The Empirical Evidence Against Utility Maximization

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

59 Pages Posted: 4 Apr 2012 Last revised: 28 Jul 2013

Asad Zaman

Pakistan Institute of Development Economics

Mehmet Karacuka

Ege University - Faculty of Economic and Administrative Sciences

Date Written: June 1, 2011

Abstract

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.

Keywords: behavioral economics, utility theory

JEL Classification: D010, D100

Suggested Citation

Zaman, Asad and Karacuka, Mehmet, The Empirical Evidence Against Utility Maximization (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. Available at SSRN: https://ssrn.com/abstract=2033641 or http://dx.doi.org/10.2139/ssrn.2033641

Asad Zaman (Contact Author)

Pakistan Institute of Development Economics ( email )

Quaid-i-Azam University Campus
P.O.Box 1091
Islamabad, Federal Capital 44000
Pakistan

Mehmet Karacuka

Ege University - Faculty of Economic and Administrative Sciences ( email )

Bornova, Izmir 35100
Turkey

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