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Utility Functions
Economists like to discuss goal-seeking
in a mathematical terminology. When they talk about
maximizing utility functions, they are using an abstract,
mathematical way of saying that people are trying to attain
goals. A utility function, written as follows:
U = f(x1, x2,...xn)
means that items x1, x2, etc. to some nth x all
contribute to a person's utility. Utility, as the word is
used here, is an abstract variable, indicating
goal-attainment or want-satisfaction. If a person has simple
goals or objectives, such as accumulating material
possessions, then x1 may represent cars, x2 fine furniture,
x3 antiques, x4 land, etc. Anything that helps achieve goals
gives utility, in the jargon of economists.
Although it is of no practical importance here, it should
be noted that some economists disagree with the
interpretation above. They see utility as a real psychic
entity, just as happiness, joy, and satisfaction can be
considered real psychic states. In this interpretation, the
possibility of measuring utility exists, though the
techniques have not been developed. If, however, utility is
a fiction invented to allow us to talk about goal attainment
in an abstract way, no general technique of measurement is
possible.
Economists have been reluctant to examine goals that
involve competition for status. Perhaps their
reluctance is due to their emphasis on the mutual advantages
of exchange. In an honest transaction both the buyer and
sellers must benefit or else the transaction will not take
place. However, quest for status is zero-sum. If one person
rises in status, he does so at the expense of others who he
passes up. Their reluctance to examine goals involving
status has meant that economists have surrendered some
interesting questions to other disciplines. For example, to
what extent does economic development depend on the goals
that people have? Do some goals stop economic development?
Limited evidence seems to suggest that groups in which it is
socially unacceptable for a person to rise relative to his
neighbors have a harder time developing than those groups in
which social mobility is acceptable. Other social sciences
have emphasized pursuit of status, and it gives them a very
different way of seeing the world than the way economists
do.
In developing the logic of choice, economists assume that
people are rational, which means that people have
well-defined goals and that they purposefully and logically
act to attain those goals as best they can, given their
circumstances. You might note that economics does not judge
the goals themselves as rational or irrational. Economists
almost always take goals as given. People are irrational if,
given their goals, they act in ways that do not lead to the
accomplishment of their goals.
Benefits are only part of the picture. The other part is
constraints and costs.
Copyright
Robert Schenk
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