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Consumer Behavior Versus Economie Theory(*)

Published online by Cambridge University Press:  17 August 2016

Richard Schmalensee
Richard Schmalensee*
Affiliation:
University of California, San Diego
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Extract

The neoclassical model of consumer behavior, hereafter generally called utility theory, both serves as the basis for modern welfare theory and draws some of its support from the usefulness of that theory to the economics profession. Modern welfare theory, however, posits a direct correspondence between market behavior and individual welfare, a correspondence that does not exist in modern market economies. In such economies, where information is imperfect and learning is important, utility theory also fails to describe or to facilitate analysis of important aspects of consumers' behavior. Thus it provides neither a sound normative theory nor a generally useful positive theory of consumer' behavior. These assertions are amplified and defended in Sections I - III below.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 40 , Issue 3 , 1974 , pp. 261 - 276
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1974 

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Footnotes

(*)

This paper was written while I was Visiting Associate Professor of Economics. University of Louvain. I would like to thank A.P. Barten and D. Weiserbs for very helpful comments on an earlier version, without suggesting that they necessarily agree with anything that remains.

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