Book contents
- Frontmatter
- Contents
- Figures
- Preface
- 1 Preferences, Comparative Evaluations, and Reasons
- Part I Preferences in Positive Economics
- 2 Preference Axioms and Their Implications
- 3 Revealed-Preference Theory
- 4 Preferences, Decision Theory, and Consequentialism
- 5 Game Theory and Consequentialism
- 6 Constraints and Counterpreferential Choice
- Part II Preferences, Welfare, and Normative Economics
- Part III Psychology, Rational Evaluation, and Preference Formation
- References
- Index
2 - Preference Axioms and Their Implications
from Part I - Preferences in Positive Economics
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Figures
- Preface
- 1 Preferences, Comparative Evaluations, and Reasons
- Part I Preferences in Positive Economics
- 2 Preference Axioms and Their Implications
- 3 Revealed-Preference Theory
- 4 Preferences, Decision Theory, and Consequentialism
- 5 Game Theory and Consequentialism
- 6 Constraints and Counterpreferential Choice
- Part II Preferences, Welfare, and Normative Economics
- Part III Psychology, Rational Evaluation, and Preference Formation
- References
- Index
Summary
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.
- Type
- Chapter
- Information
- Preference, Value, Choice, and Welfare , pp. 13 - 22Publisher: Cambridge University PressPrint publication year: 2011