Measuring the Economizing Mind in the 1940s and 1950s: the Mosteller-Nogee and Davidson-Suppes-Siegel Experiments to Measure the Utility of Money

The paper studies the origin, content and impact of two experiments to measure the utility of money. The first experiment was performed between 1948 and 1949 by F. Mosteller and P. Nogee, and grew directly out of Mosteller’s discussions with M. Friedman and L.J. Savage. The second was carried out in 1954 by D. Davidson, P. Suppes, and S. Siegel. Both experiments relied on expected utility theory (EUT), and both groups of experimenters concluded that their findings supported the measurability of utility as well as EUT. For a number of reasons, the two experiments provide a case study that illuminates the interaction between economics and psychology in the 1940s and 1950s. First, their designs exhibit a tension between the economic image of human agency associated with EUT, and insights from experimental psychology research that were in contrast with EUT’s assumptions. Second, both experiments were performed by psychologists and other non-economists, and the paper reconstructs how their authors became interested in measuring the utility of money. Third, the paper shows that the psychological insights contained in the designs of the two experiments found some application between 1955 and 1965, but were quickly forgotten afterwards. Only in the 1970s, when robust experimental evidence against EUT accumulated, were economists compelled to re-consider those psychological insights