Well-Being : The Relationship between Utilitarian Philosopphy and Utility Maximisation in Economics

Utilitarianism was a major philosophical movement of the nineteenth century which focused on maximising the happiness of individuals and societies through the mechanism of rational reasoning by individuals. Many of the 19th century utilitarians, including John Stuart Mill, were also early economists, but they largely rejected the use of utilitarianism in their economic writings. Utilitarian thinking in economics developed in the 1870s via Jevons and Marshall who developed the concept of utility maximisation via marginal utility. I argue in this paper that utility maximisation in economics as it evolved over the next 80 years had surprisingly little in common with utilitarian philosophy. In philosophy, utilitarianism went into retreat after 1900 following the criticisms of G E Moore and the analytic philosophers but, in recent years, consequentialism – its more qualified descendant – has again become important both in theory and for the ethical consideration and appraisal of policy issues, particularly international policy issues such as climate change. Conversely, in economics, utility maximisation has become much more criticised as a theoretical basis for individual consumption and related decisions. This is primarily the result of evidence that there are significant amounts of non-rational and irrational choices by individuals, which violates the key assumption in utilitarian thinking of rational reasoning and decision making. The paper concludes with a recommendation for more exploration of semi-rational decision making theories of individual economic choices, including satisficing