• DOI:10.1086/257416
• Corpus ID: 222439814

Cardinal Utility in Welfare Economics and in the Theory of Risk-taking

@article{Harsanyi1953CardinalUI,
  title={Cardinal Utility in Welfare Economics and in the Theory of Risk-taking},
  author={John C. Harsanyi},
  journal={Journal of Political Economy},
  year={1953},
  volume={61},
  pages={434 - 435}
}

• J. Harsanyi
• Published 1 October 1953
• Journal of Political Economy

FROM most branches of economics the concept of cardinal utility has been eliminated as redundant since ordinal utility has been found to suffice for doing the job. Cardinal utility has been kept only in welfare economics to support the demand for a more equal income distribution. Recently, however, the concept of cardinal utility has been introduced also in the theory of choices involving risk.1 The question naturally arises whether the concepts of cardinal utility used in these two parts of economics are the same thing or not. According to Messrs. Friedman and Savage, who are among the main initiators of the use of cardinal utility in the theory of risk-taking, the two concepts have nothing to do with each other: "It is entirely unnecessary to identify the quantity that individuals are interpreted as maximizing [in the case of choices involving risk] with the quantity that should be given special importance in public policy."2 In effect, the cardinal utility function has to be invested with quite opposite properties in each case. In welfare economics the marginal utility of income is assumed to decrease with a growing income. In the theory of risk-taking on