Experienced utility

Notes for Tuesday, November 18, 2014

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

You’re on your own here. I was flat on my back with fevers, chills, and delusions from the codeine in my cough syrup.

This page was written by Michael Green for Freedom, Markets, and Well-being, PPE 160, Fall 2014. It was posted November 30, 2014.
Freedom, Markets, and Well-being