Towards a Theory of Constrained Economic Utility: Localized Constrained Utility Maximization Paradoxically Results in Greater Welfare and Global Utility Maximization
13 Pages Posted: 27 Jun 2011
Date Written: 2011
This paper discusses the non-satiability assumption, i.e. the more is better assumption, embedded in classic unconstrained utility maximization and discusses the proposition that constrained utility maximization results in greater overall utility and welfare. The paper frames common economic phenomenon from the constrained utility maximization principle. Then it discusses examples from computational optimization problems where constrained utility or optimization results in far superior and higher utility solution in terms of predictive utility than greedy optimization of utility maximization.
Keywords: economic utility theory, maximization, optimization, constrained utility maximization, economics, complexity theory, sustainable economic growth, stable markets, random forest, lasso, fast frugal, bounded rationality, complexity, interdisciplinary, constrained optimization
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