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The Elgar Companion to Recent Economic Methodology

The Elgar Companion to Recent Economic Methodology

Edited by John B. Davis and D. Wade Hands

Bringing together a collection of leading contributors to this new methodological thinking, the authors explain how it differs from the past and point towards further concerns and future issues. The recent research programs explored include behavioral and experimental economics, neuroeconomics, new welfare theory, happiness and subjective well-being research, geographical economics, complexity and computational economics, agent-based modeling, evolutionary thinking, macroeconomics and Keynesianism after the crisis, and new thinking about the status of the economics profession and the role of the media in economics.

Chapter 7: Happiness and Experienced Utility

Luigino Bruni and Pier Luigi Porta

Subjects: economics and finance, behavioural and experimental economics, methodology of economics


Luigino Bruni and Pier Luigi Porta 7.1 INTRODUCTION The term and concept of ‘experienced utility’ has been reintroduced by Daniel Kahneman as ‘the meaning of utility that Jeremy Bentham introduced, and it was mostly retained by the economists of the nineteenth century’ (Kahneman and Thaler, 2006). Edgeworth’s Mathematical Psychics (1881), Kahneman and Thaler continue, provides an instance; that work ‘was quite explicit about this, and even defined happiness as the temporal integral of momentary experienced utility’. However, those authors further observe, ‘the notion of utility as an aspect of experience essentially disappeared from economic discourse at the beginning of the twentieth century, when utility came to be construed as decision utility’. It is important to understand how and why the use of the idea of experienced utility is embedded in a revolution in method and content in economic theory, deploying itself through the last 40-odd years and gaining momentum at present. The revolution involves two main areas of economics: the use of the concept of rationality and the definition and measurement of welfare or well-being. Thereby the present chapter will be divided into two sections: we shall first discuss utility and its link with rationality, stressing the cognitive imperative for economics to part with the idea of optimizing; in the second half, which follows as an implication and a consequence from the first, we shall highlight the motives behind the impressive recent surge of happiness studies within economics. 7.2 UTILITY 7.2.1 Economics and Psychology Dealing with the use of the...

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