Re: Utility maximizing

["Chas Anderson" <cnanderson@xxxxxxxxxxxxxxxx>]

----------
> From: Paul Davidson <pdavidso@xxxxxxx>
> To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
> Subject: Re: Utility maximizing
> Date: Saturday, September 20, 1997 9:15 AM
>
> Charles 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.
>
>
> 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 Charles what behavior does utility maximization help us
explain??
>
> Paul
> Paul Davidson

Chas writes:

With respect to this subject, I believe the sole purpose of economic method
is to provide a calculus for quantifying the process of choice given the
guiding principle of utility maximization. The principle itself merely
provides the basic foundation from which the logical economic paradigm is
deduced and is superior to it by its natural extension beyond quantitative
analysis. Therefore:

1) a natural constraint on the method is that descriptions or definitions
of utility are     beyond its scope,

2) rational behavior in an economic context refers to the adherence to the
logic of     process and this behavior is neutral with respect to outcome,
and

3) economic method is useful for building incentive structures that seek to
influence outcomes through affecting the process of choice but is not the
creator of any impulse desirable or not.

Chas Anderson