Lee, I believe that a good many holes have been exposed in utility theory,
but it is an easy concept to be woolly around and helps to make sense for
the current business environment. (Hegemony of ideology? Conspiracy
theories? Just the way it is?)
Of course, the classical view of utility assumes perfect knowledge. In
this case, that requires at all buyers are aware of their utility
preferences, are aware of all products that could meet their needs and
aware of all prices so that utility could be maximised. (It also assumes
that we all automatically solve a utility maximising function to be able
to optimise our choices :-) )
The reality is that people make choices based on some understanding of
their needs (but note that this is not an atemporal thing) and their
current knowledge (or expectation of future knowledge) of markets, their
own desires, whims, weather patterns, windows of irrationality etc. I
suspect that if one were to ask a panel of psychologists if human
behaviour can be predicted with certainty, the answer would be something
like "It depends on the people, their environment, their history, their
relationships......."
I believe that economics is much like that. It is an attempt to
understand human relationships in the "marketplace", where the market is
much less clearly defined than we would like to think. Like any study of
human behaviour, I think that economics can model some "big picture"
elements, but even these are subject to variable feedback. I have
modelled economies, and sectors of economies using traditional econometric
tools, and while these exercises have satisfied immediate needs to some
extent, I do believe there is an element that we tend to gloss over: the
human factor. I have not done all that much thinking on this area, but
have been striving to expand my systemic understanding of economics and
constantly come up against challenges in defining system boundaries that
are sufficiently inclusive to allow emergence, yet "small" enough to be
tractable.
To come back to Lee's note, and hopefully make a link with this note, what
is in our own best interests must by necessity constantly change - as we
grow, as our environment changes, and new products are developed, as old
products are removed from the market, etc. In a similar way, what is in
the LO's best interests will also constantly be changing. I think that as
long as we can make decisions based on our believed assessment of current
best interests (taking a temporal view of interests) we are likely to be
along the path to learning. I also think that if we are prepared to
categorically define a "best interest" we may well be limiting our ability
to learn.
Thanks for listening to this ramble.
Still learning,
Les
--Leslie Lax Kelowna BC
e-mail: leslax@cnx.net web: http://members.cnx.net/leslax
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