The Problem of Indifference and Choice: An Answer to Nozick’s Challenge to Austrians

Abstract

This part looks critically at an interesting ongoing discussion about the problem of indifference and choice within the Austrian school. This discussion is due to Nozick (1977) who addressed the problem of indifference to representatives of the Austrian school implying the invalidity of the law of diminishing marginal utility in the absence of a presupposition of indifference. Presented solution, based on the modification of the theory of subjective value, will allow to preserve elements of indifference analysis as interpreted by the neoclassical mainstream; however, it will also allow interpretation of the problem of choice based on strict preferences and creates room for indifference also from the point of view of the Austrian School of Economics. Admittedly, this is a rather controversial conclusion, but it is a logical consequence of the proposed minor modification in the theory of subjective value.