Mainstream Utility Viewpoints

[Azure]

I usually don’t bother to read Wiki articles on economics, but happened to be browsing and ran into something… interesting.

Cardinal utility is mostly considered to be an outdated concept. Only within specific contexts such as decision making under risk, utilitarian welfare evaluations, and discounted utilities for intertemporal evaluations, cardinal utility is usually accepted. Elsewhere, such as in general consumer theory, ordinal utility is preferred.

Utility functions g and u give rise to identical indifference curve mappings. Thus in ordinal utility theory, there is no concept of diminishing marginal utility, which would correspond to the second derivative of utility being negative.

The respective articles.

I’m more inclined to believe the wiki here is simply wrong, but is the Austrian school really the only ordinal preference school which acknowledges marginal utility? If so, how do other the other schools handle price theory?

[abirkmanis]

I read this as “in ordinal utility theory, there is no concept of diminishing marginal utility, because subtracting values of ordinal utility makes no sense” (you get marginal utility by subtraction between two utility values). This is technically correct, but misleading. While arriving at marginal utility via this way of subtraction is wrong, it does not invalidate the notion of marginal utility in the framework of ordinal utility; it just invalidates the specific approach.

I guess whoever’ve written this Wikipedia article was not speaking for all “ordinal utility” schools.