The purpose of this glossary is to help increase clarity of thought (and exposition) about the topics listed. It explains some terms that are misused in economics and it defines some new terms I have coined.
- ¡¿ – See ‘Sarcasm Mark’
- Base-Tercile Class
- Middle Class
- Mid-Tercile Class
- Mmutilitarian revolution
- Sarcasm Marks (¡¿)
- Top-Tercile Class
- WAP: Willingness and Ability to Pay
The lower tercile of the income distribution is the third of the population that is poorest. Also see mid-tercile class and top-tercile class.
Constant marginal utility. In particular, this term refers to the constant marginal utility of money which is a core principle of mmutilitarianism. Also see Dimmeu, below.
Diminishing marginal utility. If you have much of something, the utility of a little bit more eventually diminishes. For example, if you have a lot of food, then a little more food won’t be as satisfying as if you were starving. Almost everyone agrees that food, water, cars, yoga, and other market goods eventually have dimmeu, and the dimmeu of money was one of the standard Laws of economics until the ordinal revolution. Since then, dimmeu has become a forbidden concept in mainstream welfare economics, and mainstream economists avoid it everywhere else if they can. But it is a very useful concept, so it is still a standard part of economics in theories of risk, insurance, savings, altruism, and elsewhere. The one place that the mmutilitarian revolution banished dimmeu is from welfare concerns where cimmeu has taken over.
I coined the term because I got tired of typing “diminishing marginal utility” over and over, so I began abbreviating the concept as DMU, and when you pronounce “DMU,” it sounds like “dimmeu” which is a more elegant term for this important concept. It almost sounds like what it means. The concept deserves a less unwieldy term as part of the effort to rehabilitate its use in economics. The main difference between standard utilitarianism and mmutilitarianism is disagreement about dimem
meu. Most utilitarians don’t talk about dimmeu much because because it is the part of utilitarianism that faces the most entrenched political opposition, but it is one of utilitarianism’s most important philosophical contributions.
Economists are always talking about “efficiency” which is often claimed to mean Pareto efficient. But Pareto efficiency is a useless concept in practice, so economists really mean mmutilitarian efficient whenever they apply the term “efficiency” to any real-world example. Ever. Really! Mmutilitarian efficient is sometimes called ‘potential-Pareto-efficient’ or ‘cost-benefit efficient,’ but economists usually just say ‘efficient.’ What it basically means is to maximize the inflation-adjusted aggregate market value of final goods and services. In the simplest usage, it means to maximize GDP or GDP per capita, but sometimes economists also add monetary costs or benefits that are not included in traditional GDP protocols. “Efficiency” as economists apply the term, is the highest goal of mmutilitarianism. A major flaw of ‘efficiency’ is that it assumes that the marginal utility of money is constant across all individuals and so it sometimes recommends undemocratic policies that increase inequality. Efficiency recommends that most people should lose in order to benefit a few rich elites as long as the monetary gains of the rich are bigger than the losses of everyone else.
An ethical system that should replace mmutilitarianism in economics. It is an ordinal form of consequentialism. For more information about medianism, see the Medianism home page and the Medianism FAQ.
An acronym for Median Expected Lifetime Income: the total income over the expected lifespan for the median person in a population. See a longer definition here. It is prounounced “Mellie” because that is more mellifluous than the unfortunate alternative pronunciation: “mealy”. One of the main goals of medianism is to promote MELI to replace GDP as a measure of human welfare.
A useless term because it is usually used to describe people well above the median income. A better term is midtercile class.
The middle tercile of the income distribution is the third of the population that is centered on the median income. Also see base-tercile class and top-tercile class.
This is a period in the history of economic thought that mmutilitarians began promoting by calling it “the ordinal revolution” in utility theory. But this historiography was Whiggish historical propaganda to hide the philosophical shortcomings of mmutilitarianism because there never was anything ordinal about it. The pivotal document in the so-called “ordinal revolution,” Hicks and Allen’s 1934 “A Reconsideration of the Theory of Value,” relied on cardinal utility and so did Hicks’ later justifications for cost-benefit analysis (the “Kaldor-Hicks criterion“) which reinforced the gradual acceptance of GDP as the main welfare measure. Unlike psychology which really did have a kind of ordinal revolution during this 1930s and 40s, economics did not develop any ability to deal with ordinal utility nor ordinal welfare. There really was an intellectual revolution in economics, but it was an coup de etat that overthrew dimmeu and stealthily installed cimmeu in its place. This cemented the philosophical foundations of mmutilitarianism that soon took over economics and related disciplines.
A mutant form of utilitarianism which has become the main ethical philosophy of modern applied welfare economics. The ethical goal is to maximize the sum of everyone’s money-metric utility (mmutility). Things that are hard to evaluate in money (like leisure time, feelings, and public goods) are de-emphasized or ignored. Mmutilitarianism assumes that there is constant marginal utility of money so inequality is of no concern. As a result charity is futile (a dollar given is zero-sum) and utilitarians promote selfishness by conflating it with with rationality and/or suggesting that self-interest is an efficient means to maximize the mmutility of society as is suggested by the first fundamental theorem of welfare and Friedman’s doctrine of profit focus. GDP is the main mmutilitarian measure used for assessing human wellbeing and cost-benefit analysis is the second most important methodology for measuring mmutility. The main theoretical concept is the social surplus (profit plus consumer surplus). For a more complete explanation, see:
Money-metric utility. Utility is ‘the good’ in utilitarian ethical systems and mmutility is how ‘the good’ is measured in mmutilitarian ethical systems. There are several different methodologies for measuring mmutility which include GDP (expenditures on final goods), social surplus (willingness to pay minus social cost), and probabilistic representative agent models used for estimating the value of a human life in dollars. Also see Mmutilitarianism.
Sarcasm Marks (¡¿)
¡¿ These two symbols are placed at the beginning of a sarcastic sentence or phrase to alert the reader that the sentence is sarcastic. Its meaning is upside-down. See more about sarcasm marks.
The upper tercile of the income distribution is the third of the population that is richest. Also see base-tercile class and mid-tercile class.
WAP: Willingness and Ability to Pay
In supply and demand analysis, WAP is what the demand curve actually represents. “Demand” is a bad description for the demand curve because that word has a completely different meaning in English. Some textbooks say that the demand curve measures the marginal willingness to pay for something, but unless there are close substitutes for a good, the willingness to pay is mostly determined by each person’s ability to pay (wealth). Ability to pay is the main determinate of ‘demand’ for status symbols, fine art, the best housing, education, time-saving services, and things that preserve one’s life including everything from organic food to heart transplants. Standard economics treats the demand curve as the primary measure of social welfare (or marginal benefit) which yields the implicit mmutilitarian conclusion that each person’s WAP is that person’s worth to society. Adding externalities to mmutilitarian moral philosophy improves WAP as a measure of social utility, but externalites are often neglected due to difficulties in measuring them and they do not overcome the problem that rich elites are much more important than the rest of us because they pack a much greater WAP.