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
Date Written: June 1, 2011
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: Suggested Citation