The Empirical Evidence Against Utility Maximization
Pakistan Institute of Development Economics
Ege University - Faculty of Economic and Administrative Sciences
June 1, 2011
published with title changed to:" The Empirical Evidence Against Neoclassical Utility Theory: A Review of the Literature," International Journal of Pluralism and Economics Education, Vol. 3, No. 4, 2012, pp. 366-414
Current Economics Textbooks and Economists justify a theory of consumer behavior based on utility maximization on a priori grounds. This methodology follows Lionel Robbins’ idea that economic theory is based on logical deduction from postulates which are 'simple and indisputable facts of experience.' Strong evidence has emerged from many different lines of research that these 'simple and indisputable facts of experience' are contradicted by human behavior. In this article, we summarize some of main contradictions between predictions of utility theory and actual human behavior. Efforts to resolve these contradictions continue to be made within orthodox frameworks, but it appears likely that a paradigm shift is required.
Number of Pages in PDF File: 59
Keywords: behavioral economics, utility theory
JEL Classification: D010, D100
Date posted: April 4, 2012 ; Last revised: July 28, 2013
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