A Note on the Pure Theory of Consumer's Behaviour

Abstract

FROM its very beginning the theory of consumer's choice has marched steadily towards greater generality, sloughing off at successive stages unnecessarily restrictive conditions. From the time of Gossen to our own day we have seen the removal of (a) the assumption of linearity of marginal utility; (b) the assumption of independence of utilities; (c) the assumption of the measurability of utility in a cardinal sense; and (d) even the assumption of an integrable field of preference elements.. The discrediting of utility as a. psychological concept robbed it of its only possible virtue as an explanation -of human behaviour in other than a circular sense, revealing its emptiness as even a construction. As a result the most modern theory confines itself to an analysis of indifference elements, budgetary equilibrium being defined by equivalence of price ratios to respective indifference slopes. Consistently applied, however, the modern criticism turns back on itself and cuts deeply. For just as we do not claim to know by introspection the behaviour of utility, many will argue we cannot know the behaviour of ratios of marginal utilities or of indifference directions. Why should one believe in the increasing rate of marginal substitution, except in so far as it leads to the type of demand functions in the market which seem plausible ? Even on the advanced front we are confronted with this dilemma -either the argument with respect to indifference varieties is circular or to many people inadmissible (at least without further demonstration). Hence, despite the fact that the notion of utility has been repudiated or ignored by modern theory, it is clear that much of even the most modern analysis shows vestigial traces of the utility concept. Thus, to any person not