Monday, September 27, 2010

Jargon Du Jour - Utils

Many economists believe that the goal of the economy is to increase people's utility. Money is only worth its purchasing power, and the goods and services it can provide are only worth how much people truly enjoy them. However, you can't actually measure happiness so economists often use a proxy they call "utils" as a measure of utility.

Utils: an arbitrary measure of relative satisfaction from consumption of goods and services. They are usually ordinal numbers, but some models use cardinal numbers to measure utils.

You know you are a true economics nerd when you start describing your emotions in terms of utils. "Those flowers increased my utility by 400 points." "A cold beer would be about a 1000 utils right now."

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