In my last post I discussed at length the question of rationality. I concluded that contrary to the opinion of behavioral economics, humans do make decisions that they believe to be in their best interests, in my view the correct definition of a rational decision. In that post, I first had to define what “best interests” means, a concept we called “utility.” In this post, I want to do two things. First, I want to repeat (apologies) the definition of utility and expand on what it means for a person to try to maximize utility. Second, I will use our model of utility to hypothesize a theory of human emotions.
Before we begin a quick note. I mentioned in my previous article, and I reiterate here, that for the most part, my definition of utility is not groundbreaking. However, I believe my view of where emotions come from and their relation to utility may be unique. At least I am not aware of anyone who has espoused a similar idea.
What is utility?
To many philosophers and economists, utility is a measure of, or a proxy for, happiness. As we will see shortly, utility and happiness are absolutely related but they are not the same thing. Utility is a metaphorical basket comprised of all the different things evolution and biology and our genes have made us humans desire. I believe that the components of utility can be grouped into three categories: basic life necessities, social desires and entertainment/leisure. I’d go further and say that these three categories are listed in order of importance. In other words, basic life necessities are the strongest contributor to utility, then social desires and then entertainment.
Basic life necessities are things such as water, food and good health. Other things equal, my utility at any given moment is higher if I’m not thirsty, not starving, and not sick. Like many of the Earth’s species, humans have evolved to be social animals. We desire such things as love, friendship, companionship, sex and status. Other things equal, my utility is higher if I love and am loved, have friends and consider myself to be superior (higher status) to my peers. Lastly, we desire all sorts of entertainment or leisure, the third category of utility. Other things equal, my utility is higher if I am entertained, having fun, not bored. And keep in mind entertainment means very different things to different people. To couch potatoes, mindless TV watching. To adventurers, sky diving. To intellectuals, reading articles on EconomicsFAQ.
Before moving on I want to clarify a few things. First, the three categories are not perfectly discrete. There can be overlap. For instance, food is nourishment (basic necessity) but can also be entertainment. Similarly, hanging out with friends or having sex can also contribute to multiple categories: social desires and entertainment. Wearing fancy clothing can provide warmth (basic necessity) and status (social desire).
Moreover, every person, based on their genes, will have somewhat different weightings for these three categories, not to mention all the different human activities that make up these categories. For example, an extrovert will likely favor friendships and human interaction more than an introvert. Someone with a “Type A” personality might favor the “status” component of utility more than a less aggressive person. In addition, each person’s individual weightings will almost certainly vary over time. For instance, “status” seeking probably peaks when seeking a mate and declines as we age.
What does it mean to maximize utility?
So far, we’ve defined utility as best we could. At every given (conscious) moment of time, each of us have some level of utility. When we say that we humans make decisions in order to “maximize utility” what we precisely mean is that we make decisions in order to maximize the present value of the sum of our probability weighted future utility over our lifetimes (or longer, if you believe in an afterlife).
By the term “present value,” we mean that the same amount of utility today is worth somewhat more than that amount of utility tomorrow. How much more depends on some “discount rate” which will also vary from person to person and may vary from moment to moment. Furthermore, we implicitly weight the utility we will experience in the future by their probabilities of occurring. That is, an event that has a higher chance of happening will contribute proportionally more to the present value of my utility.
Going forward, I’m going to use a shortcut for the sake of brevity and readability. When I use the word “utility” I mean the present value of probability weighted future utilities. So when I say “maximize utility” I really mean maximizing the sum of the present value of probability weighted future utilities.
A few points before we move on. You might be skeptical that every time we are faced with a decision, we actually map out the rest of our lives and make some incredibly complex calculations. You’d be right of course, sort of. Our incredibly complex brains have evolved to do this for us. That is, we do this subconsciously. Also, keep in mind that we make only one decision at a time, that the vast majority of decisions we make have negligible effects on our lifetime utility, and that most decisions involve a small number of choices (often just two).
We also have evolved to use rules of thumb (“heuristics”) to help us forecast the future and make decisions. One of the most powerful, I believe, is to favor decisions that maximize our ability to make future decisions. In other words, to keep our options open. Perhaps we humans are naturally optimistic creatures. I might land my dream job! I might win the lottery! I might marry a supermodel!
I find it helpful to think of life as a giant decision tree. Each decision results in our tree dividing into two or more branches. We choose the branch that we expect will result in the highest utility (the largest leaf if you will). But as I said, we tend to favor choices that maximize the size of our tree, the number of branches, even if some of those branches have quite a low probability. We try hard to avoid making decisions that will significantly prune our decision tree. More than anything else, I believe that this accounts for our natural desire for freedom. The more freedom, the larger our decision tree, and the larger our decision tree, the greater number of “high utility” branches.
I want to be very clear about this idea of a tree. Strictly speaking, maximizing the size of your tree is just a heuristic for maximizing utility and is not always the correct one. Consider the following. A long time ago you’ve committed a crime. Hanging over your head is the chance of jail time, almost certainly a low utility branch of your tree! But now the statute of limitations for your crime has run out and the threat of prison has been eliminated. In this example, your tree has been pruned, normally something to avoid. But because this was a low utility branch, your lifetime utility is almost certainly higher. Mostly, however, we humans like to maximize our possibilities because some of them will lead to high utility outcomes. Keeping our options open is good, because we can always choose the one with the highest utility.
Before we move on, I want to make one last very important point. When we make a decision, only the future matters. Absolutely we take our past life experiences into account to help us make our decisions. And certainly, things we’ve done in the past can result in future utility, for example, the memories of a loved one or the sentimental value of a favored object. But, when we try to maximize the present value of future utility, we do not factor in the past into our “calculation.” We only look forward. We will return to this crucial idea when we talk about emotions, and also regarding winning a lottery.
A few decision making examples
To make the discussion of utility a bit clearer, let’s discuss a few examples of decisions I might make and see how they will (or will not) impact my utility.
Say tomorrow I wake up and it’s time for breakfast. I look into my kitchen cupboard and I find two cereal boxes: Corn Flakes and Rice Krispies. Assume they both have the same nutritional value, cost the same amount of money, and I like them equally. I have a choice to make, but this choice will have a negligible effect on my utility. I say negligible but not zero because perhaps there’s a slightly greater chance of choking on the slightly larger Corn Flake. Or maybe there’s a minuscule chance that the “snap crackle pop” noise of the Rice Krispies will wake up my sleeping child. But point being, I’m not going to give this decision much thought because it is not going to have much of an impact on my utility.
The next day I wake up and again go to the cupboard for breakfast. However on this day I look a little more closely inside and realize that there is a third box of cereal: Lucky Charms. Now I have a slightly harder choice to make, and one that will likely have a bit more impact on my utility. Do I eat one of the healthier, boring cereals (Corn Flakes or Rice Krispies)? Or, do I go for the Lucky Charms, the sugary, marshmallowy, unhealthy one?
Lucky Charms may very well give me more current utility (I’m ignoring the guilt I might also feel which would lower my utility). But, it may also lower my future utility by making me fatter, raising my chance of developing diabetes or heart disease, perhaps lowering my life expectancy. Here I must make a choice that has a trade-off. Eat the Lucky Charms and have more utility now but less later, or eat healthy and have less utility now and more later. There’s no necessarily right or wrong answer that works for everyone for every morning, but there is a right or wrong answer for you for that particular morning. Choose the cereal that results in the greatest lifetime (present valued) utility.
Of course in the grand scheme of things, choosing what to eat for breakfast is a pretty small decision, and one that very likely has a tiny effect on my lifetime utility. Let’s go to the other extreme, decisions that might have very large impacts, for example which college to attend or what career to pursue. These are decisions worth obsessing over. Let’s discuss the decision of whether or not to marry your current girlfriend or boyfriend.
The decision of marriage is one of life’s decisions that probably impacts future utility more than just about any other. Before we begin, recall that I said earlier that most decisions we make involve a very small number of choices, often only two. That is the case here. We are not choosing who to marry among hundreds or thousands or millions of eligible bachelors/bachelorettes. We are making a binary (yes or no) decision, to marry or to stay single. Let’s think about how marriage affects my future utility.
If I choose marriage, the upside is love, companionship, children, etc. Sure I may experience those contributors to utility even without marriage, but the probability is much higher with marriage (perhaps close to 100% probability, at least for the foreseeable future). On the other hand, choosing marriage substantially “prunes your tree.” That is, you give up (pending your views of polygamy or adultery), the fun of dating. You give up the chance to meet someone even “better.” You give up all those branches of your tree that might just lead to that supermodel or trophy husband. What to do? Keep your options open? Or prune the tree for the substantially greater probability of all of those social components of utility?
Most of life’s decisions are like the breakfast ones. They have very limited impact on utility. Occasionally however, we face a big one like marriage, a decision that has a huge influence on our utility, and on our emotions.
A theory of emotions
I hope that by now the concept of utility, and how we make decisions to maximize utility, is reasonably clear. Now I am going to turn our attention to the topic of emotions. I believe that emotions are derived from utility, specifically from changes to utility.
Just like we spend some time specifying the concept of utility, we need to properly define the term emotion. This is tricky because at least in the English language, we tend to associate the word “emotion” with “feelings.” However, the word “feeling” or “to feel” is quite ambiguous. We often say we feel hungry or feel hot or feel loved or feel happy. In my view, neither hunger nor cold nor love is a proper emotion. Of these four “feelings,” only happiness is a true emotion.
Hunger (or being satiated), being cold (or warm) and experiencing love (or loneliness) are all direct contributors to utility. Recall that we grouped utility into three categories: basic needs, social desires and leisure. Eating and keeping warm fall into the basic needs bucket. Love is in the social desire basket. In fact there are many such social desires that we think of as emotions but directly contribute to utility. For example, jealousy (when we perceive our own social status lower in comparison to someone we know) or guilt (when someone we know views our social status as low because of something we did) or schadenfreude (when we view our social status as superior to someone else because of something they did).
On the other hand, happiness is a real emotion because we “feel” it when we experience a change to the present value of our utility. In other words, the definition of an emotion is what we feel when there is a change to utility. I will argue that there are, in fact, only two real emotions: positive (call it “happiness”) and negative (call it “sadness”). All other emotions are just variations of happiness and sadness as we will discuss in a moment. As we mentioned, happiness occurs when our utility increases. Sadness occurs when our utility decreases.
To drive the point home, let me suggest two other ways to contrast feelings like “hunger” and “cold” and “love” with the true emotions, happiness and sadness. If you are verbally inclined, think of the former as some of the “nouns” of utility. True emotions are the “adjectives.” Alternatively, if you are mathematically disposed, think of the true emotions as derivatives of our utility function. That is, they result from the change to utility, not from the components of utility itself.
As I said, happiness and sadness represent what we feel when the sum of the present value of future utility increases or decreases, respectively. Of course, we use many more words to describe our emotions. Where do all these other words come from? I believe that there are two types of variations to these two basic emotions. The more obvious first variation relates to the strength of the emotion, or more accurately, the degree to which utility increases or decreases. Emotion is a spectrum. The second variation relates to time period. That is, is the change to utility in the past, the present or the future. Let’s discuss each of these in turn.
If my utility increases a modest amount I feel happy. If my utility increases a larger amount I feel thrilled, elated, ecstatic, euphoric. Find $10 on the ground and I am happy. Win the $100 million lottery and I am ecstatic. Both increase my utility but I can do far more with $100 million than I can with $10. Hence, my utility increases substantially more having won the lottery, and thus my positive emotion is much stronger. Similarly, a small decrease in utility results in sadness. A larger decrease results in feelings of despair, devastation, depression. Lose $10 and I am sad. Lose my life’s savings and I am devastated. Both decrease my (present valued) utility, the latter much more than the former.
The second variation to emotion relates to the time period with which I experience the change to utility. I feel a slightly different set of emotions depending on whether the change to utility happens now (the present), whether I am remembering about a change to utility in the past, or most interestingly, whether I anticipate the change to utility in the future.
We’ve already discussed what we feel when the change to utility happens in the present. We feel those variations of happiness and sadness (stronger or weaker) depending on the magnitude of the utility change. However, when we recall changes to utility we feel slightly different positive and negative emotions. When we reminisce about positive changes to utility, we are proud, content, sentimental, perhaps relieved. On the other hand, when we recall a decrease in our utility we feel such emotions as regret or anger (especially anger if we can place blame).
As I said above, I think the most interesting variations of the positive and negative emotions (especially the negatives ones) occur when we predict changes to our utility. That is, when they happen in the future (when changes to utility happen that we do not predict, we feel “surprise” which can naturally be positive or negative). When we look forward to or expect a positive change we feel anticipation or excitement. When we contemplate a decline in future utility we experience powerful emotions such as stress, anxiety and panic. In fact these variations of negative emotions seem to have outsized effects on our bodies and our immune systems, something I want to discuss a bit further.
To understand how we anticipate a decline in utility I think it is helpful to use the the model of the decision tree. Recall that we can view the size of our tree as a proxy for our utility (though remember also that this is just a proxy, it does not always hold true). The more choices we have going forward (generally speaking) the greater our utility. What happens if we take away choices, when we prune our tree? Generally speaking again, our utility is lower and we feel negative emotion. What happens when we anticipate or expect or fear the pruning of our tree? We feel stress and anxiety, perhaps even panic.
Think about a time when you had a take a big test, perhaps the SATs. If you score well your dream college might be in your future. But, if you score poorly, there goes Harvard, and with Harvard goes your great career and the billionaire life ahead of you… Now think about your tree. If you do poorly on the test, a substantial (and high utility) section of your tree has been pruned. Anticipating this pruning (technically, anticipating a reduction in the present value of your future utility), you feel a negative emotion and that emotion is anxiety or stress.
Let’s take an even more extreme example. You are alone in an elevator and it gets stuck. What might go through your head? Will I ever get out? Will anybody save me? Will I be stuck here forever? Will I die in this elevator? All of a sudden, your whole life’s tree has been dramatically pruned, your utility dramatically reduced (until the elevator starts moving again) and you feel the most extreme form of anxiety or stress, panic.
Winning the lottery
Before moving on, I wish to discuss one last point. Psychologists have performed studies of lottery winners and have concluded that after an initial burst of happiness (perhaps lasting several months after winning), lottery winners tend to be no happier (and sometimes even less happy) than they were prior to winning. To economists this seems surprising. Clearly winners are richer, so why shouldn’t their utilities be higher? The problem here is the confusion between happiness and utility.
Using our models of utility and happiness, we can shed light on this apparent paradox. Both psychologists and economists are correct that lottery winners have greater utility and are happier immediately after winning. We of course understand that winners are happier because they have experienced a significant increase in the present value of their future utility. Their “tree” is much larger, and indeed it takes time to think through all the possibilities that the newly won money can be used (or how it can contribute to future utility). Naturally, as utility continues to grow, happiness continues too, though at a reduced emotional amount. After a period of some months, utility ceases to grow because the winner has substantially completed the process of factoring in the new wealth into his or her future utility. Since happiness is derived from an increase in utility, absent this increase, there is no happiness. That is why the level of happiness tends to revert to what it was prior to winning. There is no longer a change to utility. In fact, sometimes utility actually decreases leading to negative emotion (less happiness) as money is squandered or as the winner is made to feel guilty by all sorts of friends and family for not being more generous.
Conclusion
So there you have it. Utility is made up of three baskets of goods: basic needs, social desires and leisure. We humans attempt to maximize the present value of the sum of our future utility. That is what drives our decision making. Emotions are derived from changes in our level of utility. When we experience an increase in the present value of utility, we feel positive emotion (happiness). When we experience a decline in our utility, we feel negative emotion (sadness). There are are differing strengths of both positive and negative emotions which correspond to the size of the change in our utility. Finally, we also feel variations of these positive and negative emotions depending on if the change to utility happens in the present, if we are reminiscing about it, or if we are anticipating it.
Thinking about the subjects of utility and emotions brings up a great number of fascinating questions. While each could easily be the subject of its own post, here are a few that I wanted to briefly address. I don’t pretend to have all the answers.
Can utility be measured?
I do not believe that utility is likely to be quantifiable. That is, I don’t think you can put a number on it, specifying, for example, that right now my utility is at a 67, before it was a 59 (obviously such a scale is also artificial). However, I concede the possibility that I could be wrong. Perhaps someday the technology will exist (an implantable device?) capable of reading brain waves or measuring levels of certain brain chemicals. Maybe these brain waves or chemicals are indicative of an individual’s utility and could be monitored constantly and in real time. I’m skeptical but time will tell.
Does everyone have the same utility scale?
Let’s for a moment assume that you could put a number of utility. Does every human have the same scale of utility, the same upper and lower bounds? Say my utility scale goes from 1 to 100. Does that mean yours does too?
I think the utility scales (whether measurable or not) among humans would indeed differ, though by only a relatively small amount. I’d speculate that some people are naturally more positive (happier) and probably have a somewhat higher upper bound to utility. Similarly some people are naturally less positive/more negative and have a somewhat lower, lower bound.
Do animals other than humans have a concept of utility?
There is no question that many animals exhibit the same sorts of emotions as do humans. Happiness, sadness, pain, boredom (technically, pain and boredom are primary factors of utility like hunger or love and not true emotions), stress, anxiety, depression and many other emotions have been observed in animals, and not only in highly intelligent creatures such as great apes or dolphins, but in “lower” species as well. Since I argue that emotions are derived from utility and animals clearly exhibit emotions, I must conclude that animals do possess a concept of utility.
The question then is do animals try to maximize the present value of their future utility as humans do? I don’t know for sure, but I am included to think that they do, at least the more intelligent ones. And perhaps most animals do. Others might say that what differentiates humans from animals is that we can think ahead, that we can anticipate our future, and maximize utility. I think there’s no such separation. Like evolution itself, this is a matter of degree, not of absolutes.
How can we explain loss aversion? Why do negative emotions feel stronger than positive emotions?
As I discussed at length in my last post, one of the key insights of psychology and behavioral economics is a concept known either as loss aversion or the endowment effect. These two related ideas show that the pain of losing is more powerful than the pleasure of winning. No doubt this is true, buy why?
There are two possibilities. The first is that there is a real asymmetry between a gain and a loss. I won’t repeat the detail here, but briefly, I may rationally view an object as more valuable once I own than before I owned it. Hence, losing it reduces my utility more than gaining the object increased my utility. Because utility is greater on the downside, so too is the emotional response to the change in utility.
The second possibility is that emotions are just stronger when utility is reduced than when utility is increased. In other words, negative emotions are just more powerful than positive emotions. Theorists have proposed that this is a consequence of evolution and nature. That is, the most negative consequences of life’s activity (death) are greater than the most positive consequences of life. Therefore, evolution (through our genes) has programmed us to feel worse with loss of utility (death being the ultimate loss of utility) than with gains to utility.
Both are plausible explanations for loss aversion and for the apparent asymmetry of emotions, but I favor the first.
Why I am not a utilitarian
I’ve thought a lot about utility and human decision making. This is a topic that I first became interested in during college (more than 20 years ago) though I never took a class in philosophy or psychology. In fact most of the ideas contained on this article date back to my college days (I’m finally getting around to writing them down!). I firmly believe that human beings rationally make decisions in an attempt to maximize their own utility. I also believe that by understanding utility, we can explain how emotions are derived. I do not, however, consider myself a utilitarian. Let me explain why.
Like everything we do, let’s start with a definition. Of course this is easier said than done. For utilitarianism means differing things to different people. In fact, there are different factions of utilitarianism advocated by various philosophers. I am going to use what I believe to be the most common and the most colloquial definition of utilitarianism: a system of morals or ethics where decisions are made to maximize the sum of total utility. As many philosophers have pointed out, there are a number of issues that arise that are not easily answerable. Here are some of the major ones.
First, who’s utility are we maximizing? Fellow American (or pick your country) citizens? All humans currently alive? What about future humans not yet alive? How about animals (recall our discuss above about animals and utility)?
Second, should everyone’s utility count equally? Should a good samaritan count the same as a murderer? An elderly person the same as a child? An Einstein or Beethoven the same as an average Joe or Jane? Are we indifferent to twice the population at half the average utility? How about ten times the population with one tenth the utility?
Third, how can we possibly measure utility? Does everyone have the same scale? Is what good for me, the same as is good for you? Do we all have the same pleasures and pains?
Fourth, is it all realistic to sacrifice my own utility to help others as the philosophy demands? Would this not be, dare I say it, irrational? Must I give away all my money? Is helping to feed a starving child in Africa the equivalent of preventing my neighbor’s kid from being hit by a bus? Is it the equivalent of saving my own child?
For these four sets of reasons I find the philosophy of utilitarianism to be lacking. It is a good philosophy, in the sense that it is better than most alternatives when it comes to ethics and morals. But, it is too unrealistic and has too many flaws to be taken seriously.
An alternative (libertarian) philosophy
I propose an alternative philosophy. A system of morals and ethics that is more realistic, easier to implement, and based on our biologically evolved decision making system. I don’t pretend that my suggestion is in any way original or without flaws. But I do think it is better, and worth contemplating.
Each individual should attempt to maximize their own utility (as they do now), with one crucial caveat: that the individual’s decision does not impact anyone else’s utility (positively or negatively) without the other party’s consent. In essence, this is the true libertarian philosophy.
The most significant advantage of my proposed philosophy over utilitarianism is that it is implementable. Under utilitarianism, I must be able to measure and predict everyone else’s utility function. This is positively impossible. I can never know what is in someone else’s utility basket (which can change from moment to moment). I can never know the weightings of each utility component (which can change from moment to moment). I can never know the discount rate someone else uses to present value future utility (which can also change from moment to moment). Now multiply what is already impossible by 7 billion people (plus animals!).
Under my philosophy, all I need to know is that my actions do not affect anyone else’s, absent their consent. This is not a completely trivial matter, but it is infinitely easier than what is asked of me under utilitarianism. The libertarian philosophy is also far more realistic because it is based on the same utility maximizing decision making framework we have inherited from evolution. In that sense it is a far more “natural” philosophy.
The main criticism that someone would likely promulgate about my philosophy is that it is amoral, selfish and antisocial, rather than moral, selfless and social. I disagree for a number of reasons. Most importantly because a decision you make should never effect anyone else (again, without consent), you can never hurt them (lower their utility). Strict utilitarians would allow hurting one individual to help two.
Furthermore, a superficial glance at my philosophy would lead one to believe that by maximizing one’s own utility, there is no rationale to help others (the selfish, antisocial critique). However, this ignores the fact that a major component of utility is the basket of social desires. As I’ve said from the outset, we humans being social creatures have evolved to live in societies where we do indeed receive utility from helping fellow human beings. We don’t necessarily need a utilitarian morality nor religion nor a tax incentive to give to charity. Charitable behavior is ingrained in us (obviously, in some more than others). There is also no reason that society cannot further emphasize and encourage charity and goodness.
Utilitarianism is not only a philosophy of individual decision making but also a moral or ethical code for government. Specifically, it is the goal of government to maximize the sum of each person’s individual utility. Just as it is impossible for you or me to try to calculate each other’s utility, it is equally impossible for government to do so for all of its citizens. This is an analogous argument to the one Frederick Hayek made in opposition to socialism. Regardless of your view of socialism’s moral or ethical merits, it is simply impossible for government to make all of the economic decisions in an economy with even a trace of efficiency. Similarly, regardless of utilitarian morals or ethics, it is equally impossible for government to make decisions with the goal of the greatest good for the greatest many (maximizing the sum of utility).
So what instead should government do? Consistent with our libertarian philosophy, government should aim to maximize freedom. I fully concede that maximizing freedom is complicated with a great many tradeoffs (the subject of a future post or maybe a book!), but I think it is a lot less complicated than maximizing total utility. Moreover, I would suggest that maximizing freedom will lead to a substantially higher level of societal utility than would trying directly to maximize utility. Recall the heuristic of our decision tree. Having more choice in my life (freedom) is, most of the time, consistent with higher utility. Having our choices reduced is indicative of lower utility (with the accompanying emotions of stress, anxiety and panic).
To be fair, a libertarian philosophy of government does raise many of the same interesting and debatable questions as utilitarianism. Specifically, whose freedom should be maximized: citizens, residents or all humans? I advocate for all humans, but given the jurisdictional limitations of government, the way to achieve this is with open immigration. Do animals count? Yes they should, but I have no idea how. Do future humans count? I’m not certain. Should everyone’s freedom be counted equally? Yes, but not because everyone is equally deserving. Instead because to do otherwise is too complicated and ripe for corruption (simplicity counts in philosophy).
Let me end this article with something I consider very important, and very misunderstood. A libertarian philosophy of government is naturally one that will tend to favor smaller government. It will also tend to favor not doing over doing. However, the proper goal of libertarian philosophy is not, contrary to popular belief, to minimize government per se. The goal is to maximize freedom.