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Utilitarianism (Economics) - Explained

What is Utilitarianism?

Written by Jason Gordon

Updated at April 24th, 2022

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Table of Contents

What is Utilitarianism?How does Utilitarianism Work? Utilitarianism in PoliticsAcademic Research on Utilitarianism

What is Utilitarianism?

The theory of utilitarianism was developed by Jeremy Bentham and John Stuart Mill. Utilitarianism focuses on the consequences of an action performed by an individual or a society. A utilitarian is concerned with how well an action favours the majority and not the far-reaching consequences of that action. An action in this structure is said to be morally right if it creates the most happiness or benefits the largest number of people (Thus their motto: the greatest amount of good for the greatest number of people), and to be morally wrong when it produces the opposite of happiness for the performer as well as the people.

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How does Utilitarianism Work? 

Utilitarianism asks the question: "What does a man have to do?" And briefly answers: "that which benefits him and others the most." In 1789, Jeremy Bentham explained his theory of the "greatest happiness" in a publication of the Introduction to the Principles of Moral and Legislation by stating that human actions are as a result of pain and pleasure. According to Bentham, the words "ought", "right", and "wrong" only have meanings in a utilitarian interpretation, and any action carried out by a person is done with reasons gotten from the principle. Mill goes on to propose that since every human action seeks to bring happiness, then one can only be judged by his or her promotion of happiness. Mill proposed this theory in his book titled Utilitarianism, which was published in 1863.

Utilitarianism in Politics

Throughout the last democratic centuries, scholars of utilitarianism have brought up different questions and suggestions that have modified the initial concept of this structure. Most of these scholars came up with questions like how happiness is measured, how to define the greater good, how justice is perceived and whether followers should choose the rule utilitarianism over the act utilitarianism, or the latter over the former. According to utilitarian practitioners, the regulations and laws in a free market should cater to the "promotion of happiness" of the masses, and not solely to maximise profits for the firms in these markets. People who practice utilitarianism are either in: the "act" sect or the "rule" sect. Rule utilitarianism states that there is a second-order of determining what is wrong. It states that even when something works in the interest of the majority, it can also be considered wrong, and should be extinguished. An example is when some group of individuals are coerced to collect low wages for their labours. In such an occurrence, it benefits the general public, as less money would be spent, but it is morally wrong. Jeremy Bentham practised this style of utilitarianism. However, act utilitarianism focuses mainly on the "promotion of happiness" of the majority and nothing else. Mill was an active believer of the act utilitarianism.

Related Topics

  • Self Interest
  • Total Utility (Economics)
  • Consumer Surplus
  • Utilitarianism
  • Indifference Curve
  • Time Preference Theory of Interest
  • Incentives
  • Marginal Benefit


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