On utility

There is something about utility (hence demand) theory that I’ve never quite understood, and I would be glad if someone could shed light on this matter.

To confirm my impression of the profession’s current level of understanding, I went to that splendid textbook, which has never failed to illuminate in the past, “Economic Theory and Operations Analysis” by William J. Baumol.  There I turned to section on utility theory, and was greeted by a diagram giving the utilities of various combinations of servings of zabaglione and number of cummerbunds.

Now my point is that we don’t choose between combinations of servings of zabaglione and number of cummerbunds, but between combinations of servings of zabaglione per unit time and number of cummerbunds per unit time.  Consumption, and demand are flows, not stock variables.  Yet the theory blithely treats them as stock variables.  I have found the same prestidigitation in Samuelson’s texbook.

Time is an essential input into production, and the economic problem vanishes if inputs are converted to outputs instantaneously.

Neoclassical mainstream economics ignores the problem of time, and thus seems stuck in a pre-newtonian vision of the world.

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