal utility comparisons Reference library
Dictionary of the Social Sciences
...margin for interpersonal utility comparisons in areas of manifest suffering or exploitation, it suggests the strong difficulties facing any attempt to quantify forms of satisfaction. There is, consequently, a distinction in economics between theories that rely on cardinal units of utility (termed utils ) and those that require only ranked (ordinal) preferences ( see cardinal and ordinal utility ). While most branches of economic theory use only ordinal utilities, John von Neumann and Oskar Morgenstern ( 1947 ) have shown that cardinal utilities play a...
interpersonal utility comparisons
interpersonal comparisons
cardinal utility
ordinal utility
equal sacrifice
collective choice
cardinal utility Quick reference
A Dictionary of Economics (5 ed.)
...cardinal utility A utility function that can be subjected to a positive affine transformation without altering the implied preference order. A positive affine transformation applied to the initial utility function U generates the transformed utility function U* = a + bU , where b > 0. The utility function U is cardinal if the functions U and U* represent the same set of underlying preferences. An example of cardinal utility is an expected utility function. See also interpersonal comparisons ; ordinal utility...
equal sacrifice Quick reference
A Dictionary of Economics (5 ed.)
...is the definition and measurement of sacrifice. One possibility is that there should be an equal sacrifice of consumption but this could be in absolute or proportional terms. An alternative is that the sacrifice is measured in utility terms, but this raises difficult questions about interpersonal comparisons of utility. See also ability to pay...
interpersonal comparisons Quick reference
A Dictionary of Economics (5 ed.)
...interpersonal comparisons Comparing the welfare of one individual with that of another. The welfare level of an individual is measured by a utility function . Utility can be ordinal so that it is no more than a numbering of indifference curves. An ordinal utility function can be subjected to any monotonic increasing transformation, f , without changing its meaning: the initial utility function U and the transformed utility U * = f ( U ) are equivalent. Utility is cardinal when the initial utility function U is equivalent to the transformed...
ordinal utility Quick reference
A Dictionary of Economics (5 ed.)
...one indifference curve has a higher number before the transformation it must have a higher number after the transformation. Ordinal utility conveys no more information than that contained in the indifference curves. The observation that the utility from choice x is greater than the utility from choice y means only that x lies on a higher indifference curve than y . See also cardinal utility ; interpersonal comparisons...
Jevons, William Stanley (1835–1882) Reference library
Dictionary of the Social Sciences
... utility ). In order to do this, an individual increases consumption of a commodity to the point where an additional unit of the good increases utility by less than it costs (the basis of the concept of marginal utility; see marginal analysis ). Although he recognized the pitfalls of interpersonal utility comparisons (comparing one person's utility with another's), Jevons used them in extending the law of diminishing marginal utility to money. This argument justified redistributing income from the rich to the poor, since the resulting increase in utility for...
utilitarianism Reference library
Dictionary of the Social Sciences
...Where Bentham initially equated utility with the maximization of pleasure and the minimization of pain, Mill recognized the challenge of equating forms of utility across different individuals or groups. He drew value distinctions between different forms of welfare in an effort to sharpen utilitarianism's social engagement, and he never abandoned the search for a basis for interpersonal utility comparisons . Subsequent utilitarian thought, especially in economics, has taken a more circumspect position on utility, seeking proxies, such as...
Pareto optimality Reference library
D. W. Haslett
The Oxford Companion to Philosophy (2 ed.)
...for purposes of this criterion, a person is ‘better off’ with some alternative A rather than B if and only if this person prefers A to B . An advantage of this criterion is that it provides a way of evaluating alternative social states that does not require interpersonal utility comparisons. Prof. D. W. Haslett Allen Buchanan , Ethics, Efficiency, and the Market (Totowa, NJ,...
ability-to-pay principle
Dictionary of the Social Sciences
...to pay taxes should contribute a larger amount. Horizontal equity states that taxpayers with the same ability to pay should contribute the same amount in taxes. To determine whether two taxpayers or families are similar in terms of ability to pay requires making interpersonal utility comparisons (i.e., comparing how much different people's welfare would decline if they had to give up the same amount of their income), a practice considered difficult, if not impossible, under most circumstances. The ability-to-pay principle is also complicated by the problem...
social-welfare function Reference library
Dictionary of the Social Sciences
...of the sum of individual welfares. This model assumed that utility (the economic term for well-being) was cardinal (or quantifiable) and that it was therefore possible to compare utility between individuals ( see cardinal and ordinal utility ). Interpersonal comparisons of utility, however, proved extremely difficult to establish and constituted a major weakness of the Benthamite model. This criticism led to a reformulation of the social-welfare function on the basis of ordinal utilities, where only the individual ranking of different social...
Pareto optimal Reference library
Dictionary of the Social Sciences
...intervention in markets and for laissez-faire policies more generally. The concept of Pareto efficiency holds beyond market applications, however, and is useful in any situation in which interpersonal utility comparisons cannot be made. Because it requires only that individuals judge their own situations, it allows some (often limited) welfare comparison of outcomes without requiring the weighing of some individuals' gains against others'...
collective choice Quick reference
A Dictionary of Economics (5 ed.)
...individual preferences in all circumstances. An alternative perspective views collective choice being made through a social welfare function that has individual utility levels as arguments. A collective choice is made by confronting the alternatives with the social welfare function and choosing the option yielding the highest level of welfare. If interpersonal comparisons of utility cannot be made then the construction of a social welfare function faces the same impossibility as any other collective choice process. See also paradox of voting ; ...
Bentham, Jeremy (1748–1832) Reference library
Dictionary of the Social Sciences
...free schooling, and the free provision of care for the sick. Because the question of marginal utility— the point at which the costs of an action exceed its benefits—informed most of his inquiries into law, punishment, and the determination of the general good, Bentham sought a quantitative measure of happiness (conceived rather narrowly in terms of pleasure and pain). In this, he came up against the problem of interpersonal utility comparisons —the comparison of inevitably complex evaluations of individual happiness, especially as it relates to changes in...
Pareto principle Quick reference
A Dictionary of Philosophy (3 ed.)
...The principle can also be stated in terms of wellbeing rather than preferences. Whether the Pareto principle delivers a social welfare function clearly depends on how unanimous the members of the society are. The great advantage of Pareto optimality is that no interpersonal comparisons of utility are needed in the application of the principle; it therefore avoids problems connected with the strength of preferences. The weakness of basing policy on the principle is that it tends to favour the status quo , since only one dissent is sufficient to prevent a...
