Economics 312, Spring 2008

Shane Murphy

Office: Science 225G Office Hours: TR 8:00am-9:25am and by appointment

Web Address:

Email address:

The reading assignment is to count towards your midterm grade. The midterm will be worth 200 points, of which the take home section will be worth 150 points, while the reports will be worth 50 points. If you wish to be graded out of all 50 points, you must read and write reports on three articles listed below. If you only do two, you will be graded out of 40 points, and if you only do one, you will be graded out of 25 points. Please see or e-mail me if you wish to read extra articles for extra credit (25 points per article).

On each address, NEIU students may use instead of in the url to avoid the paywall.

Right now, this page is split into nine sections. A couple things are certainly missing (including Austrian perspective, and articles from pre-1920, please contact me if you have suggestions). I have starred (*) articles and sections which I percieve to be at a high level in their mathematical and/or philosophical content. This is to allow you to mind your own constraints when choosing articles to read. For our initial discussion, we will look at Becker's chapter from "The Economic Approach to Human Behavior", and Kahneman, Wakker, and Sarin. Nelson's speech is directed towards the broadest audiance, with Arrow's aritcle second. Radner and Machina's articles are the most cutting edge.

If you read only one article, it should be from the first three sections (Becker is the easiest and clearest, I think). If you read a only two, They should both be from the first four sections, but not from the same section as each other. If you read three, they should come from at least two sections, and it is recomended that you read two articles from the first three sections, but the choice is up to you.


Stigler articles should be read together and count only as one article.

Stigler, Geroge J. "The Development of Utility Theory. I." The Journal of Political Economy, Vol. 58, No. 4. (Aug., 1950), pp. 307-327. Stable URL: here
Stigler, George J. "The Development of Utility Theory. II." The Journal of Political Economy, Vol. 58, No. 5. (Oct., 1950), pp. 373-396. Stable URL: here

*Allan, R. G. D. "The Foundations of a Mathematical Theory of Exchange." Economica, No. 36. (May, 1932), pp. 197-226. Stable URL: here

Neoclassical (Chicago school) perspective

Becker, Gary S. "Introduction" in "The Economic Approach to Human Behavior" University Of Chicago Press; New Ed edition (September 15, 1978) pages 3-14. Available online in Excerpts from Google Books here or from here

*Becker, Gary S. "Irrational Behavior and Economic Theory" The Journal of Political Economy, Vol. 70, No. 1. (Feb., 1962), pp. 1-13. Stable URL: here

Behavioral and Experimental perspectives:

*Kahneman, Daniel; Wakker, Peter P. and Sarin, Rakesh. "Back to Bentham? Explorations of Experienced Utility" The Quarterly Journal of Economics, Vol. 112, No. 2, In Memory of Amos Tversky (1937-1996). (May, 1997), pp. 375-405. Stable URL: here

McCormick, Ken. "An essay on the origin of the rational utility maximization hypothesis and a suggested modification." Eastern Economic Journal, Winter 1997. URL: here

Smith, Vernon L. "Review: Rational Choice: The Contrast between Economics and Psychology." The Journal of Political Economy, Vol. 99, No. 4. (Aug., 1991), pp. 877-897. Stable URL: here

Criticism of naive views:

Sen, Amartya. "The Formulation of Rational Choice" The American Economic Review, Vol. 84, No. 2, Papers and Proceedings of the Hundred and Sixth Annual Meeting of the American Economic Association. (May, 1994), pp. 385-390. Stable URL: here

*Samuelson, Paul A. "St. Petersburg Paradoxes: Defanged, Dissected, and Historically Described." Journal of Economic Literature, Vol. 15, No. 1. (Mar., 1977), pp. 24-55. Stable URL: here

Rationality, Bounded and Otherwise

**Radner, Roy. "Bounded Rationality, Indeterminacy, and the Theory of the Firm" The Economic Journal, Vol. 106, No. 438. (Sep., 1996), pp. 1360-1373. Stable URL: here

*Arrow, Kenneth J. "Rationality of Self and Others in an Economic System" The Journal of Business, Vol. 59, No. 4, Part 2: The Behavioral Foundations of Economic Theory. (Oct., 1986), pp. S385-S399. Stable URL: here

Decision Theory

**Machina, Mark J. "Choice Under Uncertainty: Problems Solved and Unsolved" The Journal of Economic Perspectives, Vol. 1, No. 1. (Summer, 1987), pp. 121-154. Stable URL: here

Criticism of Utility Maximization paradigm

Nelson, Robert. "What is Economic Theology", Speech given March 22, 2002 to the Princeton Theological Seminary (URL: here)

Radical views

*Geogescu-Roegen, Nicholas. "The Steady State and Ecological Salvation: A Thermodynamic Analysis" BioScience, Vol. 27, No. 4, The Scientist and Environmental Bioethics. (Apr., 1977), pp. 266-270. Stable URL: here

Mathematical Overview

*Fishburn, Peter C. "Utility Theory." Management Science, Vol. 14, No. 5, Theory Series. (Jan., 1968), pp. 335-378. Stable URL: here

The minimum number of sentences your answer should use is included in parenthases. Each paper should be between 1-4 pages, I will not accept shorter than 1, and longer than 4 better be real good. Feel free to include the questions themselves as section headings in your paper. Your papers should address these questions:
0 - What is your personal definition of utility (you may use a naive definition before you begin, or something synthesized from these readings)(3)?
1 - What is the definition of utility in this paper(1)? How is it different from the definition in other papers(2)? How is it different from your personal definition(2)?
2 - On what work is this papers conception of utility building (to whom does the author refer)(1 - list)?
3 - Rational economic agents are generally seen to be utility maximizers. Does this paper comment on this statement(2)? How does this paper qualify/justify/criticize this statement(2)?
4 - All of you have taken introductory micro and macro. Some of you have taken a class in sociology, political science, psychology, anthropology, literary theory, or another social science. How would any of these 7+ perspectives react to the ideas about utility in this paper(5)?

I am personally interested in the question of how our particular time and place influences our utility maximizing behavior. Namely, today there is evidence that people are rational utility maximizers (citation needed). There is an assumption that people have always behaived in this way, although they have not always realized it or recognized their utility function. Mathematically, this is because our choices, under certain situations, can imply a choice function, which in certain situations can be transformed into a utility function. What I propose is that the Individual as a utility maximizer is a rather contemporary phenomenon. The importance of this is not just that we should look at social utility, but we should look at textual evidence that utility came in to existance as a map between possibilities and choices. This is similar to David Carr's discussion of maps being contextual through history, and that people geographic actions occured as much on the map of the world they understood in their heads as it did on the map we might say represents the real world, that is the maping of the world in reality.