Re: Utility maximizing

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

In reply to James R. Olson, jr:

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James wrote:
Since there is no objective definition of utility, utility maximization is
axiomatic, in that the economic decisions of individuals are simply assumed
to be utility maximizing, no matter what they may be.

Per:
Yes, and this is what renders the theory of utility maximisation useless for
explanation and prediction of behaviour. But again, it may be useful for
purposes of volume index construction and even utility measurement.

James:
More sophisticated apologists for the axiom claim that individual decisions
are unimportant, that the aggregate of all decisions becomes utility
maximized through statistical effects.  This view purposely ignores all the
evidence for mass irrationality.

Per:
    True there are many apologists of this kind. We must of course
distinguish between the _personal_ utilities and the _social_ utility. A
pedophile might get an enhanced personal utility from mollesting a child,
but the child will suffer terribly. The _social_ utility (or disutility, I
should say) from pedophilism must be assessed by weighting the utility of
the pedophile against the disutility of the child, by applying some moral
principle. (And, in fact, we do not reckon the increased satisfaction of the
pedophile as something that should count in the aggregate -- the social
utility of pedophilism is certainly only negative). The apologists', who are
predominantly libertarians, seem to believe that individual utility
maximisation per se also leads to social utility maximisation, which is
clearly wrong.
    As to "rationality", this is a difficult concept. But in this context,
people are often said to be "rational" if the act to maximise their utility.
Next, it is laid down axiomatically that all people maximise their utilities
all the time. Ergo, all people are "rational" by definition. Clearly such a
usage would render the adjective "rational" meaningless, since everybody is
always rational by assumption.
    I have made these points before about the Beckerian standpoint, where
all human actions are regarded as "economic", which effectively drains the
adjective "economic" of all meaning. In the Beckerian world, the concept of
"rational economic man" simply translates to "man", since neither "rational"
nor "economic" means anything!

Regards,
Per

Per Gunnar Berglund
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