Principle of Utilitarianism

1. Principle of Utilitarianism • Marginal Analysis is based upon the principle of utilitarianism, which argues that the guiding principle to decision making is to achieve the greatest good for the greatest number, regardless of distributional issues. • The point is to maximize societal utility or satisfaction. If a project or reallocation of resources results in a net gain to society, then it should be undertaken. • Utilitarianism can be a useful tool in a diverse society where individual values are very different.

2. Example 1 • Microsoft has an opportunity to invest $200 Million in new software that will give computer users more powerful applications, and will generate $300 Million in revenue for the company. • Q: Should the project be undertaken?

3. Example 2 • Headwaters Forest contains significant old-growth redwoods. • Q: Should this area be logged or protected?

4. Example 3 • Government has limited funds for public health care. We can deny some care to the elderly in order to give better health care to children. • Q: Should we do this?

5. Example 4 • Current immigration policy in the US results in more than 1 million immigrants entering the country each year. • Q: Should the US continue this open door policy?

6. Eq Vs. Ef • Always remember that the principle of utilitarianism is NOT concerned with how the gains and losses are distributed. In other words, there is no concern for issues of equity or fairness. Hence, efficiency must not always dictate what our final actions are.