Measuring Utility: From the Marginal Revolution to Behavioral Economics

Ivan Moscati of University of Insubria in this paper (which is actually a prologue from his book by the same title):

This paper is the penultimate version of the Prologue to my book Measuring Utility. From the Marginal Revolution to Behavioral Economics, published in 2018 by Oxford University Press in the series Oxford Studies in the History of Economics.

Since the origins of economic thought, economists have attempted to explain what determines the exchange value of commodities, that is, the ratio at which one commodity exchanges with other commodities or, in modern terms, its relative price. According to economists such as Adam Smith, David Ricardo, John Stuart Mill, and Karl Marx, the exchange value of a commodity ultimately depends on the quantity of labor needed to produce it. This theory, called the labor theory of value, dominated economic thought from around 1770 to 1870.
From 1871 to 1874, William Stanley Jevons in England, Carl Menger in Austria, and Léon Walras, a Frenchman based at the University of Lausanne in Switzerland, independently put forward a different explanation of exchange value. They argued that the exchange value of a commodity depends on the utility that it has for the individuals in the economy and more precisely on the marginal utility of the commodity. This latter notion is the additional utility associated with an individual’s consumption of an additional unit of the commodity. Based on the notion of marginal utility and the assumption that the marginal utility of each commodity diminishes as an individual consumes a larger quantity of it, Jevons, Menger, and Walras were able to construct comprehensive theories of price, exchange, and markets that quickly rose to prominence among economists. This major change in the history of political economy is called the marginal revolution.

….

During the first two decades of the twenty-first century, utility has maintained its prominent role in mainstream economic analysis, and even approaches critical of the mainstream, such as behavioral economics, have often made use of the utility notion.

In this book, I reconstruct the history of utility measurement in economics, from the marginal revolution of the 1870s to the beginning of behavioral economics in the mid-1980s, with four goals in mind.

Four goals are:

  • History of Utility Measurement and History of Utility Theory
  • The Interplay between Utility Analysis and the Understanding of Measurement
  • Utility Measurement, Psychological Measurement, Measurement Theory
  • The Epistemological Dimension of Utility Measurement

Nice bit..

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One Response to “Measuring Utility: From the Marginal Revolution to Behavioral Economics”

  1. invertedlogicblog Says:

    https://invertedlogicblog.wordpress.com/2019/03/04/political-opinions-61-the-diamond-water-paradox-an-economic-puzzle/

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