Is the Utility Maximization Principle Necessary?
Katalin Martins (Dept. of Atomic Physics, Roland Eotvos University, Hungary) Microeconomics and thermodynamics are both based on the idea of exchange. In thermodynamics the irreversibility of exchanges is a key idea and one that my physics students sometimes have difficulty understanding. So about twenty years ago I went looking for examples of irreversibility in economic theory that I could use in my teaching of thermodynamics. What I found, however, was no irreversibility in the neoclassical paradigm. As a physicist this struck me as preposterous and incredible. Without irreversibility, microeconomics might be a wonderful mathematical theory, but it could not offer a theory of economic activity. This encounter marked the beginning of my long-term interest in economic research. Most economists living today grew up with the idea, even if not always agreeing with it, that there is and should be a master theory, neoclassicalism. [1] Central to this theory are the principles of utility an
