What We Want Doesn’t Always Make Us Happy

Much of modern economic theory is based around a simple idea: Human beings maximize utility. But what is utility? Many people think of it as happiness or pleasure; British philosopher Jeremy Bentham, the inventor of utilitarianism, conceived of it this way. But this isn't how modern economists think of the concept. To an economist, utility simply means how much people want something. If an economist observes people working hard and making sacrifices to buy houses, then the conclusion is that houses must have lots of utility to those people.

Modern economists tend to assume that utility is good — that people should get what they want. When economists talk about the notion of consumer surplus, they just mean the utility that consumers derive from getting a good deal on consumer goods. Welfare economics, which deals with the question of how much the economy benefits humanity, often conceives of social welfare as a function of the extent to which people satisfy their wants. More egalitarian economists will tend to value the utility of the poor and disadvantaged more than the utility of the wealthy, but fundamentally it’s still about giving people what they desire.