Utility, Informed Preference, or Happiness

Even accepting welfarism (argued to be compelling at the ultimate level in Chapter 3), there is still the issue as to what the individual welfares in the welfarist social welfare function should represent. In particular, should the welfare of individuals be their (net) happiness as I define welfare, or should it be their utility (representing their preferences) as most economists seem to be assuming? Recently, Harsanyi (1997) argues, among other things, that in welfare economics and normative public policy, what are important are people’s informed preferences, rather than either their actual preferences (as emphasised by modern economists) or their happiness (as emphasised by early utilitarians). The main purpose of this chapter is to argue that pursuing Harsanyi’s argument that allows him to move from actual to informed preferences to its logical conclusion forces us to accept happiness as the ultimately important thing. The early utilitarians were right after all! Since I personally approve of Harsanyi’s basic argument, I regard myself as a follower who has become more Catholic than the Pope. (On the importance of distinguishing between preference and happiness, or between ‘decision utility’ and ‘experienced utility’, see Kahneman et al., 1997.)