Utilitarian Approach to an Economy Essay Example
Utilitarian Approach to an Economy Essay Example

Utilitarian Approach to an Economy Essay Example

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  • Published: October 11, 2017
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1Introduction Utilitarianism is a major position in normative ethics stemming from the late 18th and 19th century philosophers Jeremy Bentham and John Stuart Mill. Contrary to the deontological approach to ethics that perceives morality as a duty or a moral rule that has to be followed, utilitarianism is a form of teleological ethics focussing on the consequences of actions meaning that the moral value of an action is solely determined by its outcome.Thus an action is considered right if it tends to produce happiness and wrong if it leads to the reverse effects of happiness, not only to the executer of the action but also to everyone else that is – either directly or indirectly – affected by the action. The influence of utilitarianism on other areas besides philosophy, such as law, politics and economy, over the last centuries has become clearly notable, whereas th

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is paper focuses - besides a detailed description of the classical utilitarianism itself - explicitly on its influence on decision making with respect to the economy.

Based on the common characterization of utilitarianism that ethically right acts are those that produce “the greatest good (or greatest happiness) for the greatest number” this paper aims at examining this formulation in detail with respect to applying it to the decision making process in business which has a considerable influence on economy. Chapter 2 aims to set a frame for the later theoretical discussion by presenting the basic concepts of utilitarianism. Chapter 3 further deals with the fundamental idea of the utilitarian theory formulated by Jeremy Bentham and several problems associated with its application. Chapter 4 covers John S.Mill’s enhancement of Bentham’s theory.

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this background information, chapter 5 illustrates the how utilitarianism can be applied to decision making in business and thus impacting the economy by presenting three distribution formulations that can be derived from the classical utilitarian perspective. Chapter 6 summarizes the paper and critically reflects on the findings of the theoretical evaluation. 2Basic Concepts of Utilitarianism Utilitarianism is an attempt to provide an answer to the question what a man ought to do in order to produce the best consequences possible for all persons affected from the action he undertakes.Regarding the consequences of the action, the utilitarian takes all the happiness (good) and suffering or pain (bad) produced by the act into consideration independent of the fact whether arising after the act has been performed or during its performance. The overall happiness can thus be regarded as the result of the aggregated happiness of each person involved. When evaluating the consequences of actions, utilitarianism relies on some theory of intrinsic value, meaning that when something is held to be good, all other values are assumed to deduce their worth from their relation to this intrinsic good as a means to an end.

Furthermore, utilitarianism is based on the assumption that it is possible to evaluate the consequences of two different actions by comparing their intrinsic values. Summing up, utilitarianism tries to create a complex but fair system of ethics by establishing several generalizing principles. Moreover, these principles have to be fairly easy to apply so that they can be used as a leading idea in the process of judging human actions in general so that utilitarianism maintains to be applicable to the entire mankind. 3Fundamental Ideas of

the Utilitarian TheoryEven though the roots of utilitarianism can be retraced to the Greek philosopher Epicurus, Jeremy Bentham is generally referred to as the “Father of Utilitarianism” .

He was the first European that held a view of the utilitarian theory in terms of an elaborated system. His “Principle of Utility” claims that every human action that assures the public weal is demanded. Based on the empirical assumption that every human aims at satisfying his own needs, it can be regarded as a natural human feature to aspire to happiness and avoid pain.This attitude is called hedonism, meaning that pleasure is the only thing that is good for a person and therefore solely things that result in pleasure are considered valuable. Combining this fact with the empirically obtained knowledge that social values develop from experience, Bentham meets the necessary requirements for using the terms “good” and “useful” synonymously.

Human actions thus have to pass the “Utilitarian Test”, meaning that they are evaluated according to their consequences respectively their aggregated usefulness for society in general.To conclude, the aim of “the greatest happiness for the greatest number” is a measure of right or wrong. In Bentham’s conception, this measure is of quantitative nature, whereas there is no differentiation of pleasures and pains with respect to their quality. The degree of pleasure is evaluated with the help of six circumstances – intensity, duration, certainty, remoteness, fruitfulness and purity.

Thus each human can scientifically ascertain what is morally justifiable: “If the quantitative value of pains and pleasures as motives of action could be minutely calculated, this would give scientific accuracy to morals and legislation”.This ability of summing up the

units of pleasure as well as those of pain for each individual likely to be affected either immediately or in the near future and thus to take the difference as a measure of the overall good or bad of an action is called a hedonic calculus, in which theoretically possible applicability Bentham believes in. Bentham further claims that it is the business of law and education to impose sufficiently strong sanctions, so that each individual is forced to the subordination of his own happiness to the common weal.Nevertheless, there are certainly various problems concerning the applicability of utilitarian theory in this unfinished state, whereas the main problem is the subordination of the individual under the common weal since each individual has a different perception of what happiness is and how it can be obtained. Due to the fact that in most cases the individual’s idea does not correspond to that of the others, it seems impossible to believe in the existence of man’s altruism to that high extent that the subordination of the individual under the common weal would be obtainable.Moreover the strict hedonistic principle is generalized and thus turns into a universal one, so the question arises how this generalization can be justified since each individual wants to satisfy his specific wants and needs that generally solely concern the individual.

Even if there is a number of people who share the same wants and needs, this might be merely by accident. Furthermore this very special situation still does not imply that these people feel in the same way about these wants and needs since their judgements might differ qualitatively. Another difficulty is the sacrifice

of proven moral principles, e. g.

hose that derive from religious belief or other traditions, to the principle of utility which is only in few cases directly applicable, especially since it is not manageable for a single person to weigh all the possible consequences of potential actions against each other, particularly when decisions have to be made quickly. Another serious problem is the handling of the terms “good” and “useful” as synonyms. It is obvious that not everything that is good is also useful and vice versa. Additionally, not everything that is useful is fair.

Many philosophers seriously tried to fill the gaps of the utilitarian thought.Among them was John Stuart Mill, who endeavoured to modify this strict and narrow “Benthamism” into the direction of a more human kind of the theory in order to improve its applicability to human society. 4Mill’s Enhancement of Bentham’s Utilitarian Theory The philosopher J. S.

Mill was the one who introduced the term “Utilitarianism”. Even though he was taught according to Bentham’s principles, his divergence from Bethamism can be clearly seen in his Essays on Bentham (1838), where Mill remodelled Bentham’s utilitarian theory to a more realistic and human concept.In Utilitarianism (1836) he furthermore tried to free the theory from “rude misunderstandings” , as he calls it - but this freeing from misunderstandings is far more than a slight modification of Bentham’s thought. Like Bentham, Mill bases his reasoning on the thesis that each individual strives for happiness, endeavouring to gain pleasure and avoid pain. Therefore, those pleasures that cause a higher amount of happiness are more valuable than the others. In addition to this quantitative measure, Mill introduces

a qualitative dimension of pleasures.

Both, the quantitative and the qualitative aspects enable a precise measure and thus lead to a certain “hierarchy of pleasures”. According to Bentham, the guiding concept of human actions is the principle of utility, but Mill realizes that it is not that easy to apply as Bentham thought it to be, since it is not comprehensive because it lacks preciseness. In most of the cases it is only applicable when combined with secondary rules, which can be deduced from the principle of utility. Such secondary rules are, for instance the command of brotherly love or the principle of equality, justice, and fairness.Mill agrees with Bentham that human actions basically aim at a purpose, but now, in contrast to Bentham, human actions are not judged from their consequences alone, but also from their motivation.

This results in the fact that there are certainly such proven moral principles that cannot be denied being useful or at least not being in contrast to the principle of utility. The secondary rules are more precise and can be learned by everybody through education. Therefore moral is the totality of all rules concerning human actions, which maintain the principle of utility meaning that an action is good, if it belongs to a class of actions, which are generally considered as useful. Even though there have been further modifications by philosophers such as Henry Godwin, Henry Sidgwick or Richard Mervyn Hare of the general understanding of Bentham’s and Mill’s classical utilitarianism as outlined above, the previous chapters should have been able to provide sufficient background information about the general principle of utilitarianism, that can now be applied to

the question how an economy should look like that is considered to be a good one according to utilitarianism.

Application of Utilitarianism to Economy Before approaching the question how utilitarianism influences decision making in business, it is inevitable to state a definition of the term “economy” that is referred to in the course of this paper. An economy is considered as a system of human activities related to the production, distribution, exchange, and consumption of goods and services of a specific country or other area with the objective of the correct and effective use of the available resources.The approach of phrasing a distributive formulation with respect to the utilitarian theory leading to improved decision making and thus to a good economy is based on Bentham’s understanding of utilitarianism claiming that “the interest of the community is the sum of the interests of the several members who compose it”.Even though he further maintains that “of legislation the proper end may […] be stated as being […] the creation and preservation of the greatest happiness of the greatest number” , Bentham does not present this as an equivalent to his main principle of utility which is concerned with the maximization of the aggregated pleasure or pain and does not state any requirement concerning the number of people affected. When taking his principle of utility as a basis for the further discussion it becomes clear that Bentham’s position resembles the maximization formulations of contemporary economy.

Even though Mill considerably modified Bentham’s utilitarian theory, his point of view also puts the focus on the composition of the population in question instead of the maximization of the overall number affected, so

that utilitarianism in this form can be regarded as a maximization principle of intrinsic values whereas “pleasure and freedom from pain are the only things desirable as ends”. As mentioned before, hedonic values face difficulties when trying to be measured. Thus it is essential to convert them into a suitable measure to be able to apply the utilitarianism thought to economy.Even though embedding the general principles on which utilitarianism is based on into some kinds of distributive formulas, this does not lead to a disappearance of the general problems of utilitarianism mentioned above.

It helps to develop a framework to evaluate decision making in business with respect to the utilitarian theory. The three distribution formulas that are evaluated in the following sections refer to the ambiguity in the commonly used principle of utilitarianism aiming at the “greatest good for the greatest number”. 5. 1InclusivenessThe duality of the principle stated above requires identifying the variables to be maximized, namely the difference of the aggregated overall pleasure and the total pain an actions causes as well as the number of individuals benefiting from that action, whereas the emphasis is put on the latter in this distributive formulation. Besides this primary condition of maximizing the number affected, a secondary preference is established that further takes the summed up overall pleasure into account as soon as the first requirement is fulfilled.This means that an action is considered as right if and solely if it positively affects at least as many individuals as the next best alternative and furthermore - after the first requirement is fulfilled - maximizes the aggregated pleasure compared to any alternative that positively affects as many

people.

The following example illustrates the selection process between three alternative options based on the inclusiveness interpretation of the distributive formulation. Option 1: 1,000 employees receive benefits of an aggregated total of 10,000. Option 2: 750 employees receive benefits of an aggregated total of 11,000.Option 3: 1,000 employees receive benefits of an aggregated total of 9,500.

Due to the prioritization of the number of people affected in this approach, option 2 is eliminated up-front, since it distributes a net good to less individuals than both of the other options do and thus the fact that the outcome of the second option clearly has the highest summed up total remains unvalued. Finally, the formulation requires ranking action 1 over action 3 since it causes a higher aggregated good while the number of individuals positively affected is equal. However, this evaluation neglects taking any qualitative spects into consideration that would for instance allow benefiting only a slightly smaller number of people a disproportionate gain in aggregated pleasure when choosing an alternative action. With respect to a situation in economy, this matter could be handed over to competent judges, as Mill leaves the question of the quality of pleasure by claiming “Of two pleasures, if there be one to which all or almost all who have experience of both give a decided preference, irrespective of any feeling of moral obligation to prefer it, that is the more desirable pleasure. Based on this potential pitfall of evaluating different options, there exist several possible standards that could be applied in business when facing a similar situation.

One approach to handle such a problem could state a preference for pain reduction

over enhancing happiness whenever all other factors remain constant. Another way of evaluating different options could be achieved by prioritizing pain, meaning that one unit of pain is multiplied by a specific factor higher than one before comparing the overall pain to the overall good of an option.A last approach considered in this context particularly focuses on economic issues by quantifying actions with respect to stakeholder groups. In this case, the average or accumulated benefits of a business decision would be assigned to the different subgroups, such as shareholders, employees or customers, and then proceed to the particular formula selected. 5. 2Qualified Aggregation Contrary to the distributive formulation of inclusiveness that puts its main focus on maximizing the number of people positively affected, the qualified aggregation prioritizes the maximization of the accumulated good.

However, after this condition is fulfilled, the secondary priority is put on the maximization of individuals positively affected by an action, whereas it has to be guaranteed that the aggregated happiness remains unchanged. When applying the formulation of qualified aggregation to the following example it becomes clear that option 6 is superior to the options 4 and 5 since it affects the highest number of people while the aggregated pleasure of all three alternatives is equal in value.Option 4: 1,000 employees receive benefits of an aggregated total of 10,000. Option 5: 1,100 employees receive benefits of an aggregated total of 10,000. Option 6: 1,200 employees receive benefits of an aggregated total of 10,000. But when taking into account all options (option 1-6), option 2 is finally preferred to the others according to a distributive formulation based on qualified aggregation, whereas option 6 would

be the right to choose based on the inclusiveness criteria.

5. 3Egalitarian InterpretationThe top priority of the egalitarian interpretation of the distributive formulation is put on the production of the greatest determinate good that can go to the greatest number of persons of the relevant population. This leads to the case that the person responsible for the distribution within his group might even pass on a higher amount of good available to be allocated among the group members, if it cannot be split up equally among them. The following example illustrates the decision making process that underlies the egalitarian approach.Option 7: 20 employees receive a 5% raise in salary with an aggregated total of $500,000. Option 8: 20 employees receive varying raises between 2% and 10% with an aggregated total of $600,000.

Based on the egalitarian point of view that claims that equal treatment is non-negotiable, option 7 is superior to option 8 since it guarantees the same percentage rise in salary to each employee even though resulting in a significantly lower accumulated absolute amount of pay raise. . 4Evaluation of the Proposed Approaches Even though non of the three distribution formulations explained above is equivalent to the classical aggregative utilitarianism perception postulated by Bentham and Mill, a combination of the rationale behind these three approaches combined with the utilitarianism point of view can lead to an enhancement in the decision making process in business, and thus setting the roots for a better economy according to utilitarianism.The evaluation of the following example serves as an illustration of the pitfalls resulting from a pure classical utilitarian perception, thus indicating that some changes to this traditional perspective

are necessary to arrive at a good economy according to utilitarianism. Option 9: 1,000 employees receive equal benefits of an aggregated total of 10,000. Option 10: 900 employees receive unequal benefits of an aggregated total of 10,000.

Based on the exclusive focus on the aggregated total, a utilitarian would randomly select one of the two options, whereas someone acting with respect to any of the three proposed formulation would certainly choose option 9 due to the inclusion of a second evaluation criterion in the evaluation process. Option 9 leads here to the “greatest number” affected as well as to an equal distribution of the allocated units between the individuals in the population, whereas the aggregated total remains unchanged compared to option 10.Taking the facts listed above into consideration, it can be concluded, that when applying the rationale behind utilitarianism to the decision making process in business and thus affecting the economy, the primary focus should be changed from aiming at “the greatest good for the greatest number” to trying to produce the maximum degree of good in the right way. 6ConclusionThe objective of this paper was to describe the theoretical framework to illustrate how an economy should work to meet the requirements of utilitarianism, whereby the classical utilitarianism stamped by Bentham and Mill served as the starting point. Based on the expression “the greatest good for the greatest number”, three different distribution formulations were presented, whereas each of these approaches enhanced the original utilitarian one-dimensional aggregative perception by adding a second evaluation factor to the decision making process and even altering the importance of the aggregated good.The qualified aggregation still prioritizes the aggregated total of good

and just adds the maximization of the number affected as the dimension of second priority, so that this approach shows the least divergence from the classical utilitarian perception.

The inclusiveness distribution formulation however prioritizes the number affected and downgrades the meaning of the accumulated good to an additional decision factor only for the case that various options affect an equal amount of individuals.The egalitarian approach ranks the greatest determinate good first and leaves the aggregated good as well as the overall number of people affected as subordinate evaluation criteria. When comparing the outcome based on the three different approaches to the one based on the classical aggregative utilitarian perception, it becomes clear that each of them is at least capable of producing an good result with respect to the amount of variables maximized - namely aggregated good, number of people affected, and egalitarianism. Nevertheless, it should be emphasized that ach of the proposed distribution formulations is framed in superlatives and thus important factors - that help to arrive at the best solution in an ethical demanding situation - such as the marginal utility of pleasure or tradeoffs between the investigated variables are not taken into consideration. Summing up, this paper illustrates a potential way to create foundations for an economy which is a good one according to utilitarianism, whereas further investigation of various factors, i.

e. addressing the issues surrounding the interrelations between variables that have to be maximized, is inevitable.Finally it should be mentioned that all underlying assumptions in the context of the development of the theoretical framework are relatable to the overall idea that “good ethics is good business” . BIBLIOGRAPHY Books and

Journals Audi, R. (2007). Can Utilitarianism be Distributive? Maximization and Distribution as Criteria in Managerial Decisions.

Business Ethics Quarterly, 17 (4), pp. 593-611. Bentham, J. (1961). An Introduction to the Principles of Morals and Legislation.

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(1997). Lexikon der Ethik (5th ed. ). Munchen: Beck. Hutcheson, F. (1990).

An Inquiry Into the Original of our Ideas of Beauty and Virtue. Hildesheim: Olms. Lyons, D. (1997). Mill's Utilitarianism: Critical Essays.

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