5 ms·

>Utility is a well-known concept in economics. It's well known but it still has a circular definition. Why do people spend $X on goods? Because it provides $X

>Utility is a well-known concept in economics. It's well known but it still has a circular definition. Why do people spend $X on goods? Because it provides $X worth of utility. Why does it provide $X worth of utility? Because they spent $X on it. Ultimately it therefore ends up being rather meaningless. It's also non-disprovable which makes it non-scientific.

digi_owl 11y ago
Interestingly ol' Marx tried to differentiate between use and exchange. He called it value, but i suspect it could easily translate into the utility of modern economics. Sadly he seemed to have managed to talk himself into circles trying to argue that labor was the source of value, and therefore capitalists were labor exploiters. Because of this he ended up mixing use and exchange value when talking about production machines, to try to show that said machines didn't provide any more value output than was initially put into making it. I suspect that once one correct for that, by for example making machines into labor amplifiers, Marx's writings have, given the circumstances and time it was written, some serious insights into the workings, and pitfalls, of capitalism (most people barely touch volume 1, but volume 3, published by Engels after Marx death, holds a stern warning about the effects of finance capital). Using that as a springboard to bootstrap some other kind of society may well be futile however.
- crdoconnor 11y ago
  >Interestingly ol' Marx tried to differentiate between use and exchange. Well, of course they're different. It does seem that Neoclassical economics is fundamentally structured upon a series of misdirections that benefit capitalists: * Blurring use and exchange value. * The non-existence of money in neoclassical models. * The non-existence of banks or other credit intermediaries in neoclassical models. * Even the non-existence of profit in neoclassical models ("perfect competition") Pretty much any kind of element of an economic model that could be used to analyze the source of profit, in fact, is just handwaved away under the heading "assumptions".
  - digi_owl 11y ago
    Steve Keen have some lovely lines in his presentations about those assumptions. https://www.youtube.com/user/ProfSteveKeen https://www.youtube.com/user/ProfSteveKeen
brc 11y ago
It's not meant to be scientific. It's a tool for abstracting a situation down to understand the intent rather than the details. Your first mistake here is to try and assign a '$X worth of utility' - utility is not a unit which can be expressed in another unit. Someone can spend $x on something which gives them utility, but equally they can go for a hike in the mountains which provides greater utility to that individual than the object bought for $x, yet the hike costs has no $ value and cannot be bought nor sold. So the circular argument criticism is only circular because you're forcing it to be circular.
- crdoconnor 11y ago
  Utility is the underpinning of rational choice theory, which is what neoclassical economics is based upon. Neoclassical economics definitely does make a pretense of being scientific. As does Marxism.
BraveNewCurency 11y ago
Utility is a unit of accounting that works much better than money. It's actually called a "utility function" because the utility varies depending on the inputs, including time, number of units, etc. For example, let's say you've always wanted to go skydiving. You pay $500 and go skydiving. It's a great value to you. But when you get back to the ground, would you pay $500 to do it again? Probably not, since the utility of going skydiving has dropped for you (because you crossed it off your bucket list), even though the price has stayed the same. Now imagine the price for skydiving has dropped to $25. You might go again. Heck, you might go every day for a week. But after a while, the novelty wears off, and you won't go anymore. Even if the price drops to free. In fact, if someone was forcing you to go skydiving every day, you might even PAY to do something else instead. On the other hand, maybe you need to skydive every day because you are trying to qualify as a stuntman. That means the utility of being qualified is greater than the negative utility of "boredom from too much skydiving". Or maybe you NEVER go skydiving because you went base jumping several years prior, and skydiving seems similar enough that it's just not worth $500 to you. Trying to representing these trade-offs with only money is confusing and/or impossible. Try to work out the "boredom" example using only money: Someone can know they get more utility from X than Y, but not be able to express prices for X and Y.
- crdoconnor 11y ago
  You're still defining it circularly. How much utility does sky diving give? $200 the first time and $20 the second time, apparently. Why did the skydivers pay $200? Because they got that much or more utility from doing it.
  - rejschaap 11y ago
    Money is a rather leaky abstraction for utility
  - mseebach 11y ago
    The sky diving gives you more utility that whatever else you might spend $200/$20 on. Money is mere a neutral medium of exchange. You might rather express it in terms of liking sky diving more than your ability to pay rent for x period, or eating out a number of times, or buying books for your next semester or any number of other things that might cost $200, and that you then can't do if you spend the $200 on sky diving.
Retra 11y ago
Utility is that what is optimized by a moral algorithm. Money only represents an (arguably weak) approximation to it. But someone trying to make economic decisions needs to use a moral algorithm to do so, and money is one of the more relevant quantifiable metrics in that domain. And it's perfectly scientifically sound idea. It's just too complex for us to solve very accurately. (Like a lot of important problems in science.)
- crdoconnor 11y ago
  Picking a metric because it's easy to quantify is like a drunk looking for his keys under the lamp post because there's more light there.
  - Retra 11y ago
    Yeah, it is, but you aren't likely to find your keys in the dark, so what's the problem?

digi_owl 11y ago

Interestingly ol' Marx tried to differentiate between use and exchange. He called it value, but i suspect it could easily translate into the utility of modern economics. Sadly he seemed to have managed to talk himself into circles trying to argue that labor was the source of value, and therefore capitalists were labor exploiters. Because of this he ended up mixing use and exchange value when talking about production machines, to try to show that said machines didn't provide any more value output than was initially put into making it. I suspect that once one correct for that, by for example making machines into labor amplifiers, Marx's writings have, given the circumstances and time it was written, some serious insights into the workings, and pitfalls, of capitalism (most people barely touch volume 1, but volume 3, published by Engels after Marx death, holds a stern warning about the effects of finance capital). Using that as a springboard to bootstrap some other kind of society may well be futile however.

crdoconnor 11y ago
>Interestingly ol' Marx tried to differentiate between use and exchange. Well, of course they're different. It does seem that Neoclassical economics is fundamentally structured upon a series of misdirections that benefit capitalists: * Blurring use and exchange value. * The non-existence of money in neoclassical models. * The non-existence of banks or other credit intermediaries in neoclassical models. * Even the non-existence of profit in neoclassical models ("perfect competition") Pretty much any kind of element of an economic model that could be used to analyze the source of profit, in fact, is just handwaved away under the heading "assumptions".
- digi_owl 11y ago
  Steve Keen have some lovely lines in his presentations about those assumptions. https://www.youtube.com/user/ProfSteveKeen https://www.youtube.com/user/ProfSteveKeen

brc 11y ago

It's not meant to be scientific. It's a tool for abstracting a situation down to understand the intent rather than the details. Your first mistake here is to try and assign a '$X worth of utility' - utility is not a unit which can be expressed in another unit. Someone can spend $x on something which gives them utility, but equally they can go for a hike in the mountains which provides greater utility to that individual than the object bought for $x, yet the hike costs has no $ value and cannot be bought nor sold. So the circular argument criticism is only circular because you're forcing it to be circular.

crdoconnor 11y ago
Utility is the underpinning of rational choice theory, which is what neoclassical economics is based upon. Neoclassical economics definitely does make a pretense of being scientific. As does Marxism.

BraveNewCurency 11y ago

Utility is a unit of accounting that works much better than money. It's actually called a "utility function" because the utility varies depending on the inputs, including time, number of units, etc. For example, let's say you've always wanted to go skydiving. You pay $500 and go skydiving. It's a great value to you. But when you get back to the ground, would you pay $500 to do it again? Probably not, since the utility of going skydiving has dropped for you (because you crossed it off your bucket list), even though the price has stayed the same. Now imagine the price for skydiving has dropped to $25. You might go again. Heck, you might go every day for a week. But after a while, the novelty wears off, and you won't go anymore. Even if the price drops to free. In fact, if someone was forcing you to go skydiving every day, you might even PAY to do something else instead. On the other hand, maybe you need to skydive every day because you are trying to qualify as a stuntman. That means the utility of being qualified is greater than the negative utility of "boredom from too much skydiving". Or maybe you NEVER go skydiving because you went base jumping several years prior, and skydiving seems similar enough that it's just not worth $500 to you. Trying to representing these trade-offs with only money is confusing and/or impossible. Try to work out the "boredom" example using only money: Someone can know they get more utility from X than Y, but not be able to express prices for X and Y.

crdoconnor 11y ago
You're still defining it circularly. How much utility does sky diving give? $200 the first time and $20 the second time, apparently. Why did the skydivers pay $200? Because they got that much or more utility from doing it.
- rejschaap 11y ago
  Money is a rather leaky abstraction for utility
- mseebach 11y ago
  The sky diving gives you more utility that whatever else you might spend $200/$20 on. Money is mere a neutral medium of exchange. You might rather express it in terms of liking sky diving more than your ability to pay rent for x period, or eating out a number of times, or buying books for your next semester or any number of other things that might cost $200, and that you then can't do if you spend the $200 on sky diving.

Retra 11y ago

Utility is that what is optimized by a moral algorithm. Money only represents an (arguably weak) approximation to it. But someone trying to make economic decisions needs to use a moral algorithm to do so, and money is one of the more relevant quantifiable metrics in that domain. And it's perfectly scientifically sound idea. It's just too complex for us to solve very accurately. (Like a lot of important problems in science.)

crdoconnor 11y ago
Picking a metric because it's easy to quantify is like a drunk looking for his keys under the lamp post because there's more light there.
- Retra 11y ago
  Yeah, it is, but you aren't likely to find your keys in the dark, so what's the problem?