Cardinalism and Dynamic Analysis in Economic Theory

Abstract

This paper discusses the contention of Professor Ragnar Frisch that cardinal utility has a place in dynamic analysis. As for the necessity of cardinal utility in dynamic analysis we note that ordinal utility is incapable of treating the case of calendar-time dependent preferences and we also question whether an ordinal approach can grasp the content of Bohm-Bawerk’s rate of pure time preference. In examining the meaningfulness of cardinal utility in dynamic analysis we look for a canonical way of selecting a set of representations of the preferences which are linear transformations of each other. This may be possible if the preferences admit a concave representation, because there is a result by Debreu that such preferences have a least concave representation, and all such representations are linear transformations of each other. Our methods of analysing this problem do not, however, reach conclusions that will support the claim that cardinal utility is easier to define in a dynamic than in a static framework.