Significance of the Nonuniqueness of Neoclassical Direct Utility Functions Especially When they are Empirically Confirmed

Abstract

Whenever a neoclassical direct utility function is in close (even perfect) agreement with consumer behavior data, there is always an alternative direct utility function that agrees at least as closely with the same data. Existence of this equally well (if not better) fitting alternative to such a neoclassical direct utility function has considerable significance for the rational conduct of potential problem analysis in the policymaking arena. [We shall give an important example later in this note.] However the nonuniqueness of the neoclassical utility function on empirical data is rarely mentioned in the literature of economic theory, it appears to be little understood among economists generally, and most doctoral students are never told about it in advanced economic theory courses.

We are indebted W.A. Barnett, D. W. Jorgenson, P.A. Samuelson and S.N. White for helpful comments on the subject of this paper. Responsibility for errors and omissions is ours alone.