Markets, Productivity, and Happiness in a Historical Perspective

The Ordinalist Philosophy of Measurement in Economics

Andreas Jonathan , Bluffton University

In the early 20th century, psychology and economics were under attack for mathematically modeling human perception without the cardinal measurements used in ‘legitimate’ science. As a result, psychologists revolutionized measurement theory and economists separately developed a unique theory of measurement in what became known as the “ordinal revolution.” But the ordinalist theory of measurement is flawed and its flaws have escaped the attention of conventional measurement theorists. According to standard measurement theory, most “ordinal” utility models still assume cardinal utility. The reason the ordinalists developed a flawed theory of measurement is explained by one of the primary motivations behind its creation: to abolish utilitarianism from economics. Utilitarianism had been a foundation of economics and the ordinalists desired to replace it with what they called, “The New Welfare Economics.” They claimed to base their new theory upon an ordinal welfare standard, Pareto efficiency. The problem with Pareto efficiency is that it is useless for societies of any meaningful size as demonstrated by the Wingnut Theorem. Thus, in order to make welfare theory useable, the ordinalists developed ‘potential Pareto efficiency’ which implicitly assumes cardinal utility again. They then used this concept to bring back a mutation of utilitarianism that is best described as money-metric utilitarianism or mmutilitarianism. Although utilitarianism is highly controversial, the ordinalists succeeded in cloaking their version in ordinal language which allowed mmutilitarianism to evade the critiques utilitarianism usually faces. By obfuscating the philosophical roots of mmutilitarianism, they were then able to expand its use to revolutionize the way economic policy is implemented around the world and elevate the status of economists as seemingly impartial arbiters on matters of policy.


Keywords: Utility, measurement theory, welfare economics

Please Login in order to download this file