Why Neoclassical Economics Must Eliminate the Assumption of Utility Maximization, Ceteris Paribus

A philosophical critique given of the Neoclassical assumption of utility maximization suggests that utility is an inadequate theory of well-being. An outline of the fundamental assumptions in Neoclassical economic theory is given as well as a detailed look into the utility model. Next, an outline of Institutional economics is presented as well as its attack on the assumption of utility maximization. Institutional economists believe that wellbeing is constituted by objective needs that are universalizable. It is then argued that Neoclassical economists uses utility in reference to either two theories: a pleasure theory or a preference theory. Argumentation shows that neither the pleasure nor the preference theory are adequate theories of well-being. The author proposes that there are two necessary and sufficient conditions of an adequate theory of well-being: non-instrumental values and the appreciation of non-instrumental values. The Platts-McDowell objective list theory is presented as an alternative theory of well-being. The theory holds that wellbeing is constituted by desirable characteristics intrinsic in activities and experiences, and for those characteristics to mean anything to the individual he must first appreciate those non-instrumental values. In an attempt to reconcile the philosophical theory with economics, an alternative theory of well-being is given to be used in Neoclassical economics. The alternative theory uses indices that represent non-instrumental capabilities that constitute well-being