Cardinal utility

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Cardinal utility theory states that the utility (satisfaction) gained from a particular good or service can be measured in the same way as distance, temperature and time can, and that utilities can therefore be compared across persons. The theoretical unit of measurement is the ‘util’. If utility can be measured in this way it should be possible to say that an individual will get 100 utils from good A and 150 utils from good B, for example. While this concept can be useful in theory, most people believe that it cannot be used in a practical way and that only ordinal utility theory can be used.

There are economists who believe that utility can be measured. These measures are not perfect but can act as a proxy for the utility. Lancaster’s characteristics approach to consumer demand illustrates this point.