Economic Behavior: An Inherent Problem with Utilitarianism
Cleveland, Paul A., Journal of Private Enterprise
Some fundamental issues of economic behavior
The title of this article indicates that there is some inherent problem with utilitarian thinking. To develop this thesis, it is necessary to explore the nature of human behavior and to examine the necessary implications of utility analysis when it is extended to utilitarianism. As it is understood here, economic behavior is a fundamental component of human nature. In particular, it is rooted in the observation that all human beings have a natural interest in behaving economically. That is, all human beings have a vested interest in capturing the greatest return on their scarce resources. Toward this end, any individual will have a natural tendency to avoid wasting his resources and will, instead, attempt to be frugal, thrifty, and prudent in managing them. This should be readily affirmed considering the prospect of what would happen if it were not true. As Clarence Carson has written, "If this were not the case, it is easy to believe [the human race] would have long since perished from the face of the earth (Carson, 1991)." Put bluntly, in a world characterized by the scarcity of resources, prodigality and the foolish disposition of one's efforts will surely lead to disaster.
The French economist, Frederic Bastiat echoed the centrality of this fundamental component of human nature in an essay he wrote entitled, "Effort and Result." In this essay he compared two views of how wealth is created and concluded that real wealth, "increases proportionately to the increase in the ratio of the result to effort (Bastiat, 1964)." He argued:
It is well to note that the universal practice of mankind is always guided by (this) principle. No one has ever seen, and no one ever will see, any person who works, whether he be a farmer, manufacturer, merchant, artisan, soldier, writer, or scholar, who does not devote all the powers of his mind to working better, more quickly, and more economically-in short, to doing more with less (Bastiat, 1964, p. 21).
This principle of human behavior is, of course, nothing new among economists. In fact, the primary tenet of modern economics is the notion that individuals are rationally self-interested. On this foundation, economists have made significant headway in explaining not only much of what takes place in trading relationships, but also in developing the model of supply and demand as an extremely useful tool for predicting the outcomes of various changes in important variables. Given that all this is so, most economists would probably wonder what could be wrong with utility analysis?
The fundamental problem of utility analysis and mathematical equilibrium models is that they are founded upon a naturalist vision of the cosmos and the philosophical foundations for this vision can be refuted. Economists all know that utility theory was originally promoted by Jeremy Bentham and John Stuart Mill in the nineteenth century. These men were very much influenced by the Enlightenment that was pressing forward the implications of the many scientific advancements being made in physics, astronomy, and the other hard sciences at the time. Indeed, the discoveries of natural laws or principles of action and reaction in the natural world had led to an increasingly mechanical understanding of the universe. As the mechanical view of nature progressed, thinkers and writers more and more assumed that all phenomena must belong to a vast mechanized system called Nature. As this conception developed, it was perhaps inevitable that thinkers would eventually attempt to explain the whole universe, including human life in the context of the well-oiled machine called Nature. When this occurred, a full blown naturalism became prominent and deterministic theories of human behavior were promoted. Bentham and Mill both stand in this line of reasoning. Richard Weaver has captured this progression well in his book, Ideas Have Consequences. In noting the progression of Enlightenment thought, he writes:
(Then came] psychological behaviorism, which denied not only freedom of the WILL but even such elementary means of direction as instinct. …