Economic View: When proven economic theory falls flat on its face

From: The Independent (London, England) | Date: July 11, 1996| Author: | Copyright information

Does the fact that taking Prozac can make somebody more inclined to impulse buy when they are out shopping invalidate economic theory?

It is a serious question. The foundation stone of economics is the assumption that individuals maximise their expected utility - that is, the benefit they expect to gain from their choices on work, saving and spending. Aggregating the choices of all the individuals in the economy delivers the familiar results of economics, such as lower prices, causing demand to increase.

However, the results depend on people's preferences having certain key characteristics, ...

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