ABSTRACT
Schumpeter maintained that ‘[n]othing is so treacherous as the obvious’ (1943: 235), and the following is a case in point:
In explaining economic behavior, economics relies on the fundamental premise that people choose those goods and services they value most highly. To describe the way consumers choose among different consumption possibilities, economists … developed the notion of utility. From the notion of utility, they were able to derive the demand curve and explain its properties.
What do we mean by ‘utility’? In a word, utility denotes satisfaction. … Often, it is convenient to think of utility as the subjective pleasure or usefulness that a person derives from consuming a good or service. But you should definitely resist the idea that utility is a psychological function or feeling that can be observed or measured. Rather, utility is a scientific construct that economists use to understand how rational consumers divide their limited resources among the commodities that provide them with satisfaction. In the theory of demand, we say that people maximize their utility, which means that they choose the bundle of consumption goods that they most prefer.
(Samuelson and Nordhaus, 1998: 80–1; original emphases)