Handbook of Economics and Ethics
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Handbook of Economics and Ethics

Edited by Jan Peil and Irene van Staveren

The Handbook of Economics and Ethics portrays an understanding of economic methodology in which facts and values, though distinct, are closely interconnected in a variety of ways. From theory building to data collection, and from modelling to policy evaluation, this encyclopaedic Handbook is at the intersection of economics and ethics.
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Chapter 72: Utilitarianism

Johan J. Graafland


Johan J. Graafland Introduction The basic principle of utilitarianism is ‘the greatest happiness for the greatest number’. Or, more formally, an act is right if and only if the sum total of utilities produced by that act is greater than the sum total of utilities produced by any other act the agent could have performed in its place (Velasquez 1998, p. 73). Recent improvements in measuring happiness have increased the popularity of utilitarianism among economists. According to Layard (2003, p. 50), utilitarianism is the only ethical standard that provides an overarching principle by which to solve conflicts between principles. A practical method of applying utilitarianism is by cost-benefit analysis. The basic procedure of cost-benefit analysis is as follows. If we must decide whether to perform action A, the rule is perform A if the benefits for present and future populations exceed those of the next best alternative course of action; if this is not the case, do not perform A. For this purpose, numerical values are assigned to costs and benefits of performing an action. After adding these, one should accept the project with the greatest net benefits. Utilitarianism has great practical value. It is consistent with the value of efficiency and in harmony with the way policymakers often make up their minds by looking at the beneficial and harmful consequences of a particular act. It also stimulates decision-makers to conduct a systematic overview of the benefits and costs of an act. Economic policy bureaus increasingly use cost-benefit analysis to...

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