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PreprintCited by 639Decision-Making and Behavioral EconomicsExperimental Behavioral Economics StudiesFinancial Literacy, Pension, Retirement Analysis

Anomalies: Utility Maximization and Experienced Utility

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Kahneman, Daniel, Thaler, Richard H.·2005·The Journal of Economic Perspectives
DOI 10.2139/ssrn.870494
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Abstract

The assumption that utility is always maximized allows often surprising inferences about the nature of the desires that guide people's ever-rational choices. This methodology has had many uses and undeniably has charm for economists, but it rests on the shaky foundation of an implausible and untestable assumption. In this paper we discuss a version of the utility maximization hypothesis that can be tested - and we find that it is false.

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  • A main reason for adaptation is attention, whereby the novelty and attention-seeking nature of many circumstances and events wear off over time.

    “According to Kahneman and Thaler (2005), a main reason for adaptation is attention, whereby the novelty and attention-seeking nature of many circumstances and events wear off over time.”

    From Measuring Subjective Wellbeing: Recommendations on Measures for use by National Governments (2012) · cites this paper as Kahneman and Thaler, 2005

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Authors
Kahneman, D., & Thaler, R. H.
Affiliations
  • Princeton University (US)
  • University of Chicago (US)
ORCID
Thaler, Richard H.
Venue
The Journal of Economic Perspectives
Publisher
Elsevier BV
Published
2005
Volume
20
Issue
1
Pages
221-234
ISSN
0895-3309 (ISSN-L)
DOI
10.2139/ssrn.870494
OpenAlex
W3124551585
Cited by
639
References
4
Citations by year
2026: 14 · 2025: 26 · 2024: 38 · 2023: 39 · 2022: 36 · 2021: 38 · 2020: 47 · 2019: 27 · 2018: 44 · 2017: 42 · 2016: 37 · 2015: 30 · 2014: 34 · 2013: 36 · 2012: 40
FWCI
10.05
Type
journal article
Language
en
Open access
Locations
  • The Journal of Economic Perspectives (publishedVersion)
  • SSRN Electronic Journal (acceptedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Funders
  • William and Flora Hewlett Foundation
  • Princeton University
Topics
  • Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
  • Social Sciences › Safety Research › Experimental Behavioral Economics Studies
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Literacy, Pension, Retirement Analysis
Keywords
utility maximization, experienced utility, preference heterogeneity, salience

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