Criticism of indifference curve analysis
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Hicks and Allen, in an attempt to find an alternative approach to Marshall’s utility analysis, have described the indifference curve analysis. However, many economists feel that the indifference curve is not an alternative to cardinal utility theory, but a replica of it.
For instance, according to Prof. D.H. Robertson, the indifference curve analysis is just "the old wine in a new bottle." Robertson further states that the indifference curve analysis has simply substituted new terms in the place of old ones. The following table shows how the concepts of cardinal utility theory have been replaced with new concepts.
Cardinal Utility Theory
Indifference Curve Analysis
1. Diminishing marginal utility
Marginal rate of substitution
2. utility
Preference
3. Cardinal number system (one, two, three,..)
Ordinal number system (first, second, third,...)
4. Equilibrium condition: MU of X/price of X = MU of Y/price of Y (Proportionality Rule)
Equilibrium condition: MRS of X for Y = price of X/price of Y
For instance, according to Prof. D.H. Robertson, the indifference curve analysis is just "the old wine in a new bottle." Robertson further states that the indifference curve analysis has simply substituted new terms in the place of old ones. The following table shows how the concepts of cardinal utility theory have been replaced with new concepts.
Cardinal Utility Theory
Indifference Curve Analysis
1. Diminishing marginal utility
Marginal rate of substitution
2. utility
Preference
3. Cardinal number system (one, two, three,..)
Ordinal number system (first, second, third,...)
4. Equilibrium condition: MU of X/price of X = MU of Y/price of Y (Proportionality Rule)
Equilibrium condition: MRS of X for Y = price of X/price of Y
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