HISTORY-ECONOMIC THOUGHT 125 (001) (Fall 2020)

BENTHAM’S RED HERRING

CRAIG B. MCLAREN University of California, Riverside

“For the great enemy of the truth is very often not the lie: deliberate, contrived, and dishonest,

but the myth: persistent, persuasive, and unrealistic.”

John F. Kennedy Yale commencement, 196

1) INTRODUCTION SINCE THE IDEAS OF THE SO-CALLED “MARGINALIST REVOLUTION” WERE ACCEPTED AS MAINSTREAM, economists have sought to explain the subjective value people place on commodities in terms of some hypothetical entity such as utility or preference. This is in keeping with early scientific thought in which it was common to assume the existence of undetectable substances such as energy1, ether2, or phlogiston3. While utility cannot even be clearly defined, it serves as a useful tool for describing consumer behavior as long as one need not be too concerned with exactly what utility is. The ambiguous nature of utility and preference makes it difficult to determine how far the analytic usefulness of these concepts can be taken4. When we presume that a consumer always makes choices so as to maximize his self-interest or his pleasure, we make unwarranted assumptions regarding the agent’s motive. If we take self- interest in its narrowest sense we are left with the much-maligned concept of Homo Economicus or “economic man”, the greedy egoist, commonly found in modern economic models. If additionally, we interpret utility as a measure of the agent’s welfare, we have by assumption, created a world in which greed is a virtue. Proponents of this viewpoint can be accused of using “economic man” as their prescription for the behaviors they consider to be “rational”.5 As shall be argued in the balance of this paper, the introduction of Benthamite utility into economics has distracted more than enhanced the progress of value theory. The understanding that economic value arises from the judgment of the consuming public did not begin with the marginal revolution; it began with Democritus in the fifth century BC. Such understanding led the Scholastic doctors to prescribe policies that would not be far removed from those we might make today. The Marginal Revolution produced an analysis of how this value changes with consumption, and how this change explains exchange behavior.

1 See Mirowski (1989) Chapter. 2 for a full discussion of this approach. 2 “The ether” was believed to be the medium through which light waves propagated. 3 Phlogiston was thought to be the substance of which fire was made. 4 The replacement of utility with ordinal preferences removes some of these ambiguities but by no means all, as shall be discussed shortly. 5 See Becker(1976 and 1981), Posner (1977 and 1980), and Stigler (1981)

Due to the influence of Bentham, William Stanley Jevons (1835 - 1882) presumed that the source of economic value was the happiness or pleasure one derives from consumption. Analysis of his work shows that his results do not depend on any such property other than its diminishing marginal nature. With vector calculus, a mathematical technique that was in its infancy in Jevons’ day, it is possible to slightly modify Jevons’ argument so as to define value in terms of observable behavior. The resulting theory makes far weaker assumptions regarding human behavior. The subjective value defined, which we shall call use value, is essentially that which is implicit in Aristotelian and Scholastic thought. We begin in Section 2 with a discussion of utility as Bentham conceived it along with the methodological problems that result from its use in value and welfare theory.

2) BENTHAM’S UTILITY AND ITS USE IN ECONOMICS The problem with utility as it is used in economics is one that arises whenever one attempts to explain an observable consequent in terms of non-observable antecedents. While it may be quite reasonable to assume that some consequent B (i.e. the choice one makes between commodities) is usually the result of some unobserved antecedent A (i.e. the maximization of pleasure), it is quite a stretch to presume that A always causes B, an even greater stretch to presume that only A can cause B. As is shown in Figure 2-1, Erroneous results can occur when one presumes A produces some other condition C in addition to B. Observance of B in this case would necessarily imply the presence of C, since both follow from A. If there were another condition D (which we have so far ignored) which gives rise to B but not C, any conclusion we might draw regarding C based on an observance of B would be incorrect, though valid given our assumptions.

A

C

D

BOR

Fig 2-1) Antecedent A produces consequents B and C, while antecedent D produces B only. Observation of B will cause one to erroneously to conclude that C must also be present if one assumes that D does not exist.

In practice, should B ever be observed in the absence of C, we should be led to conclude that the “theory” shown in Figure 2-1 is incorrect. It is easy however to “strategically immunize”6 such a theory with a claim that observances of C are inherently unreliable. The task now is to examine the links between “utility”, the well-being of the utility maximizing agent, and the choices the agent makes. In Chapter V of his Introduction to the Principles of Morals and Legislation,7 Bentham, describes utility as consisting of “interesting perceptions”8 of various pleasures, and the absence of their opposing pains. As shown in Figure 2-2, we can group Bentham’s pleasures into two categories; Material Satisfactions, those most directly associated with consumption of goods, and Psychic Satisfactions, which are more indirect. Figure 2-2 conspicuously lacks any connection between utility and choice. Bentham’s interest was in a (nominative) theory of social well-being, not a positive theory of individual behavior. His project was to found a system of “scientific jurisprudence”. This requires a criterion by which an observer could evaluate the performance of an institution. Mary Warnock, in the introduction to a volume in which Bentham’s Principles are contained, points out that his life’s work was twofold: He was concerned first with providing a theoretical foundation for any possible legal system, and second, with criticizing existing systems in light of that foundation. “In practice, this programme amounted, in large measure to a testing of existing systems of law by the criterion of the ‘principle of utility’ “9. Bentham was not interested in explaining why an individual might behave in such a manner, but how such a behavior might impact the well being of others and thus be of concern to lawmakers.

Satisfaction of wants

We l l - Being

Choice

Material Satisfactions

Benthamite Utility

Psychic Satisfactions

Pleasures of Benevolence

Pleasures of Thought

Pleasures of Malevolence

Pleasures of Relief

Figure 2-2) A Simplified Taxonomy of Bentham’s Utility

6 For a discussion of immunizing stratagems, see Blaug (1992) pp. 17-21 7 Bentham (2003) p. 45 8 Bentham (2003) 9 Warnock (2003) p.4

The material satisfactions can be broken into additional categories that include Satisfaction of Wants, and Bentham’s Pleasure of Relief. The satisfaction of wants include Bentham’s Pleasures of Sense10; the gratification that follows from consuming food, entertainment and the like; and the Pleasures of Wealth11 which include the security one enjoys from possessing the means to insure his own safety and comfort. The Pleasure of Relief is the “pleasure which a man experiences, after he has been enduring pain of any kind for a certain time, when it comes to cease, or to abate.”12 Bentham’s Pleasure of Relief is of interest because it resembles Amartya Sen’s “small mercies” which the hopeless beggar and the hardened unemployed enjoy.”13 We shall take up Sen’s assessment of this pleasure shortly. The Psychic Satisfactions are only indirectly associated with consumption and include Bentham’s more subtle pleasures. These can be grouped into three categories. The Pleasures of Thought, which include Bentham’s Pleasures of Good Memories, Pleasant Expectations of the Future, Pleasant Associations Between Objects and Past Happy Experiences, and Pleasures of the Imagination14. The Pleasures of Benevolence, which include the pleasure one obtains from the knowledge that one has acted compassionately or ethically, and the Pleasure of Malevolence are of particular importance when considering of the link between utility, choice, and welfare. As its name implies, the Pleasures of Malevolence are what one enjoys when seeing harm come to “one who is the object of the observer’s malevolence”15. This pleasure is one that might be derived from witnessing a public execution. For our purposes, we include Bentham’s Pleasure of Power, i.e. the “being in the condition to dispose people by means of their hopes and fears”16 among the Pleasures of Malevolence. In Figure 2-3, the connection between utility and well-being is shown as being very tenuous. This follows from Bentham’s own definition of utility as consisting only of perceptions. Wlfredo Pareto was among the first to criticize the notion that such perceptions implied well being. Pareto dismissed utility as being “simple ophelimity”, a measure of an individual’s arbitrary desires.

10 Bentham (2003) p. 45 11 Bentham (2003) p. 45 12 Bentham (2003) p. 47 13 Sen (1987) p.45 14 Bentham (2003) p. 47 15 Bentham (2003) p. 46 16 Bentham (2003) p. 46

Achievement of functionings

Satisfaction of wants

We l l - Being

"Pleaure of relief"

Choice

Material Satisfactions

Benthamite Utility

Psychic Satisfactions

Committment

"Pleasures of Benevolence"

"Pleasures of Thought"

"Pleasures of Malevolence"

Figure 2-3) Aspects of Utility and Their Impacts on Well-being and Choice Pareto recognized the work of psychologists who were investigating the source of consumer’s desires; he however excluded them from the realm of economics.17 Amartya Sen carries the argument even further. According to Sen: “Well being is ultimately a matter of valuation, and while happiness and fulfillment of desire may well be valuable for a person’s well being, they cannot - on their own or even together – adequately reflect the value of well being.”18 In particular, Sen points to the pleasures of relief and malevolence as examples of cases where pleasures and well-being are not likely to correspond. In the case of relief, a battered housewife may experience great joy from a small mercy far out of proportion to the suffering that is her daily lot19. The Pleasure of Malevolence can be seen as a special case of the pleasure one might derive from being “nosey”. In Collective Choice and Social Welfare. Sen asks if the welfare of an agent (A) is really enhanced if his neighbor (B) sleeps on his side as opposed to his back, should the (A) have preferences over B’s behavior20. Extension of this argument to the enjoyment one might obtain from discrimination against minorities is quite apparent.

17 See Ingrao and Israel (1990) pp. 132-33 18 Sen (1987) p.46. See also Sen (1980 and 1985) 19 Sen (1987) p. 45 20 Sen (1970) p. 79

Sen’s approach to determining what one “needs” in order to enhance his welfare is to define a set of necessarily functionings, or doings and beings. Functionings, which include the nutrition, education, and access to healthcare are defined by value judgments made by experts, not by the agents themselves. Achievement of such functionings, which are measured in indices such as in the Human Development Index (HDI)21, may or may not enhance the agent’s perceived utility. A farmer in a developing country may or may not understand the value of education or western style health care. While we can safely conclude that the connection between utility and welfare cannot be made generally, the connection between utility and choice is quite clear. The Satisfaction of Wants and the Pleasures of Thought clearly motivate consumer behavior. Marketing managers have long recognized that Bentham’s Pleasures of Memory motivate one’s purchase of photographic equipment while his Pleasures of Association motivate the purchase of souvenirs and memorabilia. Bentham’s Pleasure of Expectation is recognized by Revlon Co., which defines its business as selling “hope” rather than cosmetics. 22 To answer the question of whether utility is the only motive that drives a consumer’s choice, we compare what Bentham calls the Pleasure of Benevolence, and what Sen calls Commitment. If one could make the argument that people behave ethically because it gives them pleasure to do so (or pain in the form of guilt if they do not), then one might be able to assert that utility is the sole motivator. Sen does not accept this. He leaves open the possibility for agents to make choices based on ethical commitment, which he defined as involving ”a counterpreferential choice, destroying the crucial assumption that a chosen alternative must be better than (or at least as good as) the others for the person choosing it”23. Commitment needs to be distinguished from benevolence or sympathy, in that the well-being of a sympathetic person is directly impacted by the well being of another. For example “If knowledge of the torture of others makes you sick, it is a case of sympathy; if it does not make you feel personally worse off, but you think it is wrong and you are ready to do something to stop it, it is a case of commitment.”24 If we allow for the possibility of committed behavior, we can no longer consider utility to be the sole determinant of an agent’s choices. Preference orderings, the more easily definable alternative utility proposed by Pareto suffers from the same problems. “Preference” implies neither choice nor well-being for the same reasons given above. One may make choices based on commitment that are counter to his preferences. There is also no guarantee that an agent does not “prefer” alternatives that are unhealthy. If we are indeed to hypothesize the existence of some entity like utility, we are at a loss as to how to define it except tautologically as “whatever-it-is-that-an-agent-maximizes”. Such a definition has no predictive power what so ever. An agent’s “self interest” is left to include what ever the agent is observed to pursue. We are therefore better of by building a theory on what we can observe. This is intuitively what the Aristotle and Scholastics did with their concepts of use and exchange value.

21 Todaro & Smith (2003) pp.57-63 22 Kotler (1994) p.69 23 Sen (1977) p.328 24 Sen (1977) p.326

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