Thinking and Deciding

THE MEASUREMENT OF UTILITY 319
Utility is the internal representation of True Utility. Arrows represent possible causeeffect
relations. Although most discussion of utility measurement is based on an
assumed path from True Utility to Decision Utility and from there directly to the
judgment, it seems likely that several biases affect the link from True Utility to Decision
Utility, such as risk aversion in standard gambles. It is possible the best way
to remove these biases is to concentrate on the use of Judged Utility. Decision Utility
then becomes a way of informing that judgment, through the downward arrow:
for example, a person who was considering a very extreme utility judgment could
imagine a hypothetical decision (PTO or TTO) as a way of checking it.
Direct judgments are those based on Judged Utility. Direct judgments suffer
from biases too, and it may turn out that these are larger than the biases of some
corresponding indirect task. However, if we want to eliminate biases, then we may
do better to start with direct judgments. We cannot expect to eliminate biases by
finding tasks with different biases that just happen to cancel each other out, and
indirect judgments clearly suffer from biases inherent in the nature of the tasks.
This argument is against the spirit of current economic theory, which gives behavior
a privileged place in the definition of value. For example, if we want to find
out the average tradeoff between commuting time and money for some group of people,
the best way to tell is to ask how much those people actually pay for reduced
commuting time in a free market. If no real market is available, then we ask hypothetical
questions about what people would be willing to pay, if they could.
An alternative view is that, in order to decide rationally what to do in a market
or anywhere, people should consult their values and make judgments about their application
to the case at hand. When people ask themselves what they would do in
a hypothetical situation, they either consult their values in this way, or they distract
themselves with irrelevant considerations (such as trying to figure out a fair price, as
found by Baron and Maxwell, 1996). Thinking about hypothetical behavior adds an
extra step to the process, with additional opportunity for error to intervene. Moreover,
even real behavior may be fallible as an indicator of value, because people can
go against their deepest values and regret their behavior, for example, saving too little
money, engaging in unhealthful habits, or failing to do enough for others in need
or for environmental protection.
Of course, real behavior adds a kind of discipline by forcing people to ask hard
questions about tradeoffs, questions they may try to avoid when they make judgments
of values. Judgments alone, taken at face value, are not an absolute criterion of value,
for they may be distorted by such careless thinking. But this proposal is about cases
in which real behavior cannot be used. Hypothetical behavior — making judgments
about hypothetical decisions — need not impose this kind of discipline.
One problem with indirect judgments is that they tend to be difficult. When a
subject is asked “How many cases of blindness is as bad as 100 cases of blindness
plus deafness?,” the temptation is to think of this as an analogy problem. Subjects
often get it backward. They think, “Blindness is about 40% as bad as blindness plus
deafness, so I will say 40.” But blindness is not as bad, so the number should be
higher. The most direct methods do not suffer from this kind of difficulty.