Jeremy Bentham's Bentham Utilitarianism is essentially based on his desire to move away from the moral philosophy of Judeo-Christian ethics ,or the deism of Adam Smith, and move toward a philosophy that could under pin an atheistic perspective.Bentham wants to come up with a decision making calculus which is simultaneously applicable to issues in economics(politics)and ethics(morals).Bentham claims that for all actions there are two distinctly measurable outcomes,pain and pleasure. Bentham comes up with a Principle of Utility(p.1).This essentially boils down to the observation that positive utility(pleasure) is generated by activities that generate sensations of pleasure while negative utility(pain) is generated by activities which generate sensations of pain.One can approve or disapprove of any action to the extent that it increases happiness(pleasure)or decreases pain.Approve ,in Bentham's system,translates as good or right.Disapprove,in Benthams system, translates as bad or wrong.How is this system implemented ? Bentham claims that there are lots(units) of pleasure and pain that all decisionmakers can calculate precisely and exactly.The value of the lots will be more or less depending on the duration,intensity,and certainty of the pleasure.All actions are equally good if the sum of the amounts of pleasure resulting from each action is equal.This is where economists come up with their indifference curve analysis and hedonic calculus.Unfortunately,Bentham fails miseribly in his attempt to demonstrate that human decision makers have the capacity to calculate exactly in quantitative terms.He never answers the question ," How do humans actually make the quantitative calculations ? ", upon which Bentham's entire edifice of decision amking is so precariously balanced .He merely asserts it:" ...who is their who does not calculate ? Men calculate,some with less exactness,indeed,and some with more:but all men calculate.I would not say,that even a madman does not calculate ".(p.188) .This is very similar to the modern neoclassical economist who simply asserts that the normal distribution is applicable even if goodness of fit tests demonstrate that the data from the time series observations does not come close to fitting the normal probability distribution.
Bentham is the founder of both Classical and Neoclassical economics.Smith explicitly rejected Bentham's arguments in The Theory of Moral Sentiments (1759;sixth edition,1790)some 28 years before Bentham decided to eliminate conscience(Smith's impartial spectator) and substitute utility.It is easy to see that the modern Benthamite approach is to combine the Bayesian ,subjectivist approach to probability of F Ramsey,B De Finetti,and L Savage with the game theoretic,expected utility approach to utility of von Neumann and Morgenstern to obtain the Subjective Expected Utility (SEU)approach, which is the fundamental foundation of all neoclassical economics and economists.Any economist ,who claims that he is not a neoclassical economist ,but who fervently supports SEU,is a neoclassical economist.Only risk,usually represented by the standard deviation of a normal probability distribution
,exists in SEU.Keynes demonstrated that SEU is a very special theory that only is sound when the weight of the evidence,w, supporting the estimate of the probabilty relation, is complete.w must have a value of 1.Only in this case can a decision maker define a single probability distribution to represent his preferences.Only in this case can the standard deviation represent the risk involved . A value of w < 1 means that decisions are being made in conditions of partial ignorance.A value of w=0 means decisions are being made in total ignorance.One can just as easily work with D Ellsberg's rho index.A rho = 1 allow a decision maker to specify a single unique distribution.A rho value less than one requires a set of different possible distributions.A rho =0 means that no distribution can be used.Note that this only deals with the nature of the probabilities.The outcomes themselves may also have to be represented as intervals.This is the case with the very strange Kahneman-Tversky battlefield and rare Asian disease problems which were put forth by them as cases of decision making with either w or rho < 1.Yet Kahneman and Tversky claimed that the decision maker had exact,precise point probabilities and exact,precise outcomes attached to the point probabilities.This made no sense either in theory or to the experimental subjects subjected to this kind of bizarre decision problem.
It is extremely important to read Bentham's book in order to understand modern day approaches to decision making.The modern approach merely rewrites Bentham's book using more up to date mathematical techniques and formal exposition.The ideas are the same.