Tuesday, February 28, 2012
Utility Theory as Naive Cultural Theory
Here's a fascinating presentation by the economist Steve Keen on utility theory and neoclassical economics. From the perspective of a cultural sociologist, what is of particular interest is that the utility theory underlying neoclassical economics has the appearance of a naive cultural theory. Specifically, the indifference curves that constitute supply and demand curves in neoclassical analysis are based on strong, disproved assumptions about how people value things in the world: first, completeness (i.e., that the individual knows their evaluative ranking of all combinations of things); second, transitivity (i.e., if thing A is valued to B, and B to C, then A is valued over C); third, non-satiation (i.e., more things are always valued to less); fourth, convexity (i.e., for each thing, additional value falls); fifth, structural independence from culture (i.e., what an individual values is independent of how much income the have); finally, no curse of dimensionality (i.e., information processing abilities are unlimited). No cultural theory in sociology has even approached the disbelief required for these kinds of assumptions. Fortunately, some sociologists (for example Michael Hechter), have sought to correct this naive cultural theory, and have advocated eloquently and convincingly for a richer understanding of values in economic models of human behavior.
- ▼ February (10)