Expected Benefit
Imagine
that you choose to go to law school instead of trying to write a successful
novel. When someone asks you why, you
explain that you really wanted and valued being a successful novelist much more
than graduating from law school, but you knew you would probably never even
finish a novel, let alone write a good one, so you choose to do something you
also valued—valued less, but still valued—and at which you were virtually
certain you would succeed.
The
economists have a way of expressing your explanation. They say that the expected benefit of going to law school was greater than the expected benefit of trying to write a
successful novel. The expected benefit an action (going to law school, trying
to write the novel) is the value you place on the result (graduating from law
school, completing a successful novel) reduced
by the probability that the action will produce that result.
In the
above example, you go to law school because the expected benefit of doing so is
greater than the expected benefit of trying to write a successful novel.