utility
Sign in to saveIn economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings.
Article
29 sectionsContents
- Utility function
- Applications
- Preference
- Revealed preference
- {{Visible anchor|Functions|Utility functions}}
- Cardinal
- Ordinal
- Examples
- Marginal utility
- Law of diminishing marginal utility
- Marginal rate of substitution (MRS)
- Expected utility
- Von Neumann–Morgenstern
- Indirect utility
- Money
- Budget constraints
- Constrained utility optimisation
- Interpersonal comparisons of utility
- Challenges
- Normative aspect
- Applications despite limitations
- Types of interpersonal utility comparisons
- Criticism
- Discussion and criticism
- Measuring utility functions
- See also
- References
- Further reading
- External links
In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings. In a normative context, utility refers to a goal or objective that we wish to maximize, i.e., an objective function. This kind of utility bears a closer resemblance to the original utilitarian concept, developed by moral philosophers such as Jeremy Bentham and John Stuart Mill. In a descriptive context, the term refers to an apparent objective function; such a function is revealed by a person's behavior, and specifically by their preferences over lotteries, which can be any quantified choice.
The relationship between these two kinds of utility functions has been a source of controversy among both economists and ethicists, with most maintaining that the two are distinct but generally related.