Quantifying Utility
It was recognized that utility could not be measured or observed directly, so instead economists devised a way to infer underlying relative utilities from observed choice. These 'revealed preferences', as they were named by Paul Samuelson, were revealed e.g. in people's willingness to pay:
Utility is taken to be correlative to Desire or Want. It has been already argued that desires cannot be measured directly, but only indirectly, by the outward phenomena to which they give rise: and that in those cases with which economics is chiefly concerned the measure is found in the price which a person is willing to pay for the fulfilment or satisfaction of his desire. (Marshall 1920:78)
Read more about this topic: Utility
Famous quotes containing the word utility:
“Moral sensibilities are nowadays at such cross-purposes that to one man a morality is proved by its utility, while to another its utility refutes it.”
—Friedrich Nietzsche (1844–1900)