Question

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What are the criticisms of utility theory and how would its supporters (e.g., Gary Becker) respond?

Answer 1

Cambridge economist, Joan Robinson, famously criticized utility for being a circular concept : " Utility is the quality in commodities that makes individuals want to buy them and the fact that individuals buy them shows that they have utility. Robinson also pointed out that because the theory assumes that preferences are fixed this means that utility is not a testable assumption.

Another criticism comes from the assertion that neither cardinal nor ordinal utility is emperically observable in the real world. In the case of cardinal utility it is impossible to measure the level of satisfaction 'quantitatively'. In case of ordinal utility it is impossible to determine what choices were made by the individual. Any act would involve preference over a vast set of choices. It is criticised that the probability outcomes are often unknown and it is tricky to access the expected utility of future outcomes.