The Theory Of Modern Economic Theory Essay

746 Words 3 Pages
Although Becker and Stigler’s theory may seem to mimic classical economic thought, through closer inspection it is much more complex than this assumption. Similarly to traditional economic theory, their model is based off of Homo Economicus, or the economic man. Under this premise, all individuals operate as rational individuals whose main goal is maximizing utility. Now, after solidifying that humans are utility maximizing people, Becker and Stigler diverge from conventional thought by claiming that individuals all share a set of stable preferences and derive utility from commodities, not products. Deviating from the norms of economics allows Becker and Stigler to more thoroughly explain human choice as being manipulated by prices and incomes. Bluntly, since we all share the same tastes, one person with $1 and another with $20 looking to buy a $5 burger from a restaurant are going to make a different decision based off the cost. This may be simplistic but its true and the empirical nature of this theory provides support to Becker and Stigler’s ideas.

In order to gain further insight we must inspect commodities, as these are what individuals are actually producing when they utilize their resources to maximize utility. Now, these commodities are not tangible in the sense of a package, but the feelings and effects we receive from purchasing market goods. Since it is assumed we all share lasting preferences and are rational human beings, these resources are what…

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