Re: Utility maximizing

["Robyn Miller" <lady-r@xxxxxxxxxx>]

----------
> From: Mason A. Clark <masonc@xxxxxxxxxxxxx>
> To: POST-KEYNESIAN THOUGHT   <pkt@xxxxxxxxxxxxxxxx>
> Subject: Re: Utility maximizing
> Date: Friday, September 19, 1997 4:43 PM
>
> Chas Anderson wrote:
> >
> >Mason:
> >
> >The principle of utility maximization is a method of explaining the
> >rationality behind the process of consumer choice. The fact that you (or
I)
> >may disagree with a market outcome does not negate the fundamental logic
> >behind this principle. Your argument is with the taste and preferences
of
> >certain consumers which YOU consider to be irrational (socially
> >destructive) not with the guiding logic behind these decisions. I
believe
> >the validity of a theory is based on its ability to explain and predict
> >economic behavior, that is, to help understand the "what-is" of economic
> >behavior.  At this point, utility theory still predominates.
> >
>    If it is assumed that consumers maximize utility, is that not then
>    an assumption that the free market makes the economically correct
>    decisions?


Yes

 And that those are the decisions the economy should be
>    structured to satisfy?

No

 Is this not laissez faire, neo-liberal economics?

Not really.  It is an acknowledgemnt of how economic actors *would* behave
without social, legal, cultural or governmental restrictions.  It is
"economic man" laid bare.  How society choses to respond to this man,
assuming that his innate, purely economic side is not tempered by cultural
norms and the like - is our CHOICE (and society, in attempting to maximize
its own aggregate utility must certainly consider measures that would tame
such an amoral beast).  This explains, perhaps, *why* we have religion,
government, cultural norms, a legal system etc. Without the willingness to
acknowledge how we *would* behave if society or the government did not
intervene to impose "costs" on certain blatantly anti-social behaviors, we
would have no basis from which to argue that, as cultural barries to such
behaviors ctumble - something should be done through the legal
system/government to keep them in check.  It is our acceptance of how
economic man, naked of cultural or governmental restrains *would* act, that
provides us with the means to argue that we *should* act.


>    For good or bad.
>
>    If the theory incorporates an ideology at the outset, does it not hope
> then
>    to prove the validity of the theory  -- and the ideology?

I'm not sure why such a theory is inherently perceived as ideological.  It
can be used to support any of a variety of ideological positions.  In
certain ways, it is the libertarian types who must use it with caution (at
least when they are not preaching to the so-called choir) because it in no
way precludes the possibility of society, in the absence of some
governmental interventions, transforming into something very offensive to
civilized, 20th century people.  Libertarians argue that this possibility
*must* be permitted to exist for markets to work efficiently and individual
liberty to be maximized.  Progressives argue that such a possibility should
be actively averted, and that free people (maximizing their utility) are
willing to trade certain  freedoms for a sense of certaintly that their
society will remain a reasonabl civilized and enjoyable place to live.  I
think that utility theory, at the naive level at which I currently
understand it, does not suggest what we *should* do, merely what we would
do in an extremely libertarian world.  It therefore provides a fairly
compelling argument against the existance of such a world (in my
ever-humble opinion :-))



  Robyn

 The proving
> is by
>    using the theory to guide policy.  In what decade of the twenty-first
> century
>    may hope to we know if the theory is correct, and if wrong then change
our
>    economic ideology?
>
>              Mason C.
>
>    This year the gopher ate the roots of my tomato plants and taught me
>    that if the roots are bad, the tomatoes are rotten.
>
>