We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
from Part I - Preferences in Positive Economics
Published online by Cambridge University Press: 05 June 2012
Economics relies on standard axioms concerning preference and choice. Section 2.1 of this chapter presents the most important of these. Section 2.2 explores their implications for the interpretation of preferences. The conditions on preferences presented in Section 2.1 are the axioms of “ordinal utility theory,” and, as Section 2.1 explains, they guarantee that people’s preferences can be represented by utility functions. Section 2.3 discusses the relationship between theories of people’s actual preferences and choices and theories of rational preferences and choices. Section 2.4 argues that preferences cannot be defined in terms of expected self-interested benefits.
The Axioms of Ordinal Utility Theory
The axioms of ordinal utility theory are the core of positive economic theory, and they also constitute a fragmentary theory of rationality. Economists sometimes place other constraints on preferences, about which I shall have something to say in Chapter 4, but the axioms of ordinal utility theory are central. The following axioms are standard:
(Completeness) For all x, y in X, either x ≥ y or y ≥ x or both.
(Transitivity) For all x, y, and z in X if x ≥ y and y ≥ z, then x ≥ z.
To save this book to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.
Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.
Find out more about the Kindle Personal Document Service.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.
