Indifference Curves and the Ordinalist Revolution

Abstract

Joseph Schumpeter, as a spoilsport (and probably under Paul Samuelson's influence), looked pessimistically upon the internal coherence and methodological progress achieved by the ordinalist revolution: If [the ordinalists] use nothing that is not observable in principle, they do use "potential" observations which so far nobody has been able to make in fact: from a purely practical standpoint we are not much better off when drawing purely imaginary indifference curves than we are when speaking of purely imaginary utility functions. (Schumpeter 1954, 1067) Schumpeter actually raised a methodological issue more than a practical one. Indeed, once Vilfredo Pareto had faded from the scene, the status 1 of indifference curves within demand theory was rarely discussed for its own sake by the main protagonists of the ordinalist revolution.

How Cardinal Utility Entered Economic Analysis, 1909-1944

“…The appearance of Expected Utility Theory in 1944 gave cardinal utility a justification apparently more convincing than the one based on the ranking of transitions, and propelled its use in economics. By showing how cardinal utility entered and stabilized in economic analysis during the ordinal revolution, the paper not only revises the conventional narratives of the history of cardinal utility, but also adds to a series of recent studies that have enriched and partially modified the standard picture of the ordinal revolution itself (Lenfant 2006(Lenfant , 2012Hands 2010Hands , 2011.…”

Probabilising the consumer: Georgescu-Roegen, Marschak and Quandt on the modelling of the consumer in the 1950s

“…Alchian (1953, 32) for instance, argues that the model should deal with not only with marketable commodities but also with patterns of actions (a trip to Europe, getting married). Neither Pareto nor Hicks did entrust consumer's theory with such a purpose (see Lenfant, 2012a). This inflection was probably already on the way in the Chicago style of reasoning, but it was probably strengthen on this occasion.…”

“…Earlier on, Gilboy (1930;1931) had underlined that the pure static theory of choice was intractable because any statistical attempt at deriving demand curves would induce time and hence changes in the demand schedules. Also, following a more destructive purpose, Friedman and Wallis (1942) would criticize the Paretian theory of choice for being inadequate to any empirical investigation (see Lenfant, 2012a). 2 Apart from those few challenges, no significant appraisal of the pure theory of consumer's choice would take place before the beginning of the 1950s.…”

“…On the contrary, the 1950s would witness a number of attempts at dealing with the imperfections of consumers as utility maximizers, which in turn led to the idea to represent their behavior through a probabilistic model (later called stochastic model of choice). This search developed partly under the impulse of a growing literature on experimental psychology dealing with the rationality of choices (Lenfant 2012b). Many experiments on individual preferences, on transitivity, on binary-choice, on learning, were carried out (Moscati, 2007), and some psychologists and economists were involved in collaborative projects to study individual behavior (see Heukelom, 2014).…”

“…On the one hand, there is the internal constraint for thinking about rational behavior within a unified theory, connecting choice theory and decision 3 It is a complex story and we do not pretend to deal in depth with many issues that would deserve a separate investigation, such as the links with experimental psychology or the internal debates about the meaning of the axiomatics of expected utility. On both topics, see Moscati (2007), Lenfant (2012b), Heukelom (2014) and Moscati (2016). theory.…”