Title: The empirical evidence against neoclassical utility theory: a review of the literature

Authors: Mehmet Karacuka; Asad Zaman

Addresses: Department of Economics, Ege University, Izmir 35040, Turkey ' IIIE International Islamic University of Islamabad, New Campus Sector H-10 Islamabad 44000, Pakistan

Abstract: Current economics textbooks and neoclassical economists justify a theory of consumer behaviour based on utility maximisation on a priori grounds. This methodology follows Lionel Robbins' idea that economic theory is based on logical deduction from postulates which are "simple and indisputable facts of experience." Strong evidence has emerged from many different lines of research that these "simple and indisputable facts of experience" are contradicted by human behaviour. In this article, we summarise some of the main contradictions between predictions of utility theory and actual human behaviour. Efforts to resolve these contradictions continue to be made within orthodox frameworks, but it appears likely that a paradigm shift is required.

Keywords: behavioural economics; neoclassical utility theory; literature review; consumer behaviour; human behaviour.

DOI: 10.1504/IJPEE.2012.052695

International Journal of Pluralism and Economics Education, 2012 Vol.3 No.4, pp.366 - 414

Published online: 16 Aug 2014 *

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