Utilitarianism maintains that the value of a state of affairs depends solely on its level of utility. For a state of affairs to be good (desirable, valuable) it is necessary and sufficient that it contains the best possible level of wellbeing (pleasure, happiness, preference satisfaction). So if two situations contain the same level of utility they must be indistinguishable morally: value supervenes on good feelings (roughly). But consider the following possible states of affairs: (a) people enjoy a level l of happiness and know that l is their level of happiness; (b) people enjoy level lof happiness but don’t know that l is their level. In condition (b) they have false beliefs about how happy they are, either underestimating it or overestimating it; while in condition (a) their beliefs are just right. The level of utility is the same in both cases but the epistemic facts are quite different. Are these situations indistinguishable from the point of view of value? It might well be supposed that they are not: (a) is a better situation than (b). If so, utilitarianism cannot be a complete account of value. Knowledge of utility adds value to utility itself. The utilitarian typically assumes that knowledge of utility tracks utility, so there is no gap of the kind exploited by cases (a) and (b); but we can pull these apart in conceivable cases, and then the insufficiency of utility reveals itself.
A number of responses may be made to this simple argument. One response is that the case I described is not logically possible: people can’t be wrong about their level of happiness, since happiness is a mental state and people can’t be wrong about their mental states. However, whatever may be true about mental states in general, it is clearly possible to wrongly estimate one’s state of happiness. A change for the worse may make you realize how happy you used to be (“I didn’t know how lucky I was”), and you might think yourself happier than you really are because you have been so deprived for so long. People are not infallible about their level of wellbeing, though they may be generally reliable. What if you have been brainwashed into believing yourself brimming with joy when in fact you are only moderately content? Don’t people habitually underestimate their level of wellbeing until things turn nasty for them? Happiness is more elusive to knowledge than sensations of pain or experiences of red. If someone asks how happy you are, you might have to pause and reflect before giving an answer.
Second, it may be claimed that the cases don’t actually differ in value: if the utility level is the same, the value is the same. But this is so much biting of the bullet: surely it is better to know than not to know, especially when it comes to one’s own happiness. Isn’t this a rather vital piece of knowledge? A person who went through life believing himself a miserable wretch when in fact he was quite happy would not be living as good a life as one who gets it right; and similarly for someone who regards himself as unusually happy but in fact has a rotten time of it. There is positive value in knowing where you stand happiness-wise.
Third, it might be maintained that the knowledge in question contributes to the level of happiness, and that’s why we judge (a) and (b) differently. That is, knowing your correct level of happiness is a form of happiness: the person who gets it right will therefore be a happier person. If so, we can subsume the value of knowledge under the heading of utility. But this is not plausible: judging your degree of utility correctly does not add to your utility count, any more than other knowledge does. These are two separate things: utility on the one hand, knowledge of utility on the other. Belief isn’t a feeling, so it can’t contribute to the good feelings a person has. Knowledge isn’t a form of pleasure.  Whether someone’s beliefs about their own happiness are true or false doesn’t affect how happy they are.
So we are compelled to accept that happiness plus true belief about happiness is better than happiness alone, which means that happiness is not the only valuable thing. Of course, it has been held that knowledge is a value separate from utility, but what the cases of (a) and (b) show is that knowledge of happiness has intrinsic value. The utilitarian failed to see this because of the assumption of transparency—that happiness will necessarily communicate itself to belief. But once we recognize that that is false we have to accept that knowledge carries its own value, even when (especially when) it is knowledge concerning happiness.  Nor can we suppose that such knowledge has merely instrumental value in producing further happiness, because we can stipulate a case in which no such variation in happiness is present—the two people converge exactly and for all time in their utilities while differing in their utility knowledge. Not only is happiness a good thing, but knowledge of happiness is also a good thing—though a good thing of a different type. In a sense, then, utilitarianism is self-refuting, because it presupposes a value it refuses to acknowledge. It assumes that knowledge tracks happiness, thus avoiding acceptance of the separate value of knowledge, but pulling the two apart shows that utility is not enough. The good life is not just the happy life; it is a life in which one is also properly apprised of one’s happiness.
 Once it is accepted that utility and knowledge constitute separate values, the question of priority arises: which value is more important? Granted limited resources, we have to assign them to promoting our accepted values, so we have to decide how much to allocate to utility and how much to knowledge of utility. This means that we will have to allocate less to utility than we would under the pure utilitarian doctrine, since we have to allocate resources for the production of knowledge of utility too. So the extended utilitarian doctrine will contradict the recommendations of the simple utilitarian doctrine. And there will always be difficult questions about which value to promote in a given situation. The dent in utilitarianism is therefore not trivial.