Experienced Utility

Notes for November 19

Main points

Kahneman and Krueger seek to revive the nineteenth-century version of utility: actual felt happiness rather than revealed preferences. Specifically, they claim that it is possible to measure what they call “experienced utility” without using inaccurate reports of “remembered utility.”

They also claim to be able to construct a cardinal index of interpersonal utility, the U-index. What that means is that their index has three features:

  1. It measures experienced utility, feelings of happiness and unhappiness.
  2. It compares the happiness and unhappiness of different people. That’s what makes it an index of interpersonal utility. An index of intrapersonal utility, by contrast, would compare the states of a single person.
  3. Its numbers tell you how much happier one person is compared with another. That’s what it means to call it a cardinal index. An ordinal index, by contrast, would just tell you the order in which they are ranked and not what separates one place in the index from the next.

One interesting feature is that the U-index involves an ordinal index of intrapersonal utility but a cardinal index of interpersonal utility. People are asked whether they are in an unhappy state at any given point during the day. That gives an ordinal measure: “are you unhappier than normal?” rather than “how much unhappier than normal are you?” They get a cardinal measurement of interpersonal utility because they compare the amount of time different people spend in an unhappy state: 2 hours is twice as long as 1 hour, e.g..

Our discussion

Professor Brown kicked us off by framing the question as one about the explanation of people’s actions. Is the notion of utility that explains why we make the choices we do the one that is relevant to our well-being?

She added that the research that Kahneman and Krueger describe makes a significant difference. For instance, it shows that the so-called misery index is misleading. It treats inflation and unemployment as being equally bad: that’s why they’re combined on the same index. But when you investigate how people feel, you discover that unemployment makes them significantly more unhappy than inflation does.

We spent a significant amount of time talking about adaptation. This is a phenomenon whose existence is confirmed by Kahneman and Krueger’s work: they found that big changes in people’s lives do not actually have significant long-term effects on their felt happiness. Following on Arianna’s remarks about people who tolerate bad relationships, I argued that adaptation has all sorts of malign effects. Roughly, people put up with things that they shouldn’t.

Jackie posed an interesting question for me: why do social movements happen if adaptation is such a universal phenomenon? This seems to me to be an excellent research question. We have seen some speculative answers. Rawls thinks there is a sense of justice that is independent of our feelings of happiness. If so, that might lead people to protest their plight. Williams suggested that the roots of adaptation are ideological, that is, based on false beliefs about themselves or their social world. If so, exposing the truth ought to lead to dissatisfaction with exploitative or unequal relationships. Arianna suggested that what is needed are social leaders.

I have no idea myself. The phenomenon of adaptation is both well confirmed and puzzling. To me, at least.

This page was written by Michael Green for Freedom, Markets, & Well-being, PPE 160, Fall 2013. It was posted November 19, 2013.
Freedom, Markets, & Well-being