The Econometric and Experimental Approaches to Utility Measurement of Frisch and Thurstone, 1925–1945
Chapter 7 discusses two early attempts to measure utility empirically. In 1926, Norwegian Ragnar Frisch applied an econometric approach to measure the marginal utility of money. Following a suggestion from economist Henry Schultz, in 1930, American psychologist Louis Leon Thurstone conducted a laboratory experiment to elicit the indifference curves of an individual. Notably, both Frisch and Thurstone intended measurement in the unit-based sense. Most commentators of the 1930s and early 1940s judged the assumptions underlying both Frisch’s and Thurstone’s utility measurements highly problematic and therefore remained skeptical about the significance of their respective measurements. Moreover, after the mid-1930s and the completion of the ordinal revolution, most utility theorists lost interest in measuring utility in a more than ordinal sense. Among the most vocal critics of Thurstone’s experiment were W. Allen Wallis and Milton Friedman, then two young economists and statisticians who had studied at the University of Chicago.
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