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Measuring UtilityFrom the Marginal Revolution to Behavioral Economics$
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Ivan Moscati

Print publication date: 2018

Print ISBN-13: 9780199372768

Published to Oxford Scholarship Online: December 2018

DOI: 10.1093/oso/9780199372768.001.0001

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What Is That Function?

What Is That Function?

Friedman, Savage, Marschak, Samuelson, and Baumol on EUT, 1947–1950

(p.163) chapter 10 What Is That Function?
Measuring Utility

Ivan Moscati

Oxford University Press

Chapter 10 reconstructs the first part of the American debate on expected utility theory (EUT), which ranges from 1947, when the second edition of John von Neumann and Oskar Morgenstern’s Theory of Games was published, to April 1950. In this period, a number of eminent American economists, including Milton Friedman, Leonard J. Savage, Jacob Marschak, Paul Samuelson, and William Baumol, wrote papers in which they took stances on the validity of EUT and the nature of the cardinal utility function u featured in the expected utility formula. Friedman, Savage, and Marschak supported EUT, although for different reasons, while Samuelson and Baumol rejected it. Regarding the nature of the cardinal utility function u, however, they all shared the view that it is interchangeable with the utility function U that the earlier utility theorists had used to analyze choices between riskless alternatives.

Keywords:   Milton Friedman, Leonard J. Savage, expected utility theory, as-if interpretation, EUT axioms, descriptive and normative, Jacob Marschak, Cowles Commission, Paul Samuelson, William Baumol

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