Heterodox
Economists proved over half a century ago that certain stories are unfounded in the theory. For example, one might think that if some workers are involuntarily unemployed, a drop in real wages would lead to a tendency for the labor market to clear. The Cambridge Capital Controversy revealed some difficulties. In response, some economists turned to the Arrow-Debrue-McKenzie model of intertemporal equilibria in which it is not clear that one could even talk about such concepts. The Mantel-Sonnenschein-Debreu theorem shows that this model lacks empirical content. Utility theory provides a closure for some models. Formally, one can demonstrate the existence of equilibria under certain assumptions. But existence does not get one very far. My purpose of this post is to note that some saw
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Robert Vienneau considers the following as important: Methodology of Economics, Theory of Choice
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Economists proved over half a century ago that certain stories are unfounded in the theory. For example, one might think that if some workers are involuntarily unemployed, a drop in real wages would lead to a tendency for the labor market to clear. The Cambridge Capital Controversy revealed some difficulties. In response, some economists turned to the Arrow-Debrue-McKenzie model of intertemporal equilibria in which it is not clear that one could even talk about such concepts. The Mantel-Sonnenschein-Debreu theorem shows that this model lacks empirical content. Utility theory provides a closure for some models. Formally, one can demonstrate the existence of equilibria under certain assumptions. But existence does not get one very far.
My purpose of this post is to note that some saw utility theory as a useless tautology at the time of the marginal revolution:
"It is interesting, in this connection, that the earliest critics saw in the theory of marginal utility what we have called a behaviourist theory of choice ... and used exactly the same arguments against it which will be used below against this latter version. Thus [John] Cairnes wrote about Jevon's theory: 'What does it really amount to? In my apprehension to this, and no more - that value depends upon utility, and that utility is whatever affects value. In other words, the name "utility" is given to the aggregate of unknown conditions which determine the phenomenon, and then the phenomenon is stated to depend upon what this name stands for.' Jevon's theory was believed to say no more than this: 'that value was determined by the conditions which determine it - an announcement, the importance of which, even though presented under the form of abstruse mathematical symbols, I must own myself unable to discern'. Some Leading Principles of Political Economy, 1874, p. 15.
[John] Ingram took the same view in A History of Political Economy, 1888, ed. by Ely, 1915, p. 228 and passim. Cairnes, Ingram, and other early critics of marginal utility had, however, directed their criticism also against the mathematical method generally, and the discussion went soon into other channels. The marginalists met the criticism by claiming to be proponents of logical and mathematical method and their tautological psychology thus escaped its well-deserved criticism." -- Gunnar Myrdal (1953) The Political Element in the Development of Economic Theory (trans. by Paul Streeten, Routledge & Kegan Paul, p. 231.
Obviously, Cairnes and Ingram could not have known about results demonstrated a century later. Utility theory manages simultaneously to not say anything about market phenomena, to not be good armchair theorizing, and to be empirically false at the level of the individual.