The interpretation and role of utility from early economic views to behavioral economics

Abstract

This study examines the historical development of the concept of utility from early 18th-century economic views to behavioral economics. It critically evaluates and analyzes how the interpretation and role of utility has changed with the development of economics–from the normative foundations of utilitarianism, through the theory of marginal utility and the model of rational choice, to the formalized framework of expected utility maximization. The study pays particular attention to how behavioral economics has challenged the assumptions of neoclassical economics regarding rationality and expected utility. Finally it also discusses, how empirical research findings on decisions and behaviors in real-world settings have contributed to the enrichment of the concept of utility and utility functions.