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Or that people don't get graduate degrees with the intent of maximizing their earnings potential.

I've often heard it said that the fundamental problem with economics is that it assumes people are rational and have good information. I'd say it goes deeper than that: it assumes that money is the rational thing for a person to maximize. In reality, money is something that bears some maximization, but it's hardly the primary consideration.



Economics doesn't assume everyone wants to maximize money. It assumes everyone wants to maximize utility, and then uses money as a (poor) proxy for utility. It's a subtle, important difference.


Serious question: what's utility?


Wikipedia calls it "relative satisfaction." I'd call it "personal benefit or gain."

Considering that, it's clear why we'd use money as a proxy. Not a perfect one, of course.


People want to maximize utility, we'll use money as a proxy, people want to maximize money. I suppose there are economic schools of thought that use other proxies for utility, but you seem to be agreeing with me insofar as the primary stand-in for utility is money, and it is a poor one.


No, that was my exact point. In general, economics treats money and utility as distinct. I should've been clearer: money only proxies for utility in behavioral experiments.

Labor supply theory, for example, assumes people maximize utility by choosing a combination of work and leisure. It doesn't assume people work as much as possible (or, maximize their money).




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