Re: Utility maximizing

["Per Gunnar Berglund" <pgb@xxxxxxxxxxxxxxxxxx>]

In reply to Paul Davidson:

-----

Paul wrote:
As everyone knows masochists are maximizing their utility and if they pair
us with a sadist they are truly engaging in utility maximization. The only
problem is that this example violates another basic neoclassical assumption
of utility maximization-- namely, the independence of utility functions!!

So tell me [...] what behavior does utility maximization help us explain??

Per:
    Great points! You are perfectly right about neoclassical theory assuming
inter-personal independence of utility functions. Thank God we had
Duesenberry breaking this up.
    I have argued all the time that the assumption, or axiom if you wish, of
utility maximisation does not help us to explain behaviour at all. Still the
axiom is useful since it helps us _measuring_ what people do, and possibly
even how their utilities evolve.
    The standard micro consumer choice theory should thus _not_ be regarded
as a model by which consumer's behaviour can be explained or predicted, but
instead it should be viewed as a theory how to measure the consumer's
choices and (again, possibly) her well-being derived from those choices.

Best regards,
Per


Per Gunnar Berglund
Lilla Sallskapets vag 60
127 61  SKARHOLMEN
SWEDEN

Voice/fax +46-(0)8-883065