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Utility maximisation

Approaches based on utility maximisation explain and predict behaviour based on axiomatic mathematical models which assume that rational individuals maximise utility. Assumptions of rational choice are that given a choice set, preferences are complete, transitive and continuous. There is a vast literature dating back more than a century to the foundations of modern economic thought and utilitarianism. As it is beyond the scope of this platform to discuss this literature, we limit ourselves to a couple of approaches relevant for CCVIA. If you believe actor's choice processes can be appropriately described through the axioms of rational choice, you will be lead towards these approaches.
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Maximisation models are based on the assumption of rational individuals maximising utility. This is a vast literature dating back more than a century to the foundations of modern economic thought and utilitarianism (e.g. Mill 1863). It is beyond the scope of this guidance to comprehensively discuss developments in this field, however we can present several classifications of this literature relevant for CCVIA. At a general level, theoretical assumptions differentiate how an actor's cognitive capacities to obtain and process information are characterised. Predicting behaviour is most easily done under the conditions of independent decision, in which individuals are assumed to be rational, perfect maximisers, in the sense that they have complete information and are able to calculate outcomes for all contingencies, and optimize utility. This is referred to as maximisation (Cooke et al. 2009).

Question addressed

What actions will an actor take? What consequences will these action have?

Conditions of applicability

Individual decision making is, to a great extent, responsible for how climate (and their changes) affect the study unit.

Theoretical assumptions

Individuals take action to maximise utility. Individuals have complete information and are able to construct complete preference relations

Steps taken

1. Select of actors and constraints 2. Specify of decision rule for actor

Results achieved

Prediction actions. Consequences of actions

Issues involved

Assumptions may not be realistic.

Example cases from literature

Rounsevell et al. (2003) apply a linear programming model to address the question of how crop rotations vary between location. The model inputs costs and benefits of crop types and time constraints. The results predict how rotations vary between locations subject to farmers maximizing profit.


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Utility maximisation

This section is based on the UNEP PROVIA guidance document

Criteria checklist

1. You want to identify adaptation measures.
2. Your focus is on public actors and on individual actions.
3. The actors' potential capacity is high, but the private actors are not adapting autonomously.
4. Adaptation would not conflict with private interests.
5. It is not succificient to describe actors and behaviours.
6. It is assumed that individuals' choice is described by mathematical axioms.
7. It is assumed that individuals have full knowledge of outcomes.