455. Beyond utility



In his recent book ‘Is there a future for heterodox economics?’, Geoffrey Hodgson, a well known heterodox economist, characterized orthodox economics as maintaining the approach of ‘utility maximization’ or ‘Max U’. He criticized that, as I did in previous items in this blog.



One of the reasons that a one-dimensional measure of utility is assumed, is that it enables simple mathematics, and math rules as the paragon of ‘scientificness’.    



When people say that human conduct entails more than self-interest, such as the interests of others, or other moral values, one can simply add corresponding variables. Hence, the principle of Max U is unfalsifiable. Here, I reiterate the problems I noted in previous items in this blog,  and add an insight from Hodgson. The problems with  Max U are as follows:



First, as mentioned, utility is not observable, and the principle of Max U is unfalsifiable, while that is one of the criteria of a theory being unscientific.



Second, there are different dimensions of utility that are not ‘commensurable’, cannot be subsumed in one variable of utility.  



In particular, moral values are of a different order from economic ones. Buying a house one cannot afford is not of the same category as not killing someone. It is unconditional, imperative, and not a matter of self-interest.  Likewise, the being of another, in his/her dignity is not an economic value to be bargained with. Not everything can be subsumed in self-interest. Kant already argued this. You Follow moral rules not for pleasure or other utility, but because following the rule constitutes who you want to be.



Jobs, and perhaps relations have extrinsic, instrumental value, for achieving some purpose, but can also have intrinsic value, value by themselves, and moral principles certainly do.



In other words, the other person and moral values cannot be subsumed under ‘utility’.



In a recent book, entitled ‘Uprooting economics’, I pleaded to replace ‘utility ethics’ with the ‘virtue ethics’ of Aristotle. The first looks only at outcomes, for example in the form of utility, and ignores intentions and morals. The second includes consequences but also looks at intentions, morality. The classical virtues are: reason, courage, moderation and justice.  

They are connected. For example: one needs moderation for justice. Also courage to make sacrifices for the sake of another, or resist temptations to violate a moral stricture. In this way, morality may not only be incommensurable, of a different order from economic value, but may go against it, in moderation and justice.



Third, the future can be uncertain, incalculable, in distinction with calculable risk. This disables Max U. To deal with uncertainty, one needs trust, and courage to make a leap of faith, be vulnerable.



Liberalism excluded morality, discussions and expressions of faith from public debate, and relegated it to religion, behind doors of the private sphere. But that was in the effort to avoid religious wars, which were rampant in the past. Now, with the need for environmental protection, and excesses of inequality of income and wealth, there is a need for public debate on it, on morality.

Social psychology teaches us that much of our decision making, choice, is made subconsciously, impulsively, not subject to deliberation, let alone Max U. This was adopted in economics, as ‘behavioural economics’, but a psychologist trying to collaborate with economists on this reported that those keep on trying to fit this in max U, and this is reported also by Hodgson. But how can you talk of maximization when it is not deliberate?



Behavioural economics was already considered by Herbert Simon 60 years ago. He proposed that people ‘satisfice’: stop doing Max U from a certain point. That can easily be incorporated in Max U by assuming that there is a psychic cost of rational calculation. Thus it is much less fundamental than choice  being subconscious.  



An alternative to Max U is adaptation, as in Evolutionary Evonomics, as discussed in item 396 in this blog. Much has already been written about evolution in this blog (items 27-30, 46, 82, 161, 195, 205, 279, 376. These 11 items were collected in a bundle, presented on my website bartnooteboom.nl). It is similar to the satisficing advocated by Herbert Simon, in that one can stop when survival is assured.