Lumpiness, Uncertainty and ‘Infinite’ Choice: Three Elements of the ‘Utility Maximization’ Fraud

(Before It's News)

Rebuilding economics: 3 steps to clearing the ground

by Unlearning Economics

This appeared originally at The Institute for Dynamic Economic Analysis Blog.

Agents in neoclassical economics typically maximise some function, such as utility (‘satisfaction’) in consumption, or profits in production. Taken at face value, this is a transparently unrealistic depiction of how the world works, since it’s pretty difficult for people or firms to truly ‘maximise’ anything – especially something as intangible as utility – in the real world. But economists have shown that if you start with some not-too-unreasonable assumptions about human behaviour, then you can derive relationships that are functionally equivalent to maximising behaviour.

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