Utility

… a core term used in Economic Analysis and Atlas102

Definition

The Economist defines utility as economist-speak for a good thing, a measure of satisfaction.

The Economist goes on to say:

“Underlying most economic theory is the assumption that people do things because doing so gives them utility. People want as much utility as they can get. However, the more they have, the less difference an additional unit of utility will make – there is diminishing marginal utility. Utility is not the same as utilitarianism, a political philosophy based on achieving the greatest happiness of the greatest number.

“A tricky question is how to measure utility. Money does not (entirely) capture it. You can get richer without becoming more satisfied. So some economists have tried to calculate broader measures of happiness. They have found that people with jobs are much happier than unemployed people. Low inflation also makes people happier. Extra income increases happiness a bit, but not much. In many countries incomes have risen sharply in recent years, but national surveys of subjective well being have stayed flat. Within countries, comparing people across the income distribution, richer does mean happier, but the effect is not large. Married people are often happier than single people; couples without children happier than couples with; women happier than men; white people happier than black people; well-educated people happier than uneducated people; the self-employed happier than employees; and retired people happier than economically active people. Happiness generally decreases until you are in your 30s, and then starts rising again. Other economists are dismissive of such studies. They argue that people are rational maximisers of their own utility, so, by definition, whatever they do maximises their utility.”

Atlas topic, subject, and course

The Study of Economics (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

The Economist, Economics A-Z, at http://www.economist.com/economics-a-to-z/u#node-21529393, accessed 30 April 2016.

Page created by: Ian Clark, last modified 30 April 2016.