Bentham, utility was roughly identical to happiness or pleasure—in “maximizing their utility,” individual people would seek to increase pleasure and diminish pain. For society as a whole, maximum utility meant “the greatest happiness of the greatest number.”3 Bentham’s utilitarianism incorporated some of the philosophical views of David Hume, friend to Adam Smith. And one of Bentham’s influential followers was the British economist David Ricardo, who incorporated the idea of utility into his economic philosophy.
In economics, utility’s usefulness depends on expressing it quantitatively. Happiness isn’t easily quantifiable, for example, but (as Bentham noted) the means to happiness can also be regarded as a measure of utility. Wealth, for example, provides a means of enhancing happiness, and wealth is easier to measure. So in economics, the usual approach is to measure self-interest in terms of money. It’s a convenient medium of exchange for comparing the value of different things. But in most walks of life (except perhaps publishing), money isn’t everything. So you need a general definition that makes it possible to express utility in a useful mathematical form.
One mathematical approach to quantifying utility came along long before Bentham, in a famous 1738 result from Daniel Bernoulli, the Swiss mathematician (one of many famous Bernoullis of that era). In solving a mathematical paradox about gambling posed by his cousin Nicholas, Daniel realized that utility does not simply equate to quantity. The utility of a certain amount of money, for instance, depends on how much money you already have. A million-dollar lottery prize has less utility for Bill Gates than it would for, say, me. Daniel Bernoulli proposed a method for calculating the reduction in utility as the amount of money increased.4
Obviously the idea of utility—what you want to maximize—can sometimes get pretty complicated. But in many ordinary situations, utility is no mystery. If you’re playing basketball, you want to score the most points. In chess, you want to checkmate your opponent’s king. In poker, you want to win the pot. Often