**3. Utility: the definition of happiness in modern economics**

Despite the multidimensionality of the Greek definition of well-being, mainstream normative economics (the field known as Welfare Economics) focuses on well-being as "preference satisfaction" [10], the informational moral base of which is utilitarianism. Revealed-preference theory identifies preferences with choices or hypothetical choices.3 For orthodox economists, "preferences" and "demand" are sufficient for the purposes of understanding human needs, and therefore there is no need for a deeper discussion in this regard [11]. Reference [12] argues that the notion of well-being4 for neoclassical welfare-economists cannot be measured directly, and therefore the option is to take what is chosen as evidence. This election explains the "quantity" of well-being people define for the goods, being expressed on how much "they are willing to pay." In this sense, well-being is associated with market choices, serving as a justification to validate the market as a social institution.

<sup>2</sup> Lots of scholars have proposed some sort of nongrowing state for human society [8]. In "the limits of growth," the Club of Rome called equilibrium to that state where population and capital were constant, and where a trade-off between the opposed forces of population and capital achieved a balanced outcome. It is important to point out that this "material" equilibrium of population and capital does not necessarily imply a stagnation of "everything." In the words of John Stuart Mill, "it is scarcely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress; as much room for improving the art of living as much more likelihood of its being improved" [9].

<sup>3</sup> In the early utilitarian thinking, objects had the capacity to bring subjective pleasure or happiness. Later, this was modified to assess desire or fulfillment indicated by the choice of consumers, therefore expressed in market interactions. From this point is that the direct relation between well-being and income was made [11].

<sup>4</sup> For the moment, we are using the words welfare and well-being as synonyms. But actually, the word welfare was developed by the corpus of Welfare Economics, making no distinction between the concepts. Nussbaum & Sen [13] had distinguished these categories. They related the notion of welfare to what people have or possess, whereas the notion of well-being refers to the conditions that are not only tangible but also intangible, since it includes the opportunities, freedoms, and aspirations that the person enjoys. For this reason, Stiglitz et al. [14] recommend recovering the use of the term well-being to detach from welfare and thus be able to use well-being as an appropriate category to measure social progress.

### *(Material) Well-Being in Economics: Beyond GDP DOI: http://dx.doi.org/10.5772/intechopen.108306*

As mentioned before, the concept of utility relies on the normative theory of moral philosophy called Utilitarianism, and it was developed by Bentham in 1789. The term utility within the approach is considered synonymous with pleasure. Goods and actions, from this view, are not considered as useful or instruments with an end, but, on the contrary, they possess the intrinsic capacity of satisfying needs themselves and, in this way, produce well-being [15].

This intrinsic capacity was called utility. This term solved in a simple way the controversial relation between use-value to exchange-value. If use-value is just the utility it brings through consumption, and exchange-value is just the exchange of utilities, then the two terms are just different forms of a single general phenomenon of value. This ingenious application was allowed thank to the (again, mainstream) notion of individual self-interest:5 the idea of the social good as a collective achievement disappeared. It became a result of individuals pursuing their self-interest in the market. As authors in Ref. [2] argue, the discussion of human beings as what they "really are," rather than as what they "ought to be," was turned into an unassailable fortress of mathematics, logical x-y graphs, and analytics.

According to Sen [16], the requirements of utilitarianism can be divided into three components:


The combination of 1, 2, and 3 is what is known as the classic formula that involves judging each choice based on the total sum of the utilities generated by that decision. And maximization occurs when "the greatest utility for the greatest number of people" is achieved, which attempted to be measured by the "hedonometer" proposal of Edgeworth. The teleological ethic defined by utilitarianism is characterized by understanding what is good regardless of what is just. In this sense, it is considered just as a subordinate concept, only as that which maximizes what is good.

Thus, this philosophical doctrine establishes utility as the barometer to evaluate actions according to whether they maximize pleasure and minimize pain, assigning crucial importance to hedonic experiences [4]. In this way, in contrast to the Aristotelian subjective conception of well-being associated with an art of living, reached by the practice of specific virtues values because there are desirable conditions of being, the utilitarian philosophy is associated with the predominance of sensations of satisfaction and pleasure. The implicit assumption is that individuals

<sup>5</sup> Smith was less parsimonious than his followers about the notion of self-interest. He also developed the notion of "sympathy" in his first book, Theory of Moral Sentiments. But as "economics took shape," this is, as utilitarianism was unified with marginalism, the notion of maximization and its explanation through mathematics was done, and these complexities were ironed out. Also, as a way to consider the economy as an objective, measurable and mathematical science, the social, ethical, moral, and political sides were undermined.

(consumers) have a coherent and rational set of preferences that they reveal in their behavior. It does not matter, from this point of view, whether people are altruists, egoists, hedonists, masochists, or anything else: all that matters is that they have certain preferences and act according to them [2].

This view understands well-being in only one of its dimensions, namely the material. Under this conception, at the macroeconomic level, the higher the Gross Domestic Product (GDP),6 the greater the flow of goods and services, the greater the economic activity, which translates into greater well-being. In this sense and as its definition stresses, the GDP focuses on only one dimension of the complex concept of well-being, i.e. its monetary component, undermining its multidimensional characteristic [19].

Reference [19] provides a summary of critics to the principles in which orthodox welfare economics rely on. First, the idea that individuals are the best judges of "the correctness" of their preferences or wants—what in [11] is called "the subjective conception of interests"— is not true because people face imperfect information. The range of the things we have access to are constrained by the productive sphere and by the context. In the current state of affairs, it has been augmented by digital and surveillance capitalism that constraints and catalogs our everyday choices. In this regard, Kahneman [20] has demonstrated multiple ways in which people act and decide irrationally, particularly when they face uncertainty

Second, if preferences, tastes, and values are shaped by institutions—such as markets—where individuals take part, then preferences cannot be exogenous to peoples' beliefs and actions, who are part of these institutions. In other words, "what is being evaluated defines the criterion by which it is being evaluated" [21]. The principle of private sovereignty [11], this is, that what is to be produced, how it is to be produced, and how it is to be distributed is determined by the private consumption and work preferences of individuals but falls off to consider the individual's subjective influence on these dynamics. There is no objective standpoint from which to evaluate these preferences, as they constitute outcomes from complex interactions between institutions and the processes of exchanges. How values, power, beliefs, and thus choices are influenced by social institutions or even by the economic exchange itself is not part of the theory.

Third, the imaginary construct of a homo economicus only incentivized by its own self-interest undermines completely the notion of the other. As reference [10] emphasizes, "people are sometimes altruistic and all too often malevolent. People sometimes sacrifice their own well-being to benefit others or to do harm to those they hate." In other words, behavior can also be motivated by concern for others. Neoclassical economics assumes that individuals are autonomous. Furthermore, it assumes that each person is faced with a preexisting "set of choices" that can be hierarchically (and rationally) arranged by them. This objectivity of choices relies on the concept of the rational economic man. As regards this, Max Neef [22] argues that the modern dominant styles of development have tremendous obstacles in making personal development compatible with social development. Both the dynamics of the exercise of power and the effects of exclusionary ideologies tend to dissolve people

<sup>6</sup> GDP is "is the total monetary or market value of all the final goods and services produced within a country's borders in a specific time period," and it was adopted as the main measure of a country's economy since the Kuznets presented it in the Bretton Woods conference in 1944. It is worth noting that Kuznets himself warned that the welfare of a nation can hardly be deduced from the measurement of the GDP [17, 18].

into mass archetypes, or to sacrifice the masses for archetypes of "an individual." The current models, therefore, postpone social development in the name of consumer sovereignty, in circumstances that reduce a person to the mere category of consumer. This can only put limits to personal development.

Fourth, the neoclassical theory of consumption explains that needs, preferences, and desires are unlimited.7 In this regard, reference [2] argued that this definition on the orthodox corpus of economics had condemned us to scarcity, and not because of a lack of resources, but because of the extravagance of our appetites. It is paradoxical that while the main domain of economics is the study of efficient means to ends, the economist has nothing to say about those ends [2]. There are no limits to satisfaction nor utility, as every consumption of more and different goods only increases it: a larger bundle of goods and services is always preferable to a smaller one. However, are the production and consumption of more guns preferable? Unlike ancient Greeks, orthodox economics presupposes that needs are an open-ended and elastic concept.

Fifth, for mainstream economic analysis, everything is a preference. Both, the wish of a little baby for water and the wish of a homeless person for a secure place for sleeping. As Housman [10] points out, every action is considered a preference; and every preference is measured in the same way, regarding their willingness to pay.

Finally, reference [19] highlights that preference satisfaction theory does not take into account the preferences of future generations. Its intricate nature cannot be revealed through the choices and behavior of present generations, and, as pointed out by ecologists, they are completely undermined.

The conclusion of [19] is that preference satisfaction theory cannot provide a logical, neither ethical nor practical conception and measurement of human wellbeing—especially, on an inter-generational scale. But, as [10] indicates, accepting the connection between preferences and well-being have permitted economists to avoid offering a real and deep philosophical theory of well-being. Or, in the words of Doyal & Gough, while numerous criticisms have been made to the principles of satisfaction theory over the last century, "they still form the normative basis for the inattention paid to the concept of need by neoclassical economics" [11]. For all the mentioned reasons, we consider that this approach is not sustainable, and our science should be focusing on the creation of new tools to analyze the complex human well-being.

Furthermore, this set of limitations can lead to decisions that exacerbate—and in a way justify—injustice and deepen inequality [24]. Therefore, the public information that can be obtained based on the utilitarian metric can thus generate a distortion in the design and elaboration of public policies [1]. In this sense, the organization of the society relies on the private wants of individuals (who are only considered as consumers), and, as Skidelsky & Skidelsky [2] state, the good life is only "a marginal concern, an affair of eccentrics and enthusiasts." The construct of well-being therefore is reduced to a measurable unconditional set of goods. The sources of well-being, its components, and its complex multidimensionality are completely disregarded: "all that matter is whether you have more or less stuff."

For this reason, and in agreement with [22], we believe that to the economic logic—heir to the instrumental reason that permeates modern culture—it is necessary to oppose an ethic of well-being. The fetishism of numbers must be opposed with the notion of human development. Vertical management by the State and the exploitation

<sup>7</sup> The most widespread definition of the Economy in study plans of universities is "a science that allocates limited resources to unlimited needs" [23]. This definition is not questioned, and we will be argued that a deeper study of needs and its supposed unlimitidness is necessary.

of some groups by others must be opposed to the gestation of social wills that aspire to participation, autonomy, and a more equitable use of available resources.
