Section outline
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Content
Objective
Utility is value. Objective utility is nonrelative value. It may attach to a good for a person without being relative to the person’s attitudes. For example, a baby’s health has high objective utility although the baby is too young to value health.
Utilitarian moral theorists such as Jeremy Bentham ([1789] 1996) and John Stuart Mill ([1861] 2006) formulated accounts of objective utility. According to Bentham it is pleasure, and according to Mill it is happiness. Some contemporary utilitarians such as Fred Feldman (1986) accommodate pluralism about values. They recognize nonhedonistic basic values such as justice.
Objective utility contrasts with subjective utility. Subjective utility is a person’s rational strength of desire at any time. It varies from person to person because of differences in goals and information. John von Neumann and Oskar Morgenstern (1944) define subjective utility in terms of coherent preferences concerning gambles. Such preferences ground quantitative comparisons of a person’s attitudes toward the gambles’ possible outcomes
OutcomeExpected Utility Theory
This is a theory which estimates the likely utility of an action – when there is uncertainty about the outcome. It suggests the rational choice is to choose an action with the highest expected utility.
This theory notes that the utility of a money is not necessarily the same as the total value of money. This explains why people may take out insurance. The expected value from paying for insurance would be to lose out monetarily. But, the possibility of large-scale losses could lead to a serious decline in utility because of the diminishing marginal utility of wealth.