The Theory of Consumer Choice IV


By M. Northrup Buechner

September 18, 2013

Another in a series of essays elaborating Objective Economics: How Ayn Rand’s Philosophy Changes Everything about Economics by the author.

My last blog defined a hierarchy of values as the ranking in one’s mind of a series of items, ranked by reference to a goal one wants to reach. Ayn Rand called the procedure by which we rank values in a hierarchy “teleological measurement” (her emphasis) (ITOE, pp. 32-35, almost two and a half pages). This is perhaps her most important identification for the science of economics, so let us consider it closely. (If I could do it over, I would begin with this material.)

Teleological measurement is the type of measurement that applies to “the psychological process of evaluation” (ITOE, p. 32). Teleology means goal-directed or end-directed. Usually, the end is one’s life, explicitly or implicitly. Teleological measurement means measuring or evaluating or grading or ranking something by its relationship to an end. That relationship consists of the effect of the item on the end—by whether it helps to advance, support, enhance, or achieve the end, and by how much (in which case it is a value)—or by the extent to which it helps to negate, undermine, and destroy the end (in which case it is a disvalue).

Ayn Rand defined measurement as “the identification of a relationship—a quantitative relationship established by means of a standard that serves as a unit” (ITOE, p. 33). If the standard is an inch, we can determine that there are thirty-six of them in a yard. Thirty-six is a cardinal number; it answers the question “how many?”

Teleological measurement deals in ordinal numbers. It does not tell us the number of units there are in a total; instead, it measures things by the ranking or order of the units, such as first, second, third—or high, low, middle.

According to the OED, evaluation means “the action of appraising or valuing.” Putting aside issues of developmental psychology, evaluation is the origin of all the values of people’s lives. Evaluation transforms facts into values in our minds. If one evaluates something as crucial to one’s life, then that value is ranked high. If one evaluates something as unimportant and inconsequential, it is ranked low. The basis for both is teleological measurement, “a graded relationship of means to end,” with the end in this case being one’s life.

Most teleological measurements are relative measurements; that is, values do not stand alone like a tree on a plain. Rather, alternatives are ranked or “graded” relative to one another, and the ranking of any one derives its meaning from the values that are ranked higher and lower. For example, suppose a man looking for a car to drive to work ranks a used Lexus first, a new Hyundai second, and a new Ford third. The ranking of each car in the series is the teleological measurement of its value to him, and that measure is relative to the other cars he has ranked.

If one is willing to look, the universality of teleological measurement in human life is transparent. Every man alive makes such measurements all the time, every hour of every day. An individual’s success in life varies in part with the accuracy of his teleological measurements. If we consider that human values are the final cause (in Aristotle’s sense) of everything we are and do, teleological measurement is the most widespread and most important measurement in the world. Consequently, it is crucial to understand that this is a real measure, involving real measurements and real numbers, numbers that are absolutes in their context—but ordinal numbers, not cardinal numbers.

Teleological measurement is also the foundation of human emotions. Whereas values vary with ranking in a hierarchy, emotions vary in “intensity or dimension” (ITOE, p. 35). Emotions proceed from the relation of the external world to our values and are defined by the particular relation involved. For example, fear is the emotion caused by a threat to one’s values. Teleological measurement determines the ranking of the value that is threatened. The higher the value, the more intense the fear. Happiness proceeds from the achievement of a value. The greater the value one achieves, the greater is one’s happiness (other things equal).

Modern economists take the emotion they call utility as the starting point for the theory of consumer choice. We will take up later the meaning of utility, where it comes from, and what its role is in economics. For the time being, let us note, in opposition to this starting point, that emotions are not a first cause in human beings but derive from their hierarchies of values. Consequently, even a theory of emotions could not be erected on an emotion. Modern economists disagree; they are committed to utility as the foundation of economic thought.

Teleological measurement is true; it exists. As the cause of hierarchies of values, and particularly hierarchies of economic values, it is one of, if not the foundation of a rational economics. Persuading economists of the value of this idea may be the biggest hurdle that a rational economics has to get over.

The next installment of this blog will elaborate further the idea of a hierarchy of values.