At the base of economic analysis is the consumer, whose behavior and well-being motivate a whole gamut of questions spanning demand analysis, incentive theory and mechanism design, project evaluation, and the introduction and marketing of private and public goods and services. Understanding and modeling consumer welfare was central in early economics, and remains so, with a continuing tension between elements of illusion, temperament, and subjectivity in consumer behavior, and the need for stable, predictive indicators for demand and well-being. The neoclassical model of the individualistic utility-maximizing consumer that forms the basis of most economic analysis is largely a finished subject, but new studies of consumer behavior and interesting new measurements are coming into economics from cognitive psychology, sociology, anthropology, market science, evolutionary biology, and neurology. This behavioral revaluation challenges the neoclassical conclusion that unconcentrated self-organized markets place consumers on a welfare frontier, and suggests new directions for the continuing development of consumer theory. This talk gives a broad, brief survey of behavioral consumer theory, and places its findings in the context of the early writings of economists on the science of pleasure.
Reference: D. McFadden, “The New Science of Pleasure”, NBER Working Paper No. 18687, February 2013, forthcoming in Handbook of Choice Modelling, S. Hess and A. J. Daly, (eds.), Edward Elgar, 2014.