Behavioral finance FAQ / Glossary (Ophelimity)

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Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
i: incidental


01/4d - 04/8i + see
preferences, utility, need

When the world moves, desire is in the driver seat.

When  utility meets tastes

Ophelimity is a concept that was used by Pareto as an alternative to

"economic utility" .

It could also be called, in plainer language, "economic desirability" or
"economic satisfaction".

This notion is clearly based on tastes in order to label need, preference
or utility

Why use ophelimity instead of utility ?

Utility is a word with a moralistic undertone, and thus
does not  cover all preferences that play a part on the
ophelimity can be prefered as a more neutral word
that fits better economic realities

Of course, in the strict rational sense, some goods, assets or
investments may prove of little use,useless or even damaging.

=> But even so, there can be a demand (and offer) for them.

Also, all along History, various fundamentalists condemned
about every human satisfaction, seeing in it

* either the hand of the devil

* or a crime against the "common good" (see the "need" glossary
   article ), under their own subjective definition of those notions.

Anyway the main job of economists in their quest for knowledge is not
to define social norms, but to understand how the economy works
and to try to predict the outcomes of economic decisions.

Therefore, whatever the need for ethic to make the world livable,
and whatever ethical judgment that can be done about some economic
tastes, as long as some (or many) people feel them, such preferences
cannot be hidden
under the carpet if economics wants to be a scientific
matter examining real phenomena.

To have a full picture of economic situations, those human
have to be quantified as economic needs,
translated into personal values (utility or ophelimity) that
contribute to the market value.

Examples in business

Vice, glitter or freedom?

Narcotics or compulsive gambling, and whatever other activities of the
    "vice" economy are well known.

On a much less dramatic scale, gadgets or trinkets that are devised to
    make consumers salivate and open their wallet are omnipresent.

Also, some economic decisions are taken more out of trophy seeking
    than for monetary optimization.

But why not, except in case of clearly proven and massive destruction,
as without free choice and free initiative our civilization would stagnate!

Examples in financial asset markets

The value of some precious assets such as for example:

Gold, which has only a limited consumer or industrial interest (*),

Or collectibles,

can be linked to their ophelimity compounded by their rarity.

This makes it difficult to calculate their "fundamental" value.

(*) Although in exceptional periods of financial / monetary turmoil
economic interest might surface: some investors might
     consider gold safer than other assets,
even than cash.

(*) To find those messages: reach that BF group and, once there,
      1) click "messages", 2) enter your query in "search archives".

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This page last update: 29/07/15  

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