Thinking, Fast and Slow

by Daniel Kahneman

Jeremy Bentham opened his Introduction to the Principles of Morals and Legislation with the famous sentence “Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do.” In an awkward footnote, Bentham apologized for applying the word utility to these experiences, saying that he had been unable to find a better word. To distinguish Bentham’s interpretation of the term, I will call it experienced utility. For the last 100 years, economists have used the same word to mean something else. As economists and decision theorists apply the term, it means “wantability”—and I have called it decision utility. Expected utility theory, for example, is entirely about the rules of rationality that should govern decision utilities; it has nothing at all to say about hedonic experiences. Of course, the two concepts of utility will coincide if people want what they will enjoy, and enjoy what they chose for themselves—and this assumption of coincidence is implicit in the general idea that economic agents are rational. Rational agents are expected to know their tastes, both present and future, and they are supposed to make good decisions that will maximize these interests.