Demonstrated Preferences as the Middle Ground Between Revealed Preferences and Modern Behaviorism

Abstract

Behavioral economics rejects the Samuelsonian concept of revealed preferences, which, in turn, is a cornerstone for the development of modern neoclassical micro theory. This paper aims at criticizing the behavioral charge against revealed preferences, arguing that, while accepting the fact that neoclassical micro theory is in part not plausible, the behavioral critique is misleading and thus does not solve the problem of neoclassical microeconomics stemmed from its essence. This paper also develops a case for the Austrian concept of demonstrated preference as a middle ground between neoclassical micro theory and behavioral economics.