Utility, Preference, and Happiness: Following Harsanyi's Argument to its Logical Conclusion

Abstract

Harsanyi (1997) argues that, for normative issues, informed preferences should be used, instead of actual preferences or happiness (or welfare). Following his argument allowing him to move from actual to informed preferences to its logical conclusion forces us to use happiness instead. Where informed preferences differ from happiness due to a concern for the welfare of others, using the former involves multiple counting. This "concerning effect" (non-affective altruism) differs from and could be on top of the "minding effect" (affective altruism) of being happy seeing or helping others to be happy. The concerning/minding effect should be excluded/included in social decision. The concerning effect is shown to exist in a compelling hypothetical example. Just as actual preferences should be discounted due to the effects of ignorance and spurious preferences, informed preferences should also be discounted due to some inborn or acquired tendencies to be irrational, such as placing insufficient weights on the welfare of the future, maximizing our biological fitness instead of our welfare. Harsanyi's old result on utilitarianism is however defended against criticisms in the last decade.

JEL Classification: H00, D60