Utility, Rationality and Methodological Individualism (URMI) are the dominant aspects

which determine the paradigm of ethics applicable in economic decision making process.

Generally, in traditional economics the decision-making process for individuals has no

significant space for ethics as individuals are only interested in maximizing their profits.

URMI is a very important concept the formulation of which into various combinations determines different functions for ethics in economics. Economists have used different

definitions for the constituents of this concept but there can not be sighted noteworthy effort to integrate these multi dimensional phenomena into a framework for ethics in economics.

This paper integrates different approaches about URMI and chalk out a framework for incorporating ethics into economics

Gul, Ejaz

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MPRA
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URMI and its Integration into a
framework for Ethics in Economics
Ejaz Gul
School of Civil & Environmental Engineering (SCEE), National
University of Science and Technology (NUST), Islamabad, Pakistan
15. July 2013
Online at http://mpra.ub.uni-muenchen.de/48344/
MPRA Paper No. 48344, posted 16. July 2013 04:18 UTC
 
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URMI and its Integration into a framework for Ethics in Economics 
Ejaz Gul 
School of Civil & Environmental Engineering (SCEE) 
National University of Science and Technology (NUST) 
Islamabad, Pakistan 
 
Abstract 
Utility, Rationality and Methodological Individualism (URMI) are the dominant aspects 
which determine the paradigm of ethics applicable in economic decision making process. 
Generally, in traditional economics the decision-making process for individuals has no 
significant space for ethics as individuals are only interested in maximizing their profits. 
URMI is a very important concept the formulation of which into various combinations 
determines different functions for ethics in economics. Economists have used different 
definitions for the constituents of this concept but there can not be sighted noteworthy effort 
to integrate these multi dimensional phenomena into a framework for ethics in economics. 
This paper integrates different approaches about URMI and chalk out a framework for 
incorporating ethics into economics. 
Keywords: Ethics, utility, methodological individualism, framework, economics.  
1. Introduction 
In traditional economics individuals are assumed to be self-interested, and hence the 
decision-making process for individuals currently has effectively no space for ethics, as only 
the consequences that the individual faces are considered, and the consequences faced by 
others are generally not considered (Broom, 1999). Therefore, the individual is motivated 
only by self-interest and is not motivated by ethical considerations, such as altruism, 
sympathy or fairness (Collard, 1978). However, the individual is self-interested rather than 
selfish, as they would only be selfish if they considered the consequences faced by others and 
subsequently decided to ignore them. Current concept of rationality necessarily requires the 
maximization of self-interest. (Qizilbash, 2002). 
Ethical behaviour can be separated into two types; pure ethical behaviour (PEB) and utility 
ethical behaviour (UEB). PEB is doing the right course of action simply because it is right, 
and no benefit or utility needs to be, or indeed is, derived by the individual as a result of 
performing the action (Hausman, 1993). UEB is doing the right course of action, but that 
action will in some way benefit the individual, and hence the individual performs the right 
course of action in part because they derive utility from it. Therefore, UEB is an extension of 
the self-interested framework where the individual can derive utility from acting ethically 
(Sen, 1997) 
Methodological Individualism (MI) is a doctrine where all social phenomena are explained 
only in terms of individuals, such as in terms of their properties, goals and beliefs (Hodgson, 
1994). Methodological individualism emphasizes the primary importance of the individual, 
and the virtues of self-reliance and personal independence (Hodgson, 1994). 
The key concept in economics which determine the role of ethics in the decision-making 
process is URMI and hence, the ways in which URMI can be formulated and combined 
determine different roles for ethics in economics. This paper is focused on analysis of current 
approaches in order to integrate these and to suggest a framework for ethics into economics. 
 
 
 
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2. ESB and ESBG Matrix for Concept of Rationality and Utility 
Etzioni, Sen and Broom (ESB) are three prominent economic philosophers who have 
discussed the concept of rationality and utility. Their view point is summarized in Table 1. 
Table 1: ESB matrix 
Economic 
Philosophers 
Conception of Rationality Conception of Utility 
Amitai 
Etzioni 
Etzioni believes that rationality 
focuses more upon the process of 
making the decision, not the 
consequences of the decision 
(Etzioni, 1988). 
Etzioni believes that the current 
conception of utility requires self-
interested preferences (Etzioni, 
1988). 
Amartya Sen Sen uses a definition of rationality 
such that rationality requires the 
maximization of self-interest and 
hence individuals must be self-
interested (Sen, 1987). 
Sen believes that the definition of 
utility as well-being, where well-
being is measured in terms of 
personal advantage alone, means 
that individuals must be self-
interested (Sen, 1987). 
John Broome Broome believes that rationality only 
requires that individuals optimize and 
have preferences that satisfy the 
utility theory (Broom, 1999).  
Broome defines utility as that which 
represents preferences, and hence if 
the preferences do not have to be 
self-interested, utility will not be 
either (Broom, 1999). 
Therefore, following aspects can be deduced from Table 1.  
• Etzioni believes that rationality can enable non-self-interested motivation but utility 
requires the assumption that individuals are self-interested and, hence, utility must be 
adapted in order to increase the role of ethics in economics.  
• Sen believes that both utility and rationality require that individuals are self-
interested, and, hence, utility and rationality both must be adapted in order to increase 
the role of ethics in economics.  
• Broome believes that utility and rationality can enable non-self-interested motivation, 
but both rely on the assumption that the individual optimizes according to their 
preferences, and hence it is the preferences which currently assure that the individual 
is self-interested, not the conceptions of utility and rationality.  
 
 
 
 
 
 
 
 
 
 
 
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However, the author suggests another combination (formally known as Gul’s Conception) in 
which rationality requires self interest but utility does not require self interest. This will 
convert the matrix to ESBG. Figure 1 illustrates the ESBG matrix.  
 
Rationality require self 
interest 
Rationality does not 
require self interest 
Utility require self 
interest Sen Etzioni 
Utility does not 
require self interest Gul Broome 
Figure 1:  ESBG Matrix, after inclusion of Gul's conception 
3. Methodological Individualism (MI) 
Economics, and more specifically welfare economics, focuses upon individuals through its 
commitment to MI, and hence this appears to remain as one barrier to increasing the 
association of economics with ethics. MI can be defined as a doctrine where all social 
phenomena are explained only in terms of individuals, such as in terms of their properties, 
goals and beliefs. MI emphasizes the primary importance of the individual, and the virtues of 
self-reliance and personal independence. Therefore, the individual is focused upon, and this 
individual is independent and self-interested and does not consider other individuals 
(Hodgson, 1994).  
In the context of ethical considerations, MI has two types; individual cum social (IcS) 
focused and only individual (OI) focused. IcS focused MI refers to an analytical method 
where individuals are focused upon and used to explain social phenomena. OI focused MI 
refers not only to a method where individuals are focused upon, with no social responsibility. 
IcS focused MI refers to an individualistic analytical method but allows a holistic principle of 
action, whereas OI focused MI refers to an individualistic analytical method and 
individualism as a principle of action (Arrow, 1994). OI focused MI is currently used in 
economics, however, IcS MI has spece to incorporate ethics into economics, where 
individuals are focused upon with social concerns, and hence in welfare economics well-
being and utility may be determined by factors other than the individual’s consumption, and 
relationships between individuals may be considered important (Hodgson, 1994).  
4. Defining a Framework for Ethics in Economics  
Let us now see the possible problems and possibilities for incorporating ethics into 
economics. The rows of Figure 1 illustrate that Etzioni and Sen have common ground, as 
utility and rationality will together form a model which requires self-interest. Broome and 
Gul again have commonality, as utility and rationality will together form a model which does 
not requires self-interest. The columns of Figure 1 illustrate that Etzioni and Broome have 
common position that rationality does not necessarily imply self-interested behaviour, 
whereas Sen and Gul maintains that it does. With regard to Figure 1, it is interesting to 
 
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recognize the Gul Conception in which rationality requires self-interest but utility does not. 
This cell can be interpreted as a plea for the recognition of non-self interested behaviour, 
because to me it is the rationality which is predominantly self interest oriented whereas utility 
can have concern for the others. 
Broome and Sen have emerged as completely opposite to each other in Figure 1, as Sen 
believes in complete self-interest for rationality and utility whereas Broome believes in 
complete non-self interest for both rationality and utility. Although each of the outlined 
viewpoints regarding utility and rationality has its own significance, I believe that rationality 
does necessarily require self-interest. In this aspect I distance myself from Broom and 
Etzioni. But the current usage of utility is inapt, as I believe that utility does not require self-
interest. Consequently I distance myself from Sen and Etzioni on this matter. Therefore, the 
problem lies only with the current conception of utility. I believe that utility represents 
preferences, and hence if the preferences do not have to be self-interested, utility will not be 
so. I shake hand with Broom on this point.  
Leaving aside the rationality, the question remains how utility can be adapted in order to 
facilitate non-self-interested or other-regarding motivation. Using Figure 1, if we conduct the 
row and column operations, four clear possibilities emerge which are shown in Table 2.  
Table 2: Emerging possibilities for the rationality and utility framework 
Possibility Operation Economists Rationality 
Framework 
Utility Framework 
1 Row 1 Sen & Etzioni Multi Mono based on self 
interest 
2 Row 2 Gul & Broom Multi Mono based on non-
self interest 
3 Column 1 Sen & Gul Mono based on self 
interest  
Multi 
4 Column 2 Etzioni & Broom Mono based on non-
self interest 
Multi 
Column 1 & 2 operations gives mono rationality and multi utility framework, therefore, it can 
be ignored since we are interested in mono utility framework. Multiple utility framework fails 
to account for the strategic, or socio-political, interaction of individuals, as each individual is 
considered in isolation. The interdependency and interaction of individuals is an important 
aspect of ethical and social behaviour and decision-making, and this can be incorporated into 
the mono-utility framework set of preferences and utility that may be based non-self-
interested factors. 
The mono-utility framework can facilitate ethical considerations, where the individual has a 
holistic principle of action as they consider how their decisions impact upon others, yet the 
individual is second-order ethical rather than first-order ethical, as they still undertake the 
ethical action in part because they gain utility from doing so. Instead, the mono-utility 
framework enables the satisfaction of both ethical and self-interested preferences to be 
measured using a single umbrella measurement of ‘utility’, which therefore enables the usage 
of a formal framework where decisions can be made using a consideration of all types of 
preferences. Therefore, utility is not a representation of well-being where well-being reflects 
personal advantage alone, rather utility reflects well-being where well-being reflects personal 
advantage and objectives and values other than personal advantage, such as morality, 
altruism, autonomy and personal liberty that in some way benefit the individual 
(Brennan,1993). 
 
 
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5. Mono Utility Equation (MUE) 
Therefore ethics may be incorporated into economics using a decision-making framework 
that uses minimal rather than OI MI and although the current role of rationality may remain, 
the current conception of utility requires amendment, whilst maintaining a mono-utility 
approach. A simple utility function can be written where U is utility, U=Ex where E is 
expenditure on goods and services, and x is the common parameter. Assuming a community 
with a population of n individuals, two players are chosen at random from the community. 
Assume a two player game, where each player can behave ethically or non-ethically, the 
equation can be written as 
U1 = a1Ex 
U2 = a2Ex 
a is an indicator function which reflects the principle of action of a player, where: 
a = 1, if player has an ethical principle of action. 
a = 0, if player has a non-ethical principle of action. 
A = 0 ≤ a ≤ 1, if the players is partially ethical. 
Ethical behaviour involves undertaking some activity that involves a cost to the player 
undertaking the activity but involves a direct benefit to the other player and vice versa.  
6. Conclusions 
In conclusion, the decision-making process for individuals and society currently has a small 
role for ethics, as individuals are self-interested. The current conception of rationality may be 
consistent with non-self-interested behaviour, and MI may also be consistent with non-self-
interested behaviour, yet the current conception of utility requires some adaptation in order to 
enable ethical considerations to have a greater role in the decision-making process, and a 
mono-utility framework is able to accommodate this. 
The advantages of using a MUE are that it can facilitate trade-offs between self-interested 
and non-self-interested preferences and allows for individuals to be more or less self-
interested along a sliding scale, there is a single utility function which enables unambiguous 
criteria for a single optimal outcome to be reached, and furthermore it can enable strategic 
interaction between individuals where the actions of one individual will affect the actions of 
another individual. Therefore, in the mono-utility framework the individual can be IcS but 
not IO. 
An extension of the standard framework is suggested, where utility as it is currently 
conceived requires a minor adaptation, as although utility still represents the satisfaction of 
preferences, these preferences are not concerned with self-interest alone, rather these 
preferences also involve and are concerned with ethical considerations and social awareness.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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References 
Arrow, K. J. (1994). Methodological Individualism and Social Knowledge, American 
Economic Review, 84(2), 1-9. 
Brennan, T. J. (1993). The Futility of Multiple Utility, Economics and Philosophy, 9(1), 155-
164. 
Broome, J. (1999). Ethics Out of Economics, Cambridge University Press, 303 - 309. 
Collard, D. (1978). Altruism and Economy, Oxford, Martin Robertson, 113 - 116. 
Etzioni, A. (1988). The Moral Dimension: Toward a New Economics, New York, Macmillan, 
63 - 69. 
Hausman, and Pherson (1993). Taking Ethics Seriously: Economics and Contemporary Moral 
Philosophy, Journal of Economic Literature, 31(2), 671-731. 
Hodgson, G. M. (1994). Methodological Individualism, Edward Elgar Publishing, 63-67. 
Qizilbash, M. (2002). Rationality, Comparability and Maximization, Economics and 
Philosophy, 18(1), 141-156. 
Sen, A. (1987). On Ethics and Economics, Oxford, Basil Blackwell, 89 - 93. 
Sen, A. (1997). Maximization and the Act of Choice, Econometrica, 65(4), 745-79. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


URMI and its Integration into a framework for Ethics in Economics

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