Wanting vs. Liking in Welfare Economics

by Will Wilkinson on March 31, 2006

Tyler’s quick & dirty summary of the problems with orthodox welfare economics put me in mind of some further problems of economist folk morality.

So, in the formal theory, the highest ranked preference has the highest utility. And the highest ranked preference is revealed by the agent’s actual choice. (If something else had been more preferred, it would have been chosen instead.) Now, the folk theory adds a substantive hypothesis that is no part of the formal theory: preference satisfaction is involves a kind of psychological satisfaction as well as abstract semantic satisfaction (i.e., a fit between the semantic content of the preference and the state of the world.) That is to say, preference satisfaction is satisfying. And the satisfaction of the most preferred option is most satisfying. Economist folk theory envisions a kind of pre-established harmony between formal utility and hedonic utility, and that’s how it is supposed to work. (I blame Bentham.)

Pre-established harmony is a key component of the folk-normative appeal of orthodox welfare theory. Nobody but a bullheaded nettle-grasper will claim that semantic satisfaction by itself has anything to do with well-being. (If I prefer that Saturn have a number of moons greater than five, and it does, I am not therefore better off. Etc.) But the idea that well-being has something to do with the quality of experience is immensely appealing. If preference satisfaction is satisfying, then preference satisfaction might have a lot to be said for it.

The problem is that pre-established harmony is false. The neuroscience shows that satisfaction of the highest ranked preference does not imply the greatest hedonic satisfaction. It does not imply any hedonic satisfaction. Take a look at this paper, “Parsing Reward,” [pdf] by Kent Berridge and Terry Robinson. They report that “wanting” and “liking” have “are in fact dissociable and have different neural substrates.” Roughly, the dopamine system is more about wanting–”incentive salience”–and liking or hedonic satisfaction has more to do with opioids.

Experiments show that morphine addicts will repeatedly push a button to deliver a dose of the drug that is too small to have any experiential effect whatsoever. But they’ll keep pushing it, because the drug is doing something, just nothing you can notice subjectively, and the wanting system keeps you wanting it, even though you get nothing at all experientially out of getting what you want. Berridge argues that a lot of addiction is like that. People who are addicted to cigarettes, for example, may not much like smoking, but they want to smoke anyway. (There is a nice breezy overview of the wanting/liking distinction in Daniel Nettle’s, Happiness: The Science Behind Your Smile.)

And that pretty much demolishes pre-established harmony. What choice reveals is what we most want. But what we most want need not correspond to any kind of representation of what we expected would produces the best hedonic outcome, and doing what you want need not produce any hedonic payoff at all.

This will trouble a lot of people, mostly economists, who buy into economist folk morality. Without pre-established harmony, some libertarian economist folk wisdom falls apart. It will be possible in many circumstance to make people better off hedonically by decreasing their budget–by taking alternatives away. The hedonically ideal choice set will be the one in which the most preferred option corresponds with the biggest hedonic payoff. But that will be a choice set in which all the options that you want more, but which satisfy less, have been removed.

That, in a nutshell, is the basis for a powerful post-harmony, neo-Benthamite, crypto-Marxist, argument for the restriction of advertising and marketing. All Madison Ave. does is create wants that do not satisfy us. Good policy will restrict our choice sets to only truly satisfying options, like watching public television, paying higher taxes, and attending deliberative democracy summits in the local junior high gymnasium, instead of allowing the market to, in effect, addict us to junk. A system that allows us to self-defeatingly generate and satisfy “false” desires hardly constitutes a realm of true freedom, now does it?

Any economists out there wedded to the folk morality that want to tell me how to avoid this conclusion once pre-established harmony falls?

  • BillKorner
    Will: The difference IS important, maybe not in terms of what you refer to as the "formal theory", but surely in terms of its rhetoric and the normative considerations inherent in its application.

    An example of rhetorical importance:

    Economists talk a lot about prefernces and what actions reveal about them. But they do not offer any ways of evaluating what is within (what you call) individuals' choice sets and how much individuals know about that. So, when they (or you) say such things as:

    "If something else had been more preferred it would have been chosen instead..."

    this framework tells us nothing about what could have been chosen/what the agent knew could have been chosen (i.e. how to bring about). Strictly speaking, they should say:

    "If SOME OTHER WORLD STATE had been more preferred, could have been chosen, and the agent knew that, then it would have been chosen instead."

    There is a rhetorically significant ambiguity here, trading on the difference between (a) ability to choose different world state and (b) ability to choose different consumer goods for your money... the some total of which choices influences only a miniscule aspect of one's well-being

    An example of normative methodological importance:

    Sen and Arrow are cautiously and rigorously making points about the relationship between individual and social preferences/choices. On the other hand, the majority of libertarian neoclassical economists (and, less relevantly, libertarian non-neoclassical economists) dogmatically eschew any discussion of this relationship. Rather they predicate all inquiries on the assumption that seemingly trivial individual choices sum to the only acceptable concept of social choices and, often, that there is not even any such thing as social preference/choice.
  • hamilton
    L,

    "I don’t think you should believe everything people claim about their experience and their desires, but it is possible to extract something."

    How much should I believe, then? Who does the believing? What do they get to do with what they have allegedly gleaned? I reject that you can know more about a person's preferences from what they say than from what they choose to do. It seems that you just believe that there are people who can say they want something but not choose it when it is available. I simply don't buy that.
  • Dale G.
    Even if libertarian theory can't be divorced from the assumption that formal and hedonic utility can be equated, which I think it can be, that is not the entirety of its criticism of statist solutions. The state, or any arbitrary external party, cannot measure any meaningful kind of utility for every individual a priori. Although your argument does describe a weakness in some utilitarian theories, it does not support replacing one potentially deficient mechanism with another mechanism know to be deficient for other unrelated reasons.
  • L
    Hamilton:
    "I simply categorically refuse to believe that people consistently choose things that make them unhappy."

    This is a reaonsable position to take in the case of TV, though I think it is wrong. Some economists even argue this about people who try and fail to quit smoking. (More reasonable people talk about hyperbolic discounting and the problem of identity.) But what about the morphine experiment that WW describes? He claims that there are doses of morphine that do not affect experience, but do affect decision-making. This should not be surprising; the brain is not a unitary whole.

    This extreme example is not very relevant to policy decisions today, but, if you buy it, it shows that your categorical position is wrong. I don't think you should believe everything people claim about their experience and their desires, but it is possible to extract something.
  • hamilton
    Alex,

    "1. Hedonistic pleasure is nothing like an accurate measure of human well being. Thinking in that way undermines and trivializes the magnificently complex beings that humans are. We must take into account things like health, morality, joy(deep lasting happiness), delayed satisfaction, enablement etc. etc."

    Okay, sure. But whose job is it to account for my health, my morality, my joy, my delayed satisfaction, my enablement, and my etc. etc.? My claim is merely that, if *I* am not very good at stating to you what my preferences are (that is, I act in a way contrary to what I say I wish to do), you can do no better than I in determining what does and does not promote my health, morality, and so on. And if you can do no better than I in determining what brings me joy, and if freedom is a good thing in and of itself, then giving you power to determine what I do leaves me worse off every time, for even if you do as well as I would have, I am still worse off by the loss of freedom.

    For arguments for paternalism to work, some individuals must be able to know more of other's preferences than those individuals themselves know. You may know better than your child that it doesn't *really* want to touch the hot stove, because it doesn't know that it will be burned. I have a hard time believing that you know that people don't want the high from illicit drugs. People know of the devastation these substances can bring upon their bodies and their lives, but they choose to ingest them anyway. How can you *know* that you'll make them better off by prohibiting their actions?
  • Alex Hettinger
    Must agree with Tracy, Jeff et. al. here.

    1. Hedonistic pleasure is nothing like an accurate measure of human well being. Thinking in that way undermines and trivializes the magnificently complex beings that humans are. We must take into account things like health, morality, joy(deep lasting happiness), delayed satisfaction, enablement etc. etc.

    2. Perhaps it is not our job as individuals to limit the freedom of our peers for their own good, but there are certainly circumstances and relationships where that is not only permissible, but necessary and desired. It is certainly not rude of a father to disallow his child the freedom to touch a hot stove or to play with dangerous objects. Nor is it rude of our government to make cocaine illegal.
    Clearly there are certain things that someone (government being the most likely candidate) ought to protect the public from. And certainly freedom and choice should not be unreasonably restricted for they are good things in their own right. The question is one of degree. We disallow cocaine, but allow tobbacco which kills far more. We restrict gambling, but encourage stock market speculation. We restict toxins in our food, but allow gluttony. The difficulty lies in finding that appropriate balence. Let us help them find that balence and Let us pray that those making these decisions are wise beyond their year and have all our best intrests at heart.
  • hamilton
    Mr Hoffman,

    Precisely. *I* can determine whether something is a 'like' or a 'want'. I am suspicious of somebody else's ability to determine it for me.

    ---
    L,

    I thought I understood Tyler; perhaps now I find myself mistaken. It seems that my response to your ideas goes like this: suppose people's stated preferences don't match their revealed preferences. First off, how do we know that somebody's stated preference is their preference? It seems that we should trust what people do more than what they say they want to do. Second, suppose that their stated preferences are the truth. In that case, they are free to change their behavior. I simply categorically refuse to believe that people consistently choose things that make them unhappy.(1)

    (1) That is, once somebody discovers something to be unsatisfying, they give it up. It does not follow that they'll do any better with the substitute they choose, just that they'll give up something that already doesn't do the business.
  • A sensible policy has to compare the value of freedom to the value of frustrated, healthy people.

    If we somehow had perfect implementation, I think bans could in some situations be worth it. Freedom may be precious enough to outweigh the benefits of outlawing any consumer good currently in existence, but that doesn't mean we'll never find a consumer good that deserves to be banned.

    For instance, what if someone designed a drug such that one hit would infallibly turn you into a miserable quadriplegic in a year, and yet the year looked like so much fun that some significant fraction of those who saw someone destroy themselves with it dependably felt compelled to do the same (perhaps intending to commit suicide after the quadriplegia set in)? If that fraction were large enough, wouldn't such a drug warrant a ban -- however rationally the users of the drug had weighed the value of a year of intense pleasure?

    The example may sound absurd, but the dividing line between such absurdity and the dangers of heroin is only a question of degree. A large degree, perhaps, but still only degree.

    We can't value freedom absolutely, over any loss to the abusers of some consumer good.
  • Tracy W
    Hmmm.

    When we were living overseas on a tight income, I bullied my husband into setting some aside into savings. This reduced my hedonic satisfaction as do you know how tough it is to keep refusing to let a computer geek buy the latest toy?

    While we were overseas, one of my brothers decided to run headon into a van and wound up in intensive care. Our savings allowed us to quit our jobs and abruptly return home. However I was bottomed out in terms of happiness. I didn't know if my brother would live or die, and which country I was in would not change that basic fact.

    Yet my husband is now as convinced as I am on the benefits of having a rainy day fund and we are building it back up again. I may not have a word to explain what I got out of those savings, but it was good to have them.

    Hedonic satisfaction isn't everything.
  • Seems like many responses conflate the problem (preferences vs. hedonic response) with decision making methods (individual decisions vs. government enforcement).

    Suppose instead that we define "tricking" people into acting against their hedonic interests as fraud, and allow class actions suits against anyone defrauding people. (Note: this is not a specific policy proposal, so don't make arguments against it based on specific execution issues.) Then addictive drugs (including cigarettes), predatory lending, provably unwholesome food, etc. would be attacked by swarms of litigators.

    No government policy required. Companies would have an incentive to educate consumers about how to make hedonically valid choices and to avoid marketing that would tend to generate divergence between preferences and hedonic satisfaction.

    Lawyers, on the other hand, would have an incentive to push forward analysis of preferences vs. hedonic satisfaction, and to do extensive investigation of actual choices of groups of consumers.
  • L
    Hamilton: I think you are discussing a different critique of advertising/addiction than WW, although it probably doesn't make much of a difference to your policy comments. You are talking about how advertising can change preferences, but you claim that your preferences are hedonic.
    I think WW is talking about people's revealed preferences not matching their claims about what they enjoy. People spend a tremendous amount of time watching television that they claim not to enjoy. It's hard to interpret what this means. It's probably partly lying, that they're ashamed of enjoying TV. It's probably partly time-inconsistency, that they had fleeting pleasure, but their future self wished they'd done something to produce stronger memories. But, I believe that it's mostly a failure to get up and do something more fun. Anyhow, it seems easier to analyze a drug, to isolate its effects, as in the experiment he describes.

    The paragraph on the experiment was the only paragraph I understood of WW, and I didn't understand a word of Tyler Cowen. Judging from the responces, I'm not alone.
  • Benjamin Hoffman
    Hamilton, while public policy cannot determine the difference well enough, it seems to me that there is a test an individual could use to determine whether something is a like or merely a want: how do I feel while (and after) doing it? Picturing the experience, rather than the fact, will put shiny-new-thing-ness into perspective. (e.g. the experience of driving a fancycar over ten years vs. a plain one, watching Julius Caesar vs. watching Jerry Springer, etc.)

    Of course, that assumes the self-discipline to make the choice to think through and fully narrativize one's choices.

    IPerhaps a voluntary opt-in (or, more to the point, opt-out) system for various virtue laws (in the few cases where we can see an obvious and fixable gap between wants and likes) would increase the happiness of the general populace while still allowing those who feel they have reasons compelling enough to override the new default to act on these.
  • hamilton
    I think I'm with Prof. Whitman, though I would like to add a bit to defend explicitly the "libertarian economist folk wisdom" in the hopes of avoiding your conclusion. Let's suppose that there are things (items, not substances) to which we can be addicted. It is not clear to me how "good policy" would go about identifying those things. I derive incredible levels of pleasure from public television, public radio, and attending deliberative democratic summits (here they're conducted uptown at the courthouse, but only out of habit). Are those things that have been sold to me by consumption of too much West Wing and high school history class, or are they genuinely causing hedonic utility? Do I "want" these things, or do I "like" them?

    In short, I'd argue that the determination of what brings each of us true hedonic utility cannot be determined in "good policy", and that each of us tries clumsily to determine it for ourselves every day. So the best "good policy" is to tell the "post-harmony, neo-Benthamite, crypto-Marxists" to go suck an egg and let each of us get about the imperfect business of trying to figure out what brings us each joy, rather than them trying to figure it out for us.

    [Or am I just running around in circles and completely avoiding the issue you have raised? Please let me know if I am.]
  • I confess to being one of those economists who consider greater preference satisfaction a desirable state of affairs (other things equal, the most important other things being other people's preference satisfaction). But I don't equate preference satisfaction with hedonic utility. The way I figure it, people have lots of things that motivate them; hedonic pleasure/pain is among them, but there are also things they wish to do or see happen that don't necessary "cash out" in opioids or any other measure of neurological pleasure or pain. Some people choose to abstain from sex, despite its pleasure, because they have an idea about what kind of person they wish to be, and that idea doesn't include having intimate relations with strangers. This is a preference whose satisfaction isn't necessarily measurable in terms of chemicals in the brain (though I suppose higher self-esteem might be neurologically measurable in some way).

    The ghost of Bentham still haunts the economics profession, especially when we're trying to explain basic choice theory to undergrads (I find myself referring to someone on a higher indifference curve as happier). But I think the Benthamite language is mostly shorthand. Most economists I've spoken to about this have a view similar to mine: "preferences" and "utility" need not refer to hedonic pleasure and pain, although pleasure and pain have something to do with it for most people.
  • If something is possible and desirable from the perspective of a certain criteria, it doesn't follow that someone ought to or is legitimate to impose that outcome by force.

    If, for example, there are other equally-valid criteria, what is and what is not legitimate is undetermined primae facie.

    The assumption here is that hedonism is the only criteria by which to judge actions and with which to fundament choices. That's far from a certainty or a consensus.
  • Will Wilkinson
    Bill, I don't think what Sen & Arrow are on about differs in any important way from other neoclassical types. By assumption, we have ordered preferences over everything we can have preferences over. But the elements in my choice set are actions that I can peform. If there was a button I could push that would move the entire world from the status quo to a more preferred compresensive state of the world, then it would be in a my choice set, and I would push it. Ineed, in the consumer choice case, you can represent consumers as choosing the most preferred comprehensive state of the world that they individually have the power to bring about (e.g., exactly like it was before, but now with me having a Ho Ho in mouth.) The notion of preference for Sen, Arrow, and people doing consumer choice micro is exactly the same.
  • Jeff Lilly
    Frank,

    Aren't you implicitly assuming that the State will be the one figuring out what's REALLY good for you and restricting your access to what's bad?

    Is it unreasonable to allow the State a smaller role -- (1) funding research into what's REALLY good for you, (2) funding education programs so that people can find out what's REALLY good for them, and help them have enough self control to choose it?

    For example, we know that eating too much is bad for you. Madison Avenue would prefer that people consume more than they really need to. Should the State restrict people's access to food? Of course not. But some institution somewhere -- maybe the state -- should be funding research into how people can take control of their eating habits, and educating the public about that. Ideally, once the public is educated, they can make the "right" choices and consume an amount that will maximize their happiness.
  • I think Frank's right that it's impractical to effectively coerce people into more happiness than freedom would yield, even if it is possible in principle.

    But, beyond that, I'm unmoved by assertions that if we could do so, it would be the correct policy.

    I don't think it's proper to limit people's choices, forcibly, for their own good. I think that what's proper is to let people be autonomous human beings who pursue their own values, make and learn from mistakes, etc. It's fine to share knowledge, and opinions, and to help people solve and avoid problems. But denying them their preferences by force is rude, to say the least.

    Other people aren't our pets to manipulate as we please. Treating them that way is wrong.
  • BillKorner
    CORRECTION TO LAST PARAGRAPH:

    strike "and, furthermore" after the words "would prefer to the actual one" in the first sentence.
  • BillKorner
    This post reveals the complete lack of rigor in the definition of preference.

    In standard economics, the paradigm for preferences is "agent a would prefer to have good x than good y". So buying x instead of y demonstrates a conclusive preference.

    Supposedly, if something else had been more preferred than it would have been chosen.

    The kind of preference that can be revealed in a decision to buy x instead of y is not even remotely like the concept of preference at work in (A) Arrowian voting theory and (B) Sen's argument re: paretian liberalism.

    This is important, because Sen and Aarow are discussing comprehensive and, therefore, important preferences while most economics is discussing trivial preferences that range over only tiny aspects of total states of affairs.

    Who really cares if we can be certain that agent a would rather have good x than good y? If the only difference between state x and state y is that agent a has x in state x and y in state y then, then why should we give a hoot about these two states at all. Even if a certain action were to demonstrate conclusively a preference for state x over state y, that would not mean that state x is valued at all by the agent. x may be the second most DISfavored outcome, after every other possible outcome besides y.
    Maybe having x makes agent a only SLIGHTLY LESS MISERABLE than having y.

    If, on the other hand, preferences range over (completely described) states of the world then it is obvious that preferred states CANNOT be CHOSEN.

    People may ardently wish that the world were a given way even though none of their actions could even come close to bringing about such a world. Therefore, all of their actions may be virtually irrelevant to determining which states of the world are really high in their preference ordering.

    Furthermore, it is possible that there are loads of states of the world that every individual (or 99% of individuals) would prefer to the actual one and, furthermore. Still, you could never notice this by looking at the kinds of choices that economists talk about when they discuss revealed preference. Much more importantly, we want to know if such world states if they exist are the kind of things that we could actually achieve (or not) and nothing about knowing whether agent a would rather have good x or good y can help us find that out.
  • That, in a nutshell, is the basis for a powerful post-harmony, neo-Benthamite, crypto-Marxist, argument for the restriction of advertising and marketing. All Madison Ave. does is create wants that do not satisfy us. Good policy will restrict our choice sets to only truly satisfying options, like watching public television, paying higher taxes, and attending deliberative democracy summits in the local junior high gymnasium, instead of allowing the market to, in effect, addict us to junk. A system that allows us to self-defeatingly generate and satisfy “false” desires hardly constitutes a realm of true freedom, now does it?

    Any economists out there wedded to the folk morality that want to tell me how to avoid this conclusion once pre-established harmony falls?

    I'm no economist but i can see an easy way to avoid this conclusion. It's possible "in principal" to restrict people's choice so as to provide them with a smaller set of choices which wil have a greater payoff just like it's possible "in principal" to build a ladder to the moon. The problem is that neither are realistically achievable. The problem with the neo-Benthamite, Crypto-marxist proposal is that it's going to prove impossible to determine which are the good and which are the bad choices for a given individual never mind all of society. That's even before you get into comparing the (massive) costs and (slight) benefits of such a policy should it ever prove feasible.
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