Making it up with Psychology
Economists, Psychologists and the theory of choice after
World War Two
Jean-Sébastien Lenfant 
(First draft, May 2012, do not quote)
In this article, my aim is to understand the ins and outs of the interdisciplinary
endeavor between economists and psychologists that took place mainly at the
turn of the 1950s prior to the advent of behavioral economics as an autonomous
field of research. More precisely, I would like to question the impact on
consumer theory, of this period of intense, although relatively confined,
collaborative work. The main motivation for this study is the need to
understand the reorientation of consumer theory in the 1950s and 1960s, after
the fundamental accomplishment of Revealed Preference Theory in 1950
(Samuelson, 1950). From previous work on this subject (Lenfant, 2011) it
appeared that the reorientation of consumer theory and many debates that
arose in the 1940s and 1950s were more or less influenced by methodological
arguments that had been carefully put aside in the preceding years.
Since the banishment of psychology outside the realm of economics by Fisher
(1892) and Pareto (1909), occasions of cross-fertilization with economics have
been rare, or simply declarations of intent. From time to time, especially in the
heyday of behaviorism, some economists have condemned this isolationist
attitude, calling for reconciliation and upholding that modern psychology was
relevant to economics (J. M. Clark, 1918a and 1918b; Knight, 1925; Clark
Dickinson, 1919). Conversely, psychologists in the early 1940s were still not
interested in applying their findings to economics, and Katona (1946, 44) could
deplore that "economists have found in the publications of psychologists little
to attract their attention".1 Rightly, the economic model of rational behavior
could appear as too remote from the interests of psychologists who, on the
contrary, where studying specific behaviors in context.
Thanks to a handful of psychologists in the 1940s and 1950s, psychologists
were progressively familiarized with the economic theory of rational behavior
and would soon show a peculiar interest for the von Neumann-MorgensternSavage theories of decision. In the early fifties, the economic concepts of
preference and utility were not familiar to psychologists. The favorable context
for cooperation between psychologists and economists developed in 1950s at

Clersé, Université Lille 1, e-mail for correspondence: jean-sebastien.lenfant@univ-lille1.fr
1 See also Mayer (1949).
the university of Michigan. Under the auspices of the University of Michigan,
seminars would bring together economists, psychologists, mathematicians,
philosophers and behavioral scientists in the early 1950s, opening to an intense
collaborative work at the border between economics, psychology and
mathematics. In the early 1950s the classical model of choice (Slutsky-HicksSamuelson) and the model of Expected Utility were not familiar to most of the
psychologists. In his much-cited survey on decision theory, psychologist Ward
Edwards (1954) aimed at presenting to psychologists what he considered to be
the unknown theory of consumer’s choice as economists have developed it
along the lines of Pareto and Hicks. Although the theory was not widespread,
he could add that an increasing number of experiments had already been
conducted by psychologists and economists « that are relevant to it », thus
suggesting that a growing number of psychologists had already begun to test or
to explore the theory (e.g. Rousseas and Hart, 1951; Thurstone, 1931; Preston
and Baratta; Mosteller and Nogee, 1951; Flood, 1951)
Understandably, if the collaboration between economists and psychologists
is not that natural, it is not only due to preventions against psychology on the
part of economics; it stems also from the fact that the language of economics is
not natural to a psychologist and vice versa. When they study choice and
decision, psychologists are accustomed to think about it in terms of motivation,
learning, degree of concentration and fatigue, routines vs genuine problem
solving, attitudes, but in no way they would address directly decision and
choice in terms of preferences and indifference. Moreover, psychologists are
prone to think about any behavioral question in terms of measurement. Arrow
identified the gap:
The economist is usually not interested in choices or preferences in themselves;
the theory of choice serves as a background for empirical demand analysis or as a
tool in welfare economics. There is little investigation of the utility function in
itself, and what assumptions are made about it are of a very general nature. Only
in side remarks do we find any attempt to develop an organized structure of
choices. The sociologist and the social psychologist, on the other hand, are
interested as much in the choices themselves as in the consequences which flow
from a general theory of decision-making. Thus research on attitudes has been
concerned chiefly with the relationships among different attitudes. When social
psychologists became interested in the utility of gambling, it was the possibility
of measuring the utility curve that interested them, not the implications for
behavior in economic situations. (Arrow, 1958, 8-9)
In recent years, historians of economic thought have begun to study in depth
the relationships between economics and psychology and the advent of
behavioral economics (Heukelom, 2007 and 2009; Innocenti, 2010; Sent, 2004).
They have also identified some connections between the two disciplines on
different issues such as transitivity of preferences (Moscati, 2007), measurement
2
(Heukelom, 2009). In the present study, my aim is more methodologically
oriented, more general in its scope, and more modest in the results.
My contention, in this article, is that given the conceptual gap between
economics and psychology, the history of the overall influence of psychology
on economics could be thought of in methodological terms. As far as the theory
of choice and decision is concerned, I would like to show that what economists
have taken from psychology—if ever they have—and promptly adopted is both
the use of probabilistic thinking (the consumer and the decision maker become
probabilistic) and the use—or acceptance at least—of experimental protocols.
Actually, the article aims at clarifying the impact of the sequence of transdisciplinary relations between economics and psychology during the 1950s and
1960s, on further developments of the theory of choice, specifically on the
theory of the consumer. It does not intend to cover the broader field of decision
theory. Nevertheless, to the extent that both choice and decision theories raise
similar methodological questions on the part of psychologists, the article will
not be confined to the theory of riskless choice. Indeed, the theory of choice
under risk and uncertainty sparked a particular interest among psychologists,
and raised methodological issues common to those that arouse from the riskless
choice model.
Exchanges and collaborations between economists and psychologists were
limited after war, but would be organized around decision theory, a field of
interest to psychologists who would see in the Savage model a normative
scheme likely to serve as a departure for many experiments, with a view of
refining their theories of measurement. The interest for riskless choice is more
in the background in the 1950s, but is surfacing in any general study on
transitivity. This literature offers a good corpus to study the penetration of
psychological arguments into the economics of the consumer. The temporal
bounds and the acme of this story are well defined. At the beginning of
economics and psychology being brought closer to each other, it is
commonplace to mention Thurstone's (1931) attempt at obtaining
experimentally an indifference curve, an attempt that would let psychologists
as well as economists almost unconcerned. At the end, there is the advent of
Tversky's research program on the framing of decisions that is a hallmark in the
institutionalization of behavioral economics (Tversky, 1969; 1972; 1974). In
between, the catalyst of the exchanges between economics and psychology was
the University of Michigan, a place hosting research centers in psychology and
a regular summer seminar gathering economists, psychologists, philosophers
and mathematicians (Heukelom, 2007). In the 1950s also, a number of
contributions would pass the disciplinary border and contribute to accustom
economists with the ideas and methodology of psychologists (Mosteller and
Nogee, 1951 ; Suppes, 1961 ; Suppes and Winet, 1955 ; Luce, 1956 and 1958).
Thus, within the 1940s-1960s there is a complex relationship that I propose to
3
analyze as far as the theory of choice is concerned,2 with the aim of discussing
about what concepts and methods from psychology have been progressively
adapted and adopted within economics and to how far economics and
psychologists have worked on similar objects with different goals in mind.
Frankly, the outcome of this prolific period is tenuous, and even though to two
or three significant ideas may have cross the border, they have not lead so far to
any significant reorientation of the theory of the consumer.
In order to give a full account of the contributions of psychologists to the
theory of choice and of their eventual influence on the theory, I shall first make
it clear that the interest of psychologists in economic theories of human
behavior stems from an interest in measurement. Then, in section, 2, I shall
focus on the three main issues that psychologists will discuss about choice
theory: preferences, indifference, levels of aspiration. Section 3 gives an
overview of the influences of psychologists— and of their ideas—on the theory
of choice. Section 4 concludes.
1. The measurement ethos in psychology: from just noticeable
differences to utility
In this section, my aim is to explain how psychologists were likely to be
interested in decision making models or models of choice inasmuch that it
would serve the purpose to test or to refine their own models of measurement.
Since the nascent of psychology as an experimental science in the late
nineteenth century, with Fechner and Wundt, the issue of measurement is at the
core of its development. The spirit of measurement that pervades all
psychology derives from historical origins of experimental psychology, when
the main topics of study were linked with to the sensations associated to
physical stimuli (Michell, 2004). Most of the work done by psychologists
consists in finding out scales of measurement and of comparing alternative
experimental methods and protocols both to test the reliability of a
measurement scale and to confront different scales. In the twentieth century,
another branch of psychology would emerge, mathematical psychology, whose
aim is rather to conceive of alternative models of measurement and to inquire
about the properties of those models, notably, about the kind of operations that
one may want to do with the values.
From Fechner to Thurstone: the data of measurement in psychology
In the 1940s and 1950s, the debates on measurement systems in psychology
were organized around the seminal contributions by Thurstone (1927a and
It is beyond the scope of this article to deal with the contributions of psychologists to decision theory
(risky decision)
2
4
1927b), who claimed to have found a solution to Fechner's problem of
measurement. Fechner had grounded the measurement of psychological
magnitudes on the principle of just noticeable differences. Taking as an origin
of any magnitude the absolute threshold (the least physical magnitude a subject
is able to discriminate), considering that just noticeable differences (jnds)
constructed from this absolute threshold indicate successive variations of
physical stimuli of equal psychological value, the measurement of any physical
magnitude could then be associated to a numbering of its psychological value
for the individual. On many occasions, Fechner's method had proven to fail or
to lead to different scales of measurement for different individuals. As
psychologists would show, Fechner's law is usually wrong and jnds are larger
as we go up the scale (Stevens, 1957).
Thurstone's solution consisted in giving a stochastic interpretation of the
Fechnerian method. A stimulus a can be given many values xa1, xa2, ...xan by the
same individual or by many individuals, and those values are distributed
normally. If a subject is asked which of two stimulus a or b has the most of an
attribute, the probability pab that a as more of the attribute than b will reflect the
overlap of both normal distributions. Provided that some assumptions are
made on variance and covariance of the distribution, pab is the normal
distribution of the difference between the averages xa and xb. Then, for a
sufficient number of pair-wise comparisons between stimuli, the values xa and
xb can be recovered. As Gigerenzer (1987b, 57) notes, Thurstone provides the
first integrative analysis of modeling and measurement.3
Broadly, Thurstone's seminal article is a plea for not constructing scales (or
units of scales) on the basis of information about the about jnd, about subject's
discriminal dispersions (i.e. the variability in the subject responses to a same
stimulus) and discriminal distributions (i.e. the distribution of his responses).4
This probabilistic model of measurement, the law of comparative judgment,
provides a mathematical formulation of the relation between an individual’s (or
many individuals) variability in his response to a variation of stimulus (a
comparison between two stimuli) and the physical magnitude of the threshold.
It would become very popular in later experimental protocols, at least for the
use of a probabilistic interpretation of subject’s responses.
Measuring behavior in psychology: just noticeable differences and scaling
The relationship between rationality, measurement, and normativity is
probably the most important issue for psychologists. According to Heukelom
(2007), psychologists consider the economic model of choice and decision as a
normative benchmark that each rational subject is supposed to respect,
3 Gigerenzer notes also that the assumption of a normal distribution of the answers around the average
is not motivated by some psychological theory of perception, and that Thurstone does not state if he thinks
of intraindividual or interindividual responses.
4
5
provided that the context of choice and decision is aptly controlled. Of course,
one must add that since the question of measurement is at the core the debates,
it is not possible to identify a shared view on this. The specific difficulty for
psychologists is to make explicit a number of theoretical principles on which
they would like to erect on the one hand, one or many systems of
measurements and, on the other hand, a theory of actual behaviors, i.e. a theory
encompassing the errors and failures of subjects to abide by the principles of
rational behavior. Confronted with manifest violations of the normative theory
of choice (intransitivity, violations of independence axioms, inconsistencies in
subjective probability…) both the economist and the psychologist will look first
for external explanations (errors than can be attributed to the protocol itself or
to external uncontrolled conditions). The psychologist shall try to grasp
something from the errors of the individuals and to relate those errors to some
specific attributes of the experiments. He knows that this attempt of extracting
meaningful information from supposed errors is conditional on the quality of
his system of measurement, that must have been checked in supposed ideal
conditions, i.e. in a sufficient number of experiments for which the subjects
responses to stimuli have made it possible to construct a valid scale of
measurement, and for which it is supposed that no interfering phenomenon
would have distorted the scale. It results that any new experiment can serve as
check for the generality of the measurement scale and as an effective occasion
for measuring inconsistency of responses and making a theory of those
inconsistencies, that is, identifying some attributes of the experimental device
that are correlated with errors of measurement. Here again, Arrow captured the
essentials of the psychologist's ethos: "For empirical work, measurement, while
not logically indispensable, is extremely convenient and the behavioral scientist
will make many assumptions analogous to cardinal utility, and indeed to
highly specific forms of cardinal utility, simply because they are usable for
empirical work." (Arrow, 1958, 9)
Among the many surveys or books on psychological measurement scales in
the 1940s and 1950s (Gulliksen, 1946 ; Stevens, 1946 and 1957; Coombs, 1950
and 1952; Churchman and Ratoosh (eds.), 1959; Luce and Suppes, 1965))
psychologist adopt a recurring classification due to Stevens (1946) in terms of
ordinal scales and extensive scales. Then psychologist will develop a number of
scales, differentiating (after Stevens, 1946) between nominal, ordinal, ordered
metric, interval, and ratio scales (e.g. Coombs, Raiffa and Thrall, 1954, 26-34).
Ordinal scales are usually dismissed as the least interesting scales, inadequate
to the discovery of psychological laws. On the contrary, psychologists favor
extensive scales that lend themselves to basic calculus (sums and differences).5
Thus the law of comparative judgment and the method of paired
5
An inspiring reference in physics Is Norman Robert Campbell (1928)
6
comparisons have "valuable properties not possessed by ordered or rank order
scales" (Gulliksen 1946, 199). In psychology, additive operations on
fundamental magnitudes are not possible, contrasting with physics (mass,
length). In order to find some generalization of the operation of addition, scales
obtained from paired comparisons allow this kind of operations. An important
point in this search for measurement is not that psychology is searching for
scales having the same properties as in physics, it is rather to develop scales
based on individual responses to stimuli, on the basis of which some kinds of
operations are meaningful: "The important thing is that numbers can be
assigned to objects in such a way that an operation (no necessarily addition)
with two numbers will indicate the result of some experiment which can be
performed with the two objects represented by these numbers. This experiment
should be independent of the rest of the population of scaled objects" (Gulliksen, 1946,
202)
One fundamental hypothesis, as Stevens (1957) reports it, is that of
psychological continua, i.e. the idea that subjects will evaluate the strength of a
stimulus along a continuing homogenous line. At least for many perceptual
continua, "direct assessments of subjective magnitude seem to bear an orderly
relation to the magnitude of the stimulus". Those psychological continua are
thus highly conjectural and psychologists admit at least the principle of a divide
between two classes of continua: quantifiable (or prothetic) continua and
qualitative (metathetic) continua. Prothetic continua have to do with How
much question, whereas metathetic continua have to do with What kind and
Where questions. The main criterion for separating between those continua is
the idea that in the case of prothetic continua an additive process at the
physiological level mediates the discrimination process of the subject (e.g.
loudness, weight). As for metathetic continua, the discrimination process,
within the subject is mediated by a physiological process that is substitutive.
This distinction is important to us, regarding measurement of preference or
utility, since the main message of Stevens is that Fechner's law (the idea that
equally often noticed differences are equal, implying that the unit of
measurement is given by resolving power) is wrong for prothetic continua.
Instead, there is "growing evidence" that the form of "the psychological law" for
the prothetic continua is a power function, i.e., "the psychological magnitude is
a power function of the stimulus magnitude." (Stevens, 1957, 162). 6 The
development of this law is based on a reorientation of the methods of
psychologists. Instead of using indirect methods (Fechner) they use direct
methods regarding the relation between stimulus and sensation. Precisely, the
6 But, as Stevens mentions, it may be that the traditional Fechnerian view still can be adequate for
dealing with qualitative continua (metathetic): "the laws of judgment derived from direct experiments on
perceptual continua make it plain that, unless it can be demonstrated that the judgmental continuum
behaves like those of Class II (metathetic), any scaling procedure that is geared to the assumption that
equally often noticed differences are equal is defective"
7
psychological law is derived from the use of ratios. The psychologists identify
that subjects tend to order sensations associated to stimuli in such a way that
equal stimulus ratios tend to produce equal sensation ratios (Stevens, 1957,
162). 7 Incidentally, Stevens mentions Fullerton and Cattell (1882) as
unsuccessful pioneers on that. Indeed, Fullerton and Cattell considered that the
measurement of jnds was uneasy and that is was necessary to account for the
errors of judgment of the subject (or for the variability of his responses), thus
opening the way to a probabilistic treatment of his response to a stimulus.
All the important contributions and surveys to the topic refer to the different
kinds of scaling that one can obtain, their properties, and provide refinements.
A question that lends itself is whether psychologists are likely to measure
individual’s utility for money or preferences between different items in the
same way, and with the same fundamental assumptions as the one they use for
measuring the psychological value of physical magnitudes? It would be
preposterous to give a single answer to this question. As an example of the
importance of measurement, Coombs (1950) offers some evidence that decision
and choice issues will be approached that way, i.e. as measurable magnitudes
possessing algebraic properties, that is, on the basis of which new experiments
could be devised.
Working along Stevens lines, Coombs (1950) launched an "ordered metric
scale", a scale that does not suppose a constant unit of measurement. This
ordered metric seems to be devised specifically for dealing with preferential
judgment. Indeed, he ends by confessing that with this new type of scale, he
seeks to discover "a latent attribute underlying preferences" and the "order of
the stimuli on the attribute continuum" (Coombs, 1950, 157). In the book
Decision processes, edited by Coombs, Thrall and Raiffa (1954), Coombs again
builds upon Arrow's problem of defining a social utility function. He begins
with constructing a joint distribution scale (people and stimuli on the same
line):
If an individual says he prefers stimulus A to stimulus B, this indicates that at the time of
that judgment, his ideal was located to the left of the midpoint between the two stimuli"
(Coombs, 1954, 73). Thus, an individual ordered metric can be constructed if, for any
pairs of stimulus, one can partition the continuum into segments and if all answers to all
possible pairs allow to locate the individual in one of those judgments, then they are
consistent and transitive. And they could be completely represented by a rank order of the
stimuli. (Coombs, 1954, 73)
Of course, it is not possible to make a general statement on the basis of just
Coombs’ way of dealing with choice and measurement. Nevertheless, it is a fact
that all the psychologists that would be involved in investigating the economic
E.g. to make a sound seem half as loud as another, the physical energy must be reduced by about 90
percent, regardless of the initial level of the sound.
7
8
theory of choice and decision would constantly put to the fore the commitment
to arrive at some measurement of utility for the subjects. Edwards’ judgment on
the ordinalist turn in economics seems fairly representative of, at least, the
conditions for psychologist to find choice and decision theory worth exploring.
Dispensing with the cardinalist view on the ground that indifference curves can
do as well is “only an argument for parsimony, and parsimony is not always
welcome” (Edwards, 1954, 386)
Measuring utility
As an illustration of the disdain of psychologists for the refinements of
economists’ quibbles about utility measurement, Steven’s attempt at measuring
utility of money is probably the most unequivocal. According to Stevens, the
utility of money should be classified among prothetic perceptual continua: "it
has more the earmarks of a 'quantitative' than a 'qualitative' continuum"
(Stevens, 1959, 53)8. Then, one might expect that it is a power function of the
dollar. I won't enter into Stevens's protocol. My point is that the much
discussed topic of utility as a measurable magnitude in economics is considered
by psychologist as de facto measurable, the only question being of comparing
the power of the measurement scale obtained for different economic concepts.
As an illustration of this, Stevens goes on: "It is important to note that in
asserting [the] possibility [that utility is a power function of the quantity of
money] we are assuming that utility can be measured on better than an interval
scale. The [Von Neumann-Morgenstern] version of utility, the measure of
which is derived from risky choices, envisages interval measurement only, and
the question arises: on what grounds can we hope to do better?" (Stevens, 1959,
53). And since the ratio scale used to proceed to the measurement of utility of
money contains the interval scale obtained by VNM, theorist are simply
advised to get rid of scaling up to a linear transformation of the VNM type.
Measuring utility, devising scales of measurement and eliciting their
properties and the experimental conditions for their application becomes a
specific field of research in psychology in the 1950s, labeled mathematical
psychology.
As far as economics is concerned, the most important mathematical
psychologist is R. Duncan Luce. Luce made much to the interplay of ideas
between mathematical psychology and economics, and he was also well aware
of parallel attempts at developing probabilistic theories of the consumer in
economics. Also, Luce repeatedly came on the subject of discriminatory power,
that he linked with the Fechnerian tradition of psychophysics (see especially
Luce, 1959b and Luce and Edwards, 1958). Luce's work is of course at the core
8 This is a very strange and unjustified assertion indeed. It shows that for Stevens, the subject is
supposed to react to the increase in the amount of money irrespective of the changing representations he
should have of what he can afford with this changing sum of money, a mental process that would
certainly call for substitution of one representation by another (metathetic continuum).
9
of the ferment of ideas of the 1950s regarding psychological measurement, and
he contributed to the import of measurement methods from psychology into
economics, a move that had already started with Marschak. Luce's
contributions deal, first and foremost, with the extension of the preferenceindifference setting in a way well suited to derive a probabilistic utility scaling
from observed choices (see especially Luce, 1958, 205), or else what Marschak
would label a "random utility indicator" (cf. also Georgescu-Roegen, 1950).
In two articles (Luce, 1956; 1958) published in economic journals
(Econometrica and American Economic Review), Luce proposes a model of
probabilistic utility, such that the probabilities of choice among binary
alternatives are reflected in a probabilistic utility function. The book Individual
choice behavior (1959) would perfect the project of exploring the possible links
between the pattern of probabilistic preferences and the existence of some kind
of cardinal utility measurement. Luce share with many economists and
psychologists that human being do not have perfect discriminal abilities. We
cannot discriminate adjacent weights, for instance, and nevertheless, we can
differentiate a greater difference. Intransitivity thus "reflects the inability of an
instrument to discriminate relatively to an imposed discrimination task" (Luce,
1956, 179).9 Indeed, following the idea that individuals do have an imperfect
power of discrimination (represented through the notion of just noticeable
differences), a specific kind of scaling of individual preferences could be
obtained through an adequate set of constraints on the probability to choose
one element in a set of alternatives.
It was clear to many psychologists that the first difficulty that had to be
overcome to render the model of rational choice of interest to psychologists is to
deal with frequent intransitivities observed in preferences or with indifference.
In his first formulation (Luce, 1956), the model was not statistical, in the sense
that the variability of the subject during the experiment is not taken into
account. Luce's (1956) axiomatization of preferences allowing for intransitivity
of the indifference relation (called a semiorder) is shown "to be substantially
equivalent to a utility theory in which there are just noticeable difference
functions which state for any value of utility the change in utility so that the
change is just noticeable" (Luce, 1956, 178). The 1958 article went further in
introducing an assumption of strong stochastic transitivity on choice, as a likely
assumption of rational behavior (“it would be folly to ignore the tendency
toward transitivity completely”) (Luce, 1958, 198). From this assumption, it
follows that under some regularity assumption on the probabilities in the set of
choice (indeed, an additivity assumption), strong stochastic transitivity implies
the linearity of the random utility function. It was then the basis for formulating
an axiom of choice set forth in Luce (1959b). Consider three sets S, T, U of
alternatives, such that S  T  U, and two alternatives x and y in S and denote
9
See also Luce (1959, 145-146)
10
by PT(S) the probability that the element selected in T belongs to S. The axiom
of choice states that if P(x,y)  0, for all x, y  U, PU(S) = PT(S)PU(T). An
important consequence of this axiom10 is that under certain conditions, there is
on U a positive real-valued function v(.) such that
. In order
to obtain a single acceptable scaling of preferences, "quite strong assumptions
must be made about the probabilities of preference. These include the familiar,
but nonetheless controversial and largely untested, assumptions that certain
variables are normally distributed and that the error terms are statistically
independent of practically everything in sight. Such assumptions are most
familiar from factor analysis and the Thurstone school of scaling” (Luce, 1959b,
146-147)11
From this overview a reasonable hypothesis is that the interest of
psychologist for the theory of choice and decision in the 1950 is conditional
upon making it a tool for measurement, beyond the mere acknowledgment of
the sufficient conditions for an ordinal utility function. In this respect, there is
no doubt that the interest of psychologists for economic theory of rational
behavior was motivated by the von Neumann and Morgenstern theory of
expected utility theory, which rendered the utility function much more
attractive. For all that, this first account of measurement issues in psychology in
the 1950s highlights the fact that the interest for choice theory (and decision
theory) is conditional upon the possibility to accommodate or simplify the
model so as to make it operational for psychological measurement.
2. Preference(s) and indifference as psychologists see them
In this section, I shall advocate that the concept of preference was deeply
questioned by psychologists when they discovered the theory of choice and
decision. Unsurprisingly, a number of experiments run by psychologists as well
as by economists would point to the weaknesses of the theory regarding
transitivity (Moscati, 2007). From the outset, it is not very surprising that
psychologists and economists have a different approach to the concepts of
preferences and indifference. And the question is whether methodological and
practical issues linked to measurement, experimentation and indifference, are
likely to be transferred from psychology to economics. Psychologists' attitude
toward the economic theory of choice can be understood from the standpoint of
their own representation of decision and choice, indicating a gap with
economists. In this respect, psychology would lead to a significant change in the
meaning of the preferences-indifference scheme.
10
11
It has since been widely used in discrete choice theory (cf. de Palma and Thisse, 1987)
See Murray (1987) for a comment internal to the history of psychological measurement.
11
Katona (1953) indicated that the gap between the abstract method of
economists and the hypothesis-testing method of psychologists might be
fruitful in the fields of associative learning and habit formation and of problem
solving (Katona, 1953, 309). He also pointed to an essential distinction in
psychology between repetitive or "habitual" behavior and problem solving
behavior, each being some exclusive rule of behavior. Habits govern an
important part of our daily decisions and make them to some extent "automatic
and inflexible" (Katona, 1953, 309). The importance of repetitive behavior for
the study of economic behavior "depends upon the frequency of repetition as
well as on its recency and on the success of past performances" (Katona, 1953,
309). In contrast, problems solving situations are characterized by the
understanding of a new situation or problem, by deliberation, by a weighting of
the alternatives (Katona, 1953, 309). And Katona points that economists do not
make a distinction between both types of behavior, and more, that neither one
nor the other can be thought of as rational in the sense of based upon all
information available. The hypothesis that individuals are able to order once
and for all the set of possible alternatives to which they might be confronted is
even contradictory with the principle of selectivity of human behavior that is
operating in both kinds of behavior.12 The cooperation between economists and
psychologists will thus depend upon the ability to disentangle to a certain
extent both forms of behavior within the theory of choice. The distinction seems
to be necessary for a situational definition of rationality.
In shall try to give a picture of choice theory as psychologists see it, focusing
on preferences in general, then on indifference, and finally on alternate
interpretation of the indifference-preference scheme.
Preferences, indifference and cardinal measurement
First of all, preferences, for a psychologist—if ever it is meaningful as a
psychological magnitude—is first and foremost a kind of relation "A preferred
to B" amenable to the same kind of experiment and measurement than
brightness ("X brighter than Y"), loudness, movement perception, etc. This
general principle will play an instrumental role in revealing the difference of
aims with economics. The word "preference" and the phrases "Subject i prefers
A to B" or "A is preferred to B" are rather rare in the psychological literature of
the 1940s-1960s, since psychologists would prefer to say that "Subject i chooses
A over B", and would consider that the link with the idea of preference as
economists understand it remote. And when they come to speak about
preference (or preferences) it is not necessarily with the indifference
/preference structure in mind.
The general status of the indifference-preference scheme in psychology is
12 "Yet habitual behavior is highly selective since it is based on (repeated) past experience, and problem-solving
behavior likewise is highly selective since reorganization is subject to a certain direction instead of consisting of trial
(and error) regarding all possible avenues of action." (Katona, 1953, 311)
12
hardly discussed. We have been able to identify very few discussions dealing
seriously with it. For instance, it is absent from the output of the Michigan 1952
seminar (Thrall, Coombs and Davis, 1954). Even the philosophical contribution
on utility by Bohnert (1954) does not mention it. As another proof that it cannot
be easily integrated into psychology is that even Thurstone (1931) did not
discuss it at length in his experiment.
Before Edward's (1954) well-informed survey on the theory of decision, who
introduced psychologists with the theory of choice (riskless and risky choices),
there does not seem to have been any attempt at discussing the concept on the
part of psychologists. Edward's starting point is the principle of rationality, that
is a weak ordering allowing comparability between any alternatives A and B, so
that either A  B, A  B, or A ~ B. He points also to the fact that transitivity of
preferences is the fundamental hypothesis for enhancing rationality. This
principle would quickly be accepted as a testable proposition of the theory,
provided that the experimentalist is able to control the factors affecting choice.
Indeed, it is a common criticism that preferences and indifference as economists
understand them are not easily obtainable from experiments.
In a book devoted to the theory of expected utility, Decision Making,
Davidson, Suppes and Siegel (1957) discuss about the proper way to attack the
theory of choice for psychologists and the difficulties that psychologists should
overcome:
Most models for theories of decision are naturally interpreted as dealing with
preference and indifference, while the protocols provided by behavioristic
experiments concern choices or decisions. Choices are particular responses with a
date; preference and indifference are rather dispositions which characterize an
organism over a span of time. This raises the question how choices are to be
related to preference and indifference. Perhaps the simplest suggestion is to
consider that a single choice of an alternative a when a and b are offered is
sufficient to conclude that a is (weakly) preferred to b. But this makes trouble. In
most theories of decision, indifferences (and the equalities which represent them)
play a critical role in the process of measurement. If we enforce choice in the
experimental situation, however, then the suggestion that choices be taken as
revealing weak preference deprives us of the opportunity of ever learning that
the subject is indifferent between two alternatives. (Davidson, Suppes, Siegel,
1957, 16)
Though Decision Making is focused on devising a testable model for choice
under uncertainty and disentangling the measurement of psychological
probability from the one of utility, it contains interesting general developments
on preferences behind the choice and the adequate way to attack it for
psychologists:
Even if we suppose that introspection could be made to yield measures of utility
13
and expectation, it is not really clear that these measures would be relevant to a
theory of rational decision. For it may be argued that since a theory of rational
decision is concerned with decisions, it is concerned with preferences and
expectations only in so far as these are choice-determining factors. From this it
would follow that preferences and expectations may, for present purposes at any
rate, be considered as dispositions whose sole effects are seen in actual choices.
Indeed it might be maintained that there is no other firm basis from which to
infer preferences and degrees of belief, even our own. (Davidson, Siegel, Suppes,
9-10)
Taken as a it is, preferences are of no interest to psychologists, because they
refuse to think of the individual rational agent as knowing from the outset the
whole range of his possible consumption and keeping them in a well arranged
order. Edwards, for instance, contests that rationality should imply well
behaved indifference curves: "It is conceivable, for example, that it might be
costly of effort (and therefore in negative utility) to maintain a weakly ordered
preference field. Under such circumstances, would it be 'rational' to have such a
field?" (Edwards, 1954, 382). That is why preferences are interpreted mainly in
relation with measurement issues. For instance, Coombs (1959) in
"Inconsistency of Preferences as a measure of psychological distance" builds on
the idea developed by Thurstone and Fechner that inconsistency of judgments
are a foundation stone for psychological measurement. He does not consider
that they mean that equally often noticed differences are equal but that for
them, inconsistency is monotonically related to psychological distance. The
question is how to apply the relationship of inconsistency to psychological
distance for data dealing with preferential choice. This is the endeavor of
Coombs. The main thesis is that:
The theory leads to the inference that inconsistency of preferential judgments is
not monotonically related to psychological distance and, in particular, is a
function of two variables (as will be shown), one of which is psychological
distance, and that the relation is monotone only if the second variable (here
called laterality) is held constant. (Coombs, 1959, 222)
Coombs’ experiment is very illustrative of the way psychologists can take over
the concept of preference. Using inconsistencies of judgment to measure
psychological distance is congenial with the use of jnds in psychophysics, and
Coombs proposes to extent its use to the measurement of psychological
distance in preferential judgments. In a nutshell, the experiment ran as follows.
Subjects are presented series of chips of 12 different shades of grey, from almost
blank to almost black. In each successive trial, they have to rank four shades of
grey, from the most preferred to the least preferred as a representative grey
(their own ideal, I). Each subject is asked to rank no less that 495 combinations
of four shades of grey. Then, Coombs is able to extract information from those
14
rankings in order to identify a predominant ordering of the stimuli from most
preferred to least preferred for each subject. This is done by extracting
information about pair comparisons from the four-stimuli comparisons. For any
pair (a,b) such that a is preferred to b (in the four-stimuli comparisons) more
than 50 percent of the time, a is said to exhibit dominant preference over b. If
this binary preference relations are transitive (for all 12 stimuli), then one has
found the ideal rank order of the individual’s preference, I.
The experiment and the statistical handling of data raise many questions
relatively to preference in economics. One important question for a
psychologist is that this kind of experiment is both a means for testing how
operational a statistical theory of measurement is relatively to a class of
psychological issues. But at the same time, it raises the fundamental question
about the unidimensionality of the latent attribute attached to the stimuli that
are involved in the ranking I, i.e. laterality. Here, the hypothesis of laterality is
fulfilled: Brightness is the sole physical attribute for differentiating the 12
shades of grey.13 And the author maintains that this unique attribute is enough
to establish some functional relation between the order of the ranking and the
physical distance of each shade of grey from the ideal grey. Once this laterality
hypothesis is verified, the second step of the analysis of data consists in
transforming inconsistencies in the subject responses in an index of
psychological distance, i.e. to show that there exists a monotone transformation
of inconsistencies into psychological distance. This measurement of
psychological distance depends upon the some kind of transitivity assumption,
quite similar to Luce’s strong transitivity (Luce, 1958). Among a triple of shades
of grey, the percentage of preferences of the first over the third must be at least
as great as the percentage of preference of the first over the second or of the
second over the third.14
It happens also that indifference curves are not taken as an observational
artifact, but solely as an instrumental device to recover the utility function,
under the prominent assumption in psychology that the different latent
attributes affecting choice and decision are independent, i.e. that the utility
function is additive. For instance, Coombs and Beardslee (1959) would derive a
three dimensional representation of indifference surfaces for prizes, stakes and
subjective probability. Another example, in the context of riskless choice, is
Adams and Fagot’s (1959) experiment to the effect of testing the hypothesis of
additive utility. They infer from this hypothesis some trivial and less trivial
properties of the preference relation over bundles containing different
13 “If the order of the stimuli on this I scale can be obtained by folding the stimulus scale of greys
which goes from light to dark, then the condition that preferences for greys are generated by a single
dimension of brightness is satisfied in so far as these data could test it” (Coombs, 1959, 226)
14 Actually, Coombs’s theory is that the measurement of psychological distance will be operational
depending on the relative position of the stimuli compared to the ideal (if the stimuli are on the same side
or not and in which order).
15
quantities of two goods that they submit to test. Although the empirical data
were coherent with the additive utility model only for 25% of the subject, they
nevertheless advocated in favor of the model on the grounds that all the data
that were disconfirming the additive model were also disconfirming the simple
ordinal utility model: “In other words, when the subject was sufficiently
attentive to be transitive, he was also additive” (Adams and Fagot, 1959, 296)
In a similar fashion, when the concept of indifference is taken for granted, it
is with the aim of recovering a cardinal utility scale (interval scales of
measurement). A singular example is Stevens (1959) who upholds—against
most of his colleagues—that indifference curves are easily obtainable on the
basis of some simple questionnaires or experiments, under the assumption of
additive utility.15
From those examples, one can see that psychologists of the 1950s were prone
to reverse the relation between utility and preferences that the ordinalists had
patiently built in the first half of the 20th century, siding with those that favored
the cardinalist hypothesis.
Fundamentally, psychologist felt at odds with the concepts of preference and
indifference deprived of cardinal utility. Edwards's survey is quite explicit
about it. The article comes back on the concept of marginal utility, of
indifference curves. He also draws parallels between results in economics and
results in psychology. Regarding the cardinality sufficient conditions by Lange,
« Psychologist should know this at once; such comparisons are the basis of the
15 Stevens's (1959) survey on measurement, psychophysics and utility, contains a long section on
indifference. It is striking that his comments and ideas on this are not related to any specific content of
economic theory (there are only two references to economic theory: VNM and Savage, and Edwards too).
Notably, he comments on the Thurstone experiment, asking the following question: "If sufficient valid
data on indifference relations could be obtained by such a procedure, what might they tell us about
utility?" (Stevens, 1959, 56). He answered simply that one could use one of the usual function used
elsewhere, the power function or the logarithmic function, under the assumption that goods are
independent. Stevens does not address all the questions raised by the indifference curves and the
problems of transitivity. He simply ignores them. Definitely, he is much more interested in measuring
utility than eliciting individuals preferences. As with the expected utility hypothesis, it is an indirect
approach to the measurement of utility. He nevertheless addresses the issue of choice vs judgment.
Indirect methods based on the observation of choices, for measuring utility "put less of a burden on the
subject in the experiment. All he has to do is make a choice between options, which is something most of
us do daily. Correlated with this is the contention that, by limiting our concern to choice behavior, we
anchor utility more firmly to a behavioristic basis. It is alleged that we thereby get away from
'subjectivism' of introspection" (Stevens, 1959, 59). They must rely on additional assumptions. There are
also objections to a more straightforward method, because judgments are inherently difficult and are
tainted of introspective evidence. Nevertheless, Stevens advocates for direct methods based on judgments
and questionnaires: "Admittedly, behavior is what we are interested in when we study utility. But there is
behavior and behavior. It is behavior when a subject turns a dial to adjust the intensity of a light to meet a
'subjective' criterion. And it is no less a matter of behavior when he names a sum of money that meets a
'subjective' requirement" (Stevens, 1959, 60). Finaly, the argument for direct methods of measurement is
that it abides by good operational principles: "The fact that the subject 'thinks' before acting need be no
more of an embarrassment than that he 'thinks' before acting. … What I am really suggesting…both
capable of operational definition" (Stevens, 1959, 60)
16
psychophysical method of Equal Distances, from which an interval scale is
derived » (Edwards, 1954, 385). He interprets the history of utility and
preferences as going in the direction of behaviorists foundations of preferences
(with Samuelson). As a psychologist, he contest the principle of parsimony
behind ordinalism: "parsimony is not always welcome" (Edwards, 1954, 386),
and reminds us, in support of his contention, that Knight and Robertson have
maintained a cardinalist view, "in part on introspective considerations and in
part on an examination of psychological scaling procedures" (Edwards, 1954,
386). The only way out of this impasse would consist in probabilizing
indifference.
Toward probabilistic indifference
Leaving aside the opposition between choosing and expressing a preference, a
central point regarding the import of the indifference-preference conceptual
scheme into psychology deals with the experimental content of indifference,
given that individual choices are subject to errors and variations that are out of
control.
Here, we reach a crucial point for the understanding of the possible crossfertilization between economics and psychology in the 1950s. Historians have
discussed about the probabilistic revolution in the social sciences. It turns out
from available knowledge that the probabilistic revolution in psychology was
but a partial revolution, in the sense that it did not affect theory construction
but was rather confined to the logic of inference and to the handling of data and
measurement issues. As Gigerenzer (1987a, 11) puts it: "at the level of
measurement, the elimination of the individual by identifying individual
differences with 'error' around a single 'true' value was a second service that
probabilistic thinking rendered to the ideal of objectivity". One of Thurstone
most cited work "The law of comparative judgment" (1927b) laid the foundation
for the probabilistic model in psychology. Thurstone advocated for averaging
responses over individuals or within individuals, taking variations in responses
as independent errors.16 The fact is that "errors" where likely to be attributed to
specific psychological processes taking place during experiments (such as lost
of motivation or learning). According to Gigerenzer (1927a, 28) experimental
psychology in those years (and still today) promptly adopted random variables
models based on this principle that individuals are interchangeable or that no
process occurs during the experiment.
This general trend deserves to be discussed regarding choice and decision
theory. It might be that decision and choice theories imported from economics
where an occasion to think about models in which intra-individual changes and
variabilities could make sense.17 A question lends itself. Did psychologists make
16
17
See Gigerenzer 1987a for a discussion, 28.
A first question is about the possibility to melt data from different subjects to obtain average
17
use of a probabilistic definition of preference and indifference?
The "commonplace" psychologist's view on riskless choice might be
summarized that way:
Human beings are neither perfectly consistent nor perfectly sensitive. This means
that indifference curves are likely to be observable as indifference regions, or as
probability distributions of choice around a central locus. It would be easy to
assume that each indifference curve represents the modal value of a normal
sensitivity curve, and that choices should have statistical properties predictable
from that hypothesis as the amounts of the commodities… are changed. This
implies that the definition of indifference between two collections of
commodities should be that each collection is preferred over the other 50 percent
of the time. (Edwards, 1954, 388)
So far, so good regarding the likely convergence between economists and
psychologists, since as Edwards recognized, Kennedy had already proposed the
same criterion of indifference in 1950. Strangely, Edwards overlooked
Georgescu-Roegen (1936) description of indifference in probabilistic terms,
whereas he refers to the same article elsewhere (cf. section 3 on GeorgescuRoegen). In the same spirit, Mosteller and Nogee (1951) have used a
probabilistic definition in their experimental study of expected utility,
published in the Journal of Political Economy. This kind of definition is said to be
implicit in psychology, at least since the times of Fechner.
Here, it is an occasion to clarify the notion of probabilistic indifference and
just noticeable differences. Edwards (1954) rejects Armstrong misleading
arguments about intransitivity that stem from a wrong understanding of the
concept of just noticeable difference as a statistical concept. Even if there is less
than one just noticeable difference between two bundles A and B, if A offers
more utility than B, it will be chosen slightly more often that B in pair-wise
comparisons.18 This is where choices go beyond mere judgments. Consequently,
the baskets B offering as much utility as A are precisely defined in terms of
choices as those chosen exactly 50 percent of the time, though they may be
difficult to observe in practice "because of inconsistencies in judgments and
because of changes in taste with time" (Edwards, 1954, 388)
Edwards' second observation is more definitive and destructive, and
certainly reinstates the gap between the goals of economics and those of
responses to a certain situation. A second question deals with the use of data from the same subject, when
he has been shown to give inconsistent responses. According to Gigerenzer, Thurstone eventually favored
treating inter-individual data to deal with the normal distribution, in order to avoid learning processes or
other processes that might affect the law of errors at the intra-individual level (see Gigenrezer, 1987a and
1987b).
18 It is not clear whether Edwards thinks about this law at the inter-individual level or at the intraindividual level. It would seem necessary, at least, to discuss about the possible statistical differences to
appear in the case of an intra-individual treatment of data and in the case of an inter-individual treatment.
18
psychology:
It seems impossible even to dream of getting experimentally an indifference map
in n-dimensional space where n is greater than 3. … This is less important to the
psychologist who wants to use the theory of choice to rationalize experimental
data than to the economist who wants to derive a theory of general static
equilibrium. (Edwards, 1954, 388)
From this, it seems hopeless that we should expect to find much in the
psychologists' research on choice likely to be useful for the development of the
theory of riskless choice and thus, for demand theory.19
Reshaping preferences through learning and levels of aspiration
Two psychological concepts have been discussed in the 1950s-1960s in relation
with the concept of preferences: learning and levels of aspiration. The interest of
psychologists in indifference and preference is indirect, it stems from a more
general interest in decision theory, which offers a playground for dealing with
topics internal to psychology. For instance, the notion of levels of aspiration as
triggered an important literature. It refers to the goal-striving behavior of an
individual facing a task. Many psychologists would draw a comparison
between levels of aspiration in psychology and utility and preferences in
economics.
Edwards (1954) establishes the link with the notion of valence as developed
by Lewin and Lewinian psychology, in relation with the idea of level of
aspiration. Katona, another pivotal figure of the new dialogue between
economics and psychology had exactly pointed in the same direction:
In view of the lack of contact between economists and psychologists, it is hardly
surprising that economists failed to see the relevance for their postulates of the
extensive experimental work performed by psychologists on the problem of
levels of aspiration. (Katona, 1953, 315)
The concept of level of aspiration captures the idea that in a decision context,
individuals tend to define for themselves the goal that they will try to achieve.
The idea of level of aspiration is familiar to psychologists, who are interested in
describing the goal-striving behavior of individuals. It assumes that individuals
are to accomplish a task whose outcomes can be measured on an achievement
scale. It can be recast within a decision situation. I this case, “from the
alternative possible goals the individual must decide or which goal he will
strive” (Siegel, 1957, 253)
Davidson, Suppes and Siegel (1957) devise a way round the difficulty, but at the expense of reducing
the measurement properties of the model). And they call for a stochastic theory (chap 3) in which
"observed frequencies of choice are interpreted as probabilities" (Davidson et al., 1957, 17).
19
19
Individuals' preferences cannot be established as long as levels of aspiration
determining the goals to be achieved have not been stabilized. The preference
relation between two prospects A and B cannot give us any indication about the
future behavior of a subject if "at different times A and B are seen in different
contexts—because of changed external conditions or the acquisition of new
experiences—we may have to distinguish among several dimensions" (Katona,
1953, 316)
Lewin et al. (1944) often quoted work on learning deals mainly with the
notion of valence, i.e. attractiveness of an object or activity, and on its impact on
the level of aspiration to reach a goal. He shows that aspirations are changing
through the achievement or failure of the subject in doing something and are
influenced by the performance of a reference group. Later, Sidney Siegel (1957)
contributed to discussing the usefulness of levels of aspiration to decision
making modeling, especially for expected utility theory.
According to Siegel (1957), the degree of achievement of that task can be
associated to a level of utility for a person, success being associated to positive
utility and failure to negative utility. As Siegel saw it, there could be a common
benefit for psychologists and economists:
The benefit to traditional psychologists, accustomed to dealing with terms like
"success" and "failure," will accrue because of the much greater formality and
rigor characteristic of decision theory, a rigor unknown to many psychologists.
The benefit to decision theory will come because the synthesis will render
available to decision theorists a large amount of existing experimental evidence
with relevance to their work which has not yet been recognized by them. (Siegel,
1957, 254)
A word is in order also about the concept of learning, which is narrowly linked
with levels of aspiration. This opens to the question of learning in relation with
demand theory. At first sight one may expect that literature on learning in
psychology might have been used to deal with learning in the theory of the
consumer. The main psychologists on this topic are Estes, Bush and Mosteller.
Learning is a major field of inquiry for psychologists since the 19 th century. It
deals with the way people adapt their behavior when facing successive trials in
an experiment. Many psychologists interested in learning will contribute to the
study of decision and choice theory. Psychologists are interested in the
determinants of human behavior in learning situations, and for that matter
some scholars have come to develop models that are close to the idea of
probabilistic choice. For instance, Bush and Mosteller (1951) have introduced a
linear operator model in learning theory, and Bush, Mosteller and Thompson
(1954) have dealt with the sequential nature of learning. They try to model the
changes in the component of a probability vector p(n) representing the
probability to choose among a set of various alternatives at trial n. More
20
precisely, they compare three models of operator linking p(n) to p(n-1). In the
same vein, Estes (1950) developed another model of stochastic learning. 20
Outside psychology, there is at least one well-known influence of the
literature on levels of aspiration and learning on decision-making and
eventually possibly on economics. Indeed, Simon's imported these concepts in
behavioral sciences through his reconstruction of rational choice. Simon would
apply the idea of learning to the theory of choice and made it the touchstone of
a reconstruction of the maximizing principle. In a series of contributions
(Simon, 1955; 1957; 1959), he comes to the conclusion that if the rational man is
not omniscient, his rationality may not be interpreted as an objective orientation
to the real world; instead his rationality becomes “a subjective orientation to his
incomplete picture of (the real world)” (Simon, 157, 198). The main outcome of
this is that once a small concession is made to the faillibility of he economic
man, “his psychological properties are no longer irrelevant. Deductive
reasoning then no longer suffices for the unique prediction of his behavior
without constant assistance from empirical observation” (Simon, 1957, 198). The
drastic revision of the model of rationality cannot be done without turning to
psychology (Simon, 1955). The indifference curves are best described as
“aspiration levels with respect to several components of pay-off” (Simon, 1955,
110) and those aspiration levels could help fixing a stable solution, through
adapting the goal to the alternatives. Through a sequence of trials, the
individual will exhibit a rise in his aspiration levels if he discovers satisfactory
alternatives, and he will subsequently adapt the idea for him, of the cost of
searching a better alternative.
This idea is not without consequences on pure choice theory. It may well be
that a probabilistic theory should account for the fact that the consumer will
revise his preferences or adapt his preferences in the course of experimenting.
This might affect both the satisfaction affected to a given outcome, but also the
preference ordering, thus allowing for some kind of intransitivity.
What was the main effect of the escape of psychologists into the concept of
preferences and indifference? Certainly, they helped understanding and
adopting a way of representing indifference as a complex construction
involving errors, hesitations, and also thresholds. But in the same time, one may
wonder if the refinements of their analysis would be of little influence on the
theory of choice.
3. What did economists borrow from the psychology of choice?
The penetration of the ideas from psychologists into economics on preferences
is not so easy to follow. There is clearly a parallel development of debates and
20
For a comment, see Simon, 1959, 271.
21
inquiries, among economists, about the meaning of indifference, the structure of
preference theory in terms of axioms, the reliability of the transitivity
assumption. Debates on the meaning of the Hicks-Allen (1934) accomplishment
had begun in the 1930s with Armstrong (1934) and Georgescu-Roegen (1936)
and would foster numerous contributions in the 1950s, especially on the
question of transitivity of the preference field (Moscati, 2007). More, economists
quickly adopted the use of a probabilistic definition of preference and
indifference, which opened the way to a dialog between economists and
psychologists. The section aims at identifying the possible links and specific
impetus from the psychological literature into the theory of demand and choice
in the 1950s-1960s.
The main lesson to be drawn from those years of confrontation and
collaboration is that economists will seldom refer to specific contributions of
psychologists to the theory of choice and will rather prefer loose references that
are much less damaging for the theory of choice. Two authors deserve to be
studied separately: Marschak and Georgescu-Roegen. I then provide an
overview of other possible influences of psychology on choice theory up to the
end of the 1960s.
Georgescu-Roegen: from threshold to penumbra
As far as we know, the first probabilistic definition of indifference is due to
Georgescu-Roegen (1935 and 1936). In the course of discussing about
indifference curves and the search for the equilibrium basket, he notes that:
"The impossibility of an individual to tell at once what is his equilibrium
position on a given path … might be interpreted as a consequence of our
incapacity of visualizing an imagined situation exactly as we shall feel it after
we have experimented it" (Georgescu-Roegen, 135, 714).
Georgescu-Roegen (1936) develops upon this idea and proposes the first
probabilistic definition of preference:
Les us suppose that we have recorded the number of times an individual decided
that A > B in a series of mental comparisons so conducted as to avoid as much as
possible any hereditary influence from test to test. It is a well known fact that the
relative frequence (sic) p of the decision A > B is perfectly stable and that, ceteris
paribus, it depends only on A and B. What appears to be haphazard in a single
case is no longer so in a series of similar attempts. If we denote by q the
complementary frequency; i.e., that of the cases in which the decision is A < B;
we have p+q=1. … The function p(y,x) represents the probability that the stimulus
x be considered greater than y. (Georgescu-Roegen, 1936, 569).
He refers to only one work from psychology to ground his construction: "The
basis of the probability is explained in terms of errors of perceptions" (569), that
is due to a sensorial threshold. Thus, Georgescu-Roegen builds his definition of
22
probabilistic choice on the statistical definition of the threshold, which he
explicitly borrows from Fullerton and Cattell's book On the Perception of Small
Differences (1892). This passage from Georgescu-Roegen shows a high
consciousness of the difficulty that an experimentalist might have to overcome
factors affecting the results, even more than what Thurstone seemed to
acknowledge at first. What then after Georgescu-Roegen (1936) as far as a
probabilistic definition of choice is concerned?
Georgescu-Roegen's ensuing work on demand and choice until the end of
the 1950s is devoted to eliciting different interpretations of the fact that
individuals are subject to choosing different bundles in similar situations and in
understanding the consequences of those interpretations on demand
(Georgescu-Roegen, 1936; 1950; 1954; 1958). From this agenda and the original
reference to Fullerton and Cattell, one might expect that Georgescu-Roegen's
work would be intimately connected to psychological literature of the 1940s
and 1950s. On the contrary, Georgescu-Roegen would never refer to
psychologists except on two occasions. The first one is about commenting the
Thurstone experiment on indifference curves (Georgescu-Roegen, 1936). The
second one deals with Luce's (1956) alternative interpretation of the threshold
in choice that Georgescu-Roegen would criticize as erroneous (GeorgescuRoegen, 1958). In Luce (1956), the threshold in choice is "a sensorial threshold in
discriminating a cardinal variable: utility" (Georgescu-Roegen, 1958, 160, fn10).
It allows for some discontinuity in discriminal abilities (in passing from
indifference to preferences), which, according to Georgescu-Roegen, is at odds
with the very idea of threshold as a stochastic concept.
The disagreement with Luce deals precisely with the interpretation of the
threshold in choice. 21 For all that, Georgescu-Roegen shows a high
consciousness of the difficulty that an experimentalist might have to overcome
factors affecting the experiments on choice, even more than what Thurstone
seemed to acknowledge at first.
In "The constancy of economic laws", Georgescu-Roegen (1950) explores
another kind of dynamic representation of individual choice and demand,
accounting for the effect of past experiments of consumption upon the
formation of preferences. It goes beyond the mere imposing of a stochastic
structure on the consumer. In this case, the mapping of the preferences will
depend upon the economic experience and cannot be treated as invariant in
economic theory. Here, Georgescu-Roegen opens to the modeling of "hereditary
influences" in the individual's choice (linked to his own education and his
personal experiences). He recognizes the insuperable difficulties in
21 Cf. Georgescu-Roegen (1958, 158-159). Actually, Georgescu-Roegen (1936) distinguishes between
two kinds of threshold affecting choice. There is first a threshold of sensation, deriving from the principle
of just noticeable differences. For very small differences between two bundles, the consumer is not able to
discriminate which one provides the most utility to him. But it does not follow that subjects are unable to
discriminate differences of magnitudes in general. Actually, they do discriminate statistically.
23
experimenting with all those kinds of irreversibilities. Here, one may wonder
about possible links with learning and levels of aspiration in psychology.
Unfortunately, Georgescu-Roegen does not mention explicitly any specific
work from psychologists. All in all, introducing a probabilistic consumer into
the analytical framework leads to substitute a demand penumbra for the usual
law of demand ("a multivariate distribution between prices and quantities"),
thus opening to a questioning of the concept of market equilibrium and the
possible ways to make it more determinate. Since then, as far as we know, the
concept of demand penumbra does not seem to have led to any further
development and did not arouse much interest amongst economists.
All in all, one can interpret Georgescu-Roegen's venture into probabilistic
choice as a the endeavor of an economist that is aware of many elements
affecting choice in a dynamic setting, that strives to go deeper into the meaning
of economic concepts without loosing sight from the fundamental object of the
theory of choice: to provide a simple and manageable model for demand
studies and, possibly, for welfare economics. Fullerton and Cattell (1882),
Thurstone (1931) and Luce (1956) are the only references to experimental
psychology and mathematical psychology. And even the very idea of the
threshold, though it can be rationalized through jnds, goes back to Pareto (1909,
174).22
Marschak, probabilistic behavior and utility
Jacob Marschak was probably one of the most active theoreticians of the decade in the
field of choice theory: he was open minded to many different ways to interpret
individual choices as well as group choices, he contributed to the development of the
theory of expected utility and was interested to learn from the developments of
experimental psychology of choice. Marschak devoted many articles to the theory of
choice between 1950 and 1960 (Marschak, 1950; 1955; 1959), Davidson and Marschak
(1959), Block and Marschak (1960)). As director of the Cowles Commission, he invited
George Katona at the University of Chicago to direct field studies among businessmen
(Katona, 1951, iv)
From that moment, Marschak would keep a constant interest to the developments of
psychology relating to decision theory, both in its theoretical aspects and its
experimental aspects. In "Rational Behavior, Uncertainty Prospects, and Measurable
Utility" 23 , he discusses the normative (axiomatic) / descriptive / prescriptive
interpretations of the economic theories of choice and decision: "As an approximative
description of actual behavior, the rules of logic and arithmetic may be regarded as
hypotheses on the psychology of reasoning and calculating: hypotheses whose
predictive power ('predict how many people of a certain age-group, etc, will make a
22 Regarding axiomatization of the consumer, he refers to Arthur Bowley1924 and Frisch 1926. The
1958 article also mentions experimental work from economists on transitivity (Papandreou et al. and May,
1954).
23
(based on Cowles Commission Discussion Paper, Economics N° 226, and Marschak, 1949,
"Measurable Utility and the Theory of Assets" (abstract), Econometrica, 1949, 17 (Jan), 63-64))
24
certain kind of error') is susceptible of empirical tests." (Marschak, 1950, 112). In a
series of articles dealing with the theory of stochastic choice and random utility,
Marschak would borrow ideas from experimental psychology, more precisely from the
Fechner-Thurstone tradition, and he would show a deep knowledge of experimental
work done in relation to statistical scaling. The most important article, in this respect, is
"Norms and Habits of Decision making Under Certainty" (Marschak, 1955) where he
provides the basic ideas of the study of random utility, a conception of utility associated
to a stochastic definition of preferences. This programmatic article would be developed
in follow-up articles on the experimental side (Davidson and Marschak, 1959) and on
the theoretical side (Block and Marschak, 1960). It is not our purpose to provide a
complete idea of Marschak’s contributions to probabilistic theory of choice. Roughly, in
the field of riskless choice, Marschak identified two adjacent issues. On the one hand,
one may wonder under what conditions, i.e., under what set of hypotheses on the
properties of the probability to choose an alternative among a set of alternatives,
probabilistic choice would be representable through a determinate utility function: "An
important aspect of a general stochastic theory of choice lies in the fact that … it is
possible to obtain forms of measurement stronger than a mere ordering by imposing
plausible conditions on probabilities of choice" (Davidson and Marschak, 1959, 236).
On the other hand, one may want to weaken the non-probabilistic theory of choice just
by “making the (‘ordinal’) utility function” (Block and Marschak, 1960, 106) a random
one.
Marschak’s model to study habits of behavior is consistently oriented toward
constructing a theory of choice with testable implications. This does not mean that any
other set of hypotheses shall be dismissed from the outset, but rather that the
theoreticians might strive to make a clear distinction between theoretical constructs that
are amenable to some type of experimental evidence (from observable choice or verbal
statements) and those that are not (or only in an indirect way).
In order to compare a normative theory of behavior with actual observable choices, it
is desirable to formulate the model in such a way that comparisons with choices in a
laboratory might be possible (and not only comparisons with verbal statements). 24
In his first article on the subject, Marschak (1955) did not insist so much on the
testability of the conditions put on probabilities, even though it deals with a model of
binary choice. A special hypothesis of the model, which comes from the operational
constraints imposed to it, is that since subjects might be forced to make a decision,
indifference and incomparability between two alternatives are excluded from the
theoretical setting, at least in a determinate way. Indifference does exist only as a
probabilistic statement.
Let us first define a system of norms on decision. A person is said to behave
consistently if she obeys to two norms.
1) If x is chosen rather than y, out of a set of larger alternatives, the person shall
never choose y rather than x when facing any other set of alternatives.
2) If out of a set comprising x and y, x is chosen and if out of a set comprising y and
z, y is chosen, then out of a set comprising x and z, z shall not be chosen.
Given a set of n alternatives, the first choice a1 is always observable, whereas subsequent rankings
can be known only through verbal statements of the kind “If a 1 were not in the alternatives, I would
choose a2”.
24
25
Decision norms 1) and 2) are implied by four properties: Comparability of outcomes,
irrelevance of additional alternatives, constancy of the ordering relation over time,
transitivity.25
If an individual does not verify the norms of behavior, e.g. chooses always x in
(x,y,z) and y in (x,y,w), then either 1) there are observation errors, 2) one may find a
trend in the choices due to learning or fatigue, 3) or "one may assume that the variations
of the subject's ranking order of outcomes is a random variation, satisfying a certain
probability distribution that can be estimated from observations" (Marschak, 1955, 48)
Marschak's goal in this article is precisely to study the properties of different
structures of probability distributions on stochastic choices of the type: "x preferred to
y" in different subsets of possible outcomes, “satisfying certain probability distribution
that can be estimated from observations” (Marschak, 1955, 48).26
He starts with a definition of stochastic transitivity on preferential choices. For any
x,y,z, if pxy ≥ 1/2 and pyz ≥ 1/2 then pxz ≥ 1/2.27 As for indifference between any two
bundles x and y, it is given by pxy=1/2=pyx. 28
Here, the link with the ideas and methods from experimental psychology could not
be clearer: "I have learned from Louis N. (sic) Thurstone that psychological
experiments lead naturally to a stochastic interpretation of human responses to stimuli;
and Thurstone himself, in his work on consumer's habits, is a pioneer in stochastic
interpretation of decisions" (Marschak, 1955, 49, fn4).
In this article and ensuing articles, he also mentions other pioneer work using
stochastic models of choice (works by Reichenbach, Papandreou, Törnqvist, Vail) and
draws a parallel with Mosteller and Nogee's experiment as well as with Edward's work
on probability-preferences. The gist of the import from psychology deals with the
method of paired-comparisons due to Thurstone (1927, Law of comparative judgments)
and with its refinement by Mosteller (1951).29
The main results obtained in Marschak (1955) and later in Marschak (1959) and
Block and Marschak (1960) can be summarized as follows. It is possible to construct a
series of conditions on the probability distributions that will be more or less directly
testable and that appear at first sight more or less unrealistic. To each of these
25 Irrelevance of additional (contextual might be better) alternatives means that whether x is or is worse
than y is independent of whether z (or any other) belongs to the set of alternatives. Transitivity means that
if x is not worse than y, and y not worse than z, then x is not worse than z.
26 This does not prevent from identifying and theorizing the possible implications of observations
errors on the part of the experimenter and other variations in the decisional context that might affect the
subject’s behavior.
27 Actually, Marschak (1959) and Block and Marschak (1960) discuss different definitions of stochastic
transitivity proposed in the literature, weak transitivity and strong transitivity (introduced by Vail (1957)
and mild transitivity (introduced by Georgescu-Roegen (1958) and Chipman (1958)).
28 Later, Davidson and Marschak underlined different attitudes toward the common experiment of
inconsistencies in individual choices: "One may interpret every case of inconsistency as a case of
indifference …. In empirical application, this approach would probably make indifference all-pervasive.
An alternative approach is to define preference and indifference in terms of probability of choice [cf.
Mosteller and Nogee, 1951 and Edwards 1953b]. In this approach probabilities of choice do not enter the
formal axiomatic development. A fifth strategy, explored in this paper, incorporates probabilities of choice
into the axiomatic structures and exploits their properties in scaling utilities" (Davidson and Marschak,
1959, 234)
29 On this point, Marschak refers also to Gulliksen (1946)
26
conditions, it is possible to attach a specific property on the agent’s preferences and to
identify the properties of the utility function representing those preferences. It is not the
purpose of this article to present the different models and their properties. In a nutshell,
Marschak's builds a number of definitions on choices all expressed in terms of
probabilities of choice in pair-wise comparisons. Notably, he discusses a proposition on
the probability distribution (M6 in Marschak, 1955) such that the utilities associated to
each outcome (or bundles) x1, x2, .. xn are ordered so that the probability of the ranking
of the different utilities attached to each outcome is equal to the probability of the
ranking of the outcomes. This assumption is precisely the one used in Thurstone's
method of paired comparisons. The utility of the outcome xi exceeds that of xj if more
often than not, xi is ranked ahead of xj:
p(x1x2x3…xn)=p(ux1>ux2>ux3>…>uxn)
It is not the purpose of this article to appraise the success of Marschak's research
programme in the field of individual behavior theory. Only a brief comment on the issue
of utility measurement is in order. In the course of devising testable assumptions on
stochastic preferences, Marshak would identify sufficient conditions for obtaining an
ordinal scale of utility (strong transitivity). As for the more stringent "quadruple
condition" (if phi ≥ pjk, then phj ≥ pik) implying a four-stimuli comparison, it is shown to
be a necessary but not sufficient condition for implementing a linear scale of utility.
Other possible influences of experimental psychology on the theory of choice
We have shown that psychologists did not express an interest for choice and
decision theory before the early 1950. In those years, few economists were
already engaged in challenging both theoretically and some pillars of the
traditional theory, that is, the principle of transitivity of preferences, the
meaning of indifference, the interest of static theory and the generality of the
theory. Many economists had call for connecting economics with psychology in
order to develop a more realistic theory of choice. So, it might be of interest to
look at possible influences beyond the personal endeavors of GeorgescuRoegen and Marschak.
Unsurprisingly, the outcome of this inquiry will show that economists have
remained very reluctant to borrow ideas, concepts or methods from
psychology. As Katona (1946) put it, during the 1920s, behaviorism and
psychoanalysis, the two most popular trends in psychology, did not offer much
help to economists interested in psychological foundations of human behavior,
because unconscious motivation was put to the fore. Keynes, for instance,
proposed the fundamental psychological law "without their aid" (Katona, 1946,
45).
Nevertheless, as the works on the psychology of decision and choice would
arouse psychologists' interest, one might expect that economists could have
taken something from it, or at least that they could have discussed the content
and the methods of psychologists' inquiries.
Leaving aside informal reactions to the Thurstone experiment (Lenfant,
2012), issues about utility, preference and indifference would were put to the
27
fore after Armstrong criticism of the theory of the consumer (Armstrong, 1939).
It is beyond the scope of the present paper to deal with the controversy that
arouse on this occasion. In the course of discussing about the empirical
meaning of indifference curves, Armstrong referred implicitly to Samuelson
and Little's effort to think about preferences and indifference in behavioral
terms "so that preference and indifference are not the introspected relations of
preferences and indifference, but distinguishable forms of behaviour"
(Armstrong, 1939, 455, fn1). He sternly criticized this endeavor, using a
comparison with the use of jnds in psychology: "If I am unable to detect a
difference of brightness between A and B there is no such implication of
identity of brightness and I should be surprised if they really were identical. It
is for this reason that such measuring-rod as "just perceptible difference of
brightness" or "apparent equality of brightness" are necessarily regarded as
very imperfect" (Armstrong, 1939, 465). Coming back to the subject, Armstrong
(1948 and 1958)30 does not mention any psychological argument or author.
In their important article on demand and the theory of choice, Wallis and
Friedman (1942) provide a presentation and systematic criticism of the HicksAllen theory of choice, to the effect of showing that demand theory should be
erected on different conceptual basis. On this occasion, they reject the
Thurstone experiment as irrelevant to economic phenomena and they even
challenge the conceptual framework for understanding choice: goods,
preferences, and budget constraints are not independent elements and should
not be treated as such. Interestingly, some psychological arguments enter the
scene, since Wallis was trained as psychologist before being a statistician.
Notably, Friedman and Wallis back their criticism on psychological analysis of
learning, referring extensively to experiments with animals, notably
experiments with chimpanzees on incentives for learning and color perception.
Wallis conceives of a likely experiment with mixtures of colors (squares with a
varying proportion of red and blue) to the effect of identifying indifference
functions regarding the perception of the size of a square (Wallis, 1935).
Actually, these references to experimental devices are presented as a likely
method for experimenting upon indifference curves, provided that sufficient
experiments of this kind could be reasonably extended to tastes among
different commodities (Wallis and Friedman, 1942, 182-183)
Neither would most of the literature on demand and utility refer to any work
in psychology (Wold, 1943; Knight, 194431; Samuelson, 1950). Ensuing articles
dealing with the theory of the consumer do not show an interest for
psychological studies. Wagner's "eclectic approach to the pure theory of
consumer behavior" (Wagner, 1956a) refers only to economists (Armstrong,
30 In a long footnote on behaviorists, he apologise for not quoting Georgescu-Roegen in his 1939 article
(Armstron, 1958, 174)
31 According to Edwards (1954, 386) Knight defends cardinality "in part on introspective considerations
an in part on an examination of psychological scaling procedures".
28
Georgescu-Roegen, May, Little, Samuelson, …). The only exception in this
literature is Quandt's attempts at formulating a probabilistic theory of choice
(Quandt, 1956). Compared to Marschak and Georgescu-Roegen, Quandt's
approach is more pragmatic and discusses the ability of the consumer to obtain
information on the goods trough repetitive experiments. After Simon (1955), he
argues that the consumer may scan sequentially different characteristics
attached to different goods or combinations of goods, and is thus likely to stop
the process when he has reached a decision securing his aspiration level. He
also refers to Estes' theory of learning (Estes, 1954, "Individual behavior in
Uncertain Situations") to the effect that a probabilistic behavior is conceivable
also in the long run (due to a continuous flow of information). Other references
are more oriented towards business and management literature on durable
goods purchases.32
Finally, Houthakker (1961) in a broad survey of recent developments of
consumer theory, echoes the "promising" way out from the classical framework
by Georgescu-Roegen and Marschak, refereeing to the use of a probabilistic
approach. But though he seems favorable to the "possibility of verification by
means of psychological experiments" (Houthakker, 1961, 725) he immediately
prevents us from to much hope in this direction: "This stochastic interpretation
of the choice process seems to present formidable logical difficulties, and its
implications for market behavior have not yet been worked out" (Houthakker,
1961, 725)
A notable exception comes from the borders of economics. Earlier, I
commented upon the possible influence of psychological learning theories on
economics through Simon's work. Simon, then professor of Administration at
the Carnegie Institute of Technology, would push many insights from
experimental psychology into his models of individual rationality. In "Theories
of decision-making in economics and behavioral sciences" (1959) he opens on a
section titled "How much Pyschology does economics need?". The article is very
informed about recent development in economic psychology and theory of
decision (Edwards, 1954; Hayes, 1950; Katona, 1951 and 1953; Davidson and
Suppes, 1957; Luce and Raiffa; 1957). It contains references to models for
learning (Bush and Mosteller, 1955; Bakan, 1953) and to levels of aspiration
(Siegel, 1957 Lewin et al, 1944). Simon comments on the interpretation of
experiments on decision under uncertainty and sides with the integration of
probabilistic preferences into economics, as a sound methodological
improvement (Simon, 1959, 261-262). However, Simon seems skeptical
regarding the future improvement and unification of new theoretical tracks:
"The sketchiness and incompleteness of the newer proposals has been urged as
a compelling reason for clinging to the older theories, however inadequate they
L. H Clark et al Consumer behavior, who give evidence for the lack of circumspection in buying. Also
Duesenberry on the "top-shelve effect". Quandt refers also to Mosteller and Nogee (1951)
32
29
are admitted to be" (Simon, 1959, 280)
Apart from literature centered on demand, studies dealing with transitivity
in economics have flourished in the 1950s, and could have been a good
receptacle for psychologists's experiments (Moscati, 2007). Some articles are
theoretical reflections on the rationality hypothesis and the possibility to run
experiments. Others are empirical articles on transitivity, run by psychologists
or by economists, or else by behavioral scientists. However, references from
psychology are rare in this literature also, with some exceptions. Baudin (1954)
upon discussing rational behavior, relies indirectly on a model of stimulusreason-response borrowed from P. L. Reynaud's Economie politique et psychologie
expérimentale (1946). Rationality is essentially seen in terms of motivation.
Articles by Pfouts (1955), Wagner (1956b), Wagner (1959), Rousseas and Hart
(1951), Chipman (1958) do not discuss the influence of experimental psychology
of or mathematical psychology on their model and the protocols they use are
not explicitly linked with protocols used in experimental psychology.33
There are three notable exceptions to this relative ignorance of the
psychology of choice in economics. In his experiment on intransitivity (an
article presented at the 1952 conference of the Econometric society), May uses a
probabilistic definition of preference generalizing Georgescu-Roegen (1950),
stressing that "this kind of empirical preference [in the strict frequency sense]
has been used by psychologists and economists". He also provides an axiomatic
discussion of preference and indifference. Psychological references in the article
are to Warren S. McCulloch, actually a neurophysologist who apparently was
one of the first scientists to observe intransitivities (circularities) in experimental
conditions in 1945, and who concluded that subject, when choosing, are not
committed to a unique value scale.34 May's experiment, as well as others, goes
in the same direction since it forces the subjects to make choices in changing
environments (thus possibly with different goals or aspirations in mind). May's
contribution is interesting to the extent that it points out that consumer goods
can be seen as a vector of characteristics, which is a circumstance favoring
intransitivities. 35 The issue of multiple characteristics was not addressed
directly by psychologists, but rather through the idea of multidimensional
utilities by Hausner (1954) and Thrall (1954).
33 Chipman (1958) refers to Luce and Marschak, Papandreou et al. (1957) to Edwards (1954). Rousseas
and Hart (1951) mention Wallis and Friedman (1942) and thank Paul F. Lazarsfeld for (lecture on the
measurement of attitudes in sociology at their university of Columbia? Complete with their background in
Moscati. As Edwards (1960) notes, they suppose that people have the same preferences and their protocol
and experimental device is not linked with psychological literature. Wagner mentions Luce and Raiffa
(1957)
34 May writes also: "More complicated reaction mechanisms of a similar kind may underlie the fact that
choice patterns arising out of attitudes are not always found to be 'scalable' by social psychologists" (8) and
refers to Measurement and prediction, vol 4 of Studies in Social Psychology in World War Two, Princeton,
1950.
35 Here, May refers to Merill Flood's experiments at the RAND corporation (1951/1952)
30
In another experiment on transitivity, Arnold Rose not only mentions other
experiments by May and Papandreou, he also refers precisely to Thurstone
methods of scaling and incorporates them in his study. Lastly, Weinstein
(1968b) presents an experiment to the effect of comparing the consistency of
preferences from children with that of adults and in another article (Weinstein,
1968a) he discusses at length the methodological impact of intransitivities on
economic theory. Both articles show a great familiarity with the literature in
experimental psychology, especially with learning theory.
From this handful of articles on transitivity and rational behavior, one might
expect some further developments and influence leading to further cooperation
with experimental psychology. Yet, those articles are rarely cited in economic
literature, and never in demand studies.
Literature dealing with utility would not echo much more on psychological
literature. Debreu is probably a notable exception, since he contributed in
clarifying the links between preferences and utility in different setting
(stochastic choice, deterministic choice, risk, random utility) (Debreu, 1954;
1958; 1960).36
Strotz (1953) article in defense of cardinal utility draws much on Von
Neumann and Morgenstern and Savage and does not cite psychological
literature (except Mosteller and Nogee, 1951). Mosteller and Nogee's
experiment on the measurement of utility in risky situations appeared in
Econometrica in 1951, and has become the most quoted experiment of this kind.
In this article, the authors do not borrow from psychological methods (there is
one reference to psychologist R. M. Griffith).37
One may wonder if the work from psychologists could have been more
influential within empirical or less orthodox ways of thinking about consumer
behavior. As far as we can say, it seems that the answer is No. Considering for
instance Bayton's "Contributions of psychology to the microeconomic analysis
of consumer demand for food" (Bayton, 1963), it deals in very general terms
with the concept of "perception" of good from the subjects and does not
mention any psychologist.
Following a more theoretical vein, Lancaster's (1957 and 1966) new approach
to the theory of the consumer might be a good candidate for integrating ideas
from psychologists. Formally, it is correct to mention that the idea of multiple
characteristics could be related to multidimensional utilities. A close look at
Lancaster's model will show that he does not build his theory on contributions
from psychologists.
36 Debreu is well acquainted with literature in experimental psychology and experimental economics
on intransitivity and also with work on psychological measurement.
37 Frederick Mosteller was trained as a mathematician and statistician. He reports the preparation of
the article and the context of its presentation in abstentia by Armen Alchian, on a session chaired by Jacob
Marschak in Mosteller, F. Thepleasures of statistics. The autobiography of Frederic Mosteller, Stephen E.
Fienberg, David C. Hoaglin, Judith M. Tanur (eds.), Springer, 2010
31
4. Conclusions
1. Economists interested in demand theory and more broadly in rationality,
have borrowed very little from psychologists. It is probable that
Georgescu-Roegen found the intuition in Fullerton and Cattell (1882).
But from this time on, the notion evolved essentially independently from
psychologists, and economists in this field of research were more
inclined to claim a superficial relation with psychology, rather than to
commit themselves to model human behavior under unmanageable
psychological assumptions.
2. The span of time from mid-1940s to the end of the 1960s witnesses a fair
number of experimental endeavors about rational behavior, both from
economists and psychologists. It shows at least that economists were
open to integrating some forms of experimental economics within
economics. Far from the dominant representation of economists as
hostile to experimental economics, the experimental literature on
decision and choice in the 1950s and 1960s is alive and even if the lessons
to be drawn are discussed, many economists put is on an equal footing
with theoretical economics (Georgescu-Roegen, Marschak, Debreu).
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