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nakedcapitalism | A prisoner kneels before the watchtower in a drawing of Jeremy Bentham’s ‘Panopticon’. The Panopticon was an architectural form that Bentham envisioned for a variety of social institutions. The idea was to have a central platform where an observer could cast their gaze over all the observed, thus making them feel constantly under watch and ensuring, in Bentham’s own words, “a new mode of obtaining power of mind over mind, in a quantity hitherto without example.” Jeremy Bentham is also the father of modern utility theory – a theory often associated with individual liberty, which is actually at heart a blueprint for social control.

It’s not hard to forget just how nonsensical, simplistic and childish the so-called theory of marginal utility is. Personally, I hadn’t encountered it directly for a number of years. But reading a review copy of Steve Keen’s excellent new revised edition of ‘Debunking Economics’ encouraged me to pull out the old Samuelson and Nordhaus textbook once more.

While Keen shows quite clearly in that book that even within its own narrow and absurd definitions the theory is internally inconsistent, I propose here to take a more general look at this intellectual masturbatory appendage that passes for a theory of individual and societal desire – and to try to substantially demonstrate that, far be it from being an expression of individual liberty, it is, in fact, a vision of a controlled and deterministic society, not unlike it’s father Jeremy Bentham’s other invention, the Panopticon.

“But it’s not psychological!”

The theory of marginal utility is, like most concepts in neoclassical microeconomics, quite simple. It begins, also like most concepts in neoclassical microeconomics, with a tautology. The economists claim that people choose that which maximises their pleasure and minimises their displeasure. They refer to this as people ‘optimising their utility’ – ‘utility’ here being this supposedly innate tendency to choose that which satisfies us most.

As any even a half-blind observer will note this is complete claptrap. People often make choices that turn out later not to ‘maximise their satisfaction’ (whatever that crude phrase might mean). Have you ever gone clothes shopping and bought an expensive pair of jeans that you never wore? Well, that’s hardly utility maximising behaviour.

In fact people often make choices that lead to less than satisfactory outcomes. This seems to be by design rather than anything else. If we always made the choices that ensured constant satisfaction we would soon find that we had no motivation to do anything new and would simply sit and stew in our own narrow and static world. That we occasionally make less than satisfactory choices allows us to continue to pursue satisfaction all the more. Nothing would smother our drives, our ambitions and our aspirations quite like a constant state of satiation.

But saying any of this is far too psychological for the average economist. After all, they insist that the theory of utility is not psychological. From Samuelson and Nordhaus’ ‘Economics’ (15th Edition):

But you should definitively resist the idea that utility is a psychological function or feeling that can be observed or measured. Rather, utility is a scientific construct that economists use to understand how rational consumers divide their limited resources among commodities that provide them with satisfaction. (P. 73)

The sheer amount of qualifying statements in those sentences is outstanding. But let us ignore such brazen tautology and meandering qualifying rhetoric for a moment, as there is something far more important and interesting going on here.

Why does Samuelson insist that this is not a psychological ‘function’? After all, we have just shown that the theory of utility contains a strongly psychological dimension in which it gives a very definitive view of human psychology.

This is a classic shunning of intellectual responsibility on the part of Samuelson. He assures us – and with us, himself – that he is not passing psychological judgement. He does this by insisting that we are engaged here in ‘science’ (whatever that means).

Of course, the critical observer can see that this is a strongly psychological argument with absolutely psychological foundations, but Samuelson doesn’t want to know anything about this.

Why? Because that would lead him to be questioned regarding the psychological basis of his assertions and that would cause his neoclassical worldview to crumble, strip him of scientific authority and show him to be doing what he is, in fact, doing; namely, using a scientific ‘style’ to try to convince the reader that the unlikely psychology that he puts forward is in fact objective, scientifically verified reality.