[PEN-L:4806] Re: econ. and cognitive psychology

["DARREN BUSH" <BUSH@xxxxxxxxxxxxxxxxx>]

B. Eggleston wrote:

> I don't think a staunch NC economist would accept the idea
> that "homo economicus need only be concerned with maximizing
> his/her own utility function and has no concern for others"
> (as noted by C., Murphy in a recent post).

> He/she (the NC) would argue that the utility function could
> include "concern for others".   BTW, I don't buy this but
> have encountered similar so often that I suspect that's the
> argument you'd get.

It's strange that NC's would argue that your utility function could
include concern for others.  When I taught micro and discussed
utility theory, students frequently asked about family dynamics and
concern for others and where these things fit in to utility theory.
I used the following example to show where the problem lies:

Suppose that I received utility from your happiness and you from
mine.  I'm happy that you are happy.  My happiness about your
happiness makes you happier.  That, in turn, makes me happier.  This
situation either degenerates such that our preferences change (to
avoid hysteria) or we reach some sort of "cosmic bliss point."
(Anyone have a cigarette?)  This situation obviously breaks down and
leads some NCs to conclude that utility can only be derived from
commodities.

But if utility can only be derived from commodities, where does
this leave NC economics?  It leaves it in the marketplace and the
world of finance.  But if utility is a function of another's
happiness, how do we solve all of that hideous math?  Is this form of
social interconnectedness "efficient?"

All this leads me to conclude, as my signature suggests, that utility
theory really offers little explanation of human behavior outside of
the market and the world of finance.  Thus, applying utility theory
is a futile endeavor.



Darren Bush
Dept. of Economics
University of Utah
Salt Lake City, 84112
(801) 585-6465
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|                 Oh, the other futility of utility!                 |
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