Adaptive Cardinal Utility1

Abstract

Recent research in neuroscience suggests that utility is cardinal. This focuses attention on the adaptation of utility, as plausibly arises from a limited capacity to make fine distinctions. The present focus is on real time adaptation. The simple mechanism proposed adapts to an arbitrary distribution in a way that is ultimately optimal, in terms of minimizing the probability of error. A modified mechanism is approximately optimal, in terms of maximizing expected fitness. The model generates the so-called “hedonic treadmill”, illuminates “happiness economics”, and induces a preference for rising consumption.

Keywords: Utility, cardinal, evolutionary biology, adaptation, neuroscience. JEL Codes: A12, D11