Ethics and Economics - Research Article from Encyclopedia of Philosophy

This encyclopedia article consists of approximately 8 pages of information about Ethics and Economics.
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Rationality, Utility Theory, and Welfare

At the foundation of economics lies a normative theory of individual rationality. The theory raises no questions about the rationality of ultimate ends and few questions about the rationality of beliefs. It maintains that an agent A chooses (acts) rationally if A's preferences are rational and A never prefers an available option to the option chosen. A's preferences are rational only if they are transitive and complete—that is, A can consistently rank all alternatives. If an agent's preferences are complete and transitive and satisfy some technical conditions, they can be represented by numbers. These numbers, which are arbitrary apart from their order, are "ordinal utilities." If an agent's preferences satisfy additional conditions concerning risky or uncertain alternatives, then they can be represented by a cardinal utility function. In contemporary economic theory, utility is merely an index locating alternatives in a...

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This section contains 2,169 words
(approx. 8 pages at 300 words per page)
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Encyclopedia of Philosophy
Ethics and Economics from Encyclopedia of Philosophy. Copyright © 2001-2006 by Macmillan Reference USA, an imprint of the Gale Group. All rights reserved.
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