Economics specifically does not make that assumption.
As everything in economics, it depends on which branch you're talking about, but this assumption is the core of the marginalist revolution which is fundamental to the whole classical branch and it's derivatives, which makes the vast majority of mainstream economics nowadays, because the neoclassical synthesis made the biggest part of the Keynesian school move toward this assumption (say hello to micro-founded macro).
Anecdotally, claims that [insert a foundational hypothesis of classical economics] isn't really that important in the whole model has been the favorite defense of neoclassical economics against criticism since at least Friedman in 53 ( it might have existed before, but none of them had the popularity of his Essays in positive economics)
Classical economics is something different -- think Smith and Ricardo. Marginalism is sometimes called neoclassical, but is distinct from classical economics. The neoclassical synthesis was macroeconomics from the 1940s until the stagflation era. Micro-founded macro was later. I don't think neoclassical has a very clear meaning -- I would call any kind of Keynesianism non-neoclassical, personally.
Anecdotally, it's because so many people are bullshitting when they claim that something is a foundational hypothesis of the mainstream. People prefer to argue against a caricature rather than the real thing.
I don't see how micro-founded macro models equate utility with willingness to pay? Work-horse New Keynesian models begin with a representative agent so willingness to pay of different consumers doesn't even make sense in this context. Moreover, these models are (to my knowledge) seldom used for welfare analysis but rather to examine things like the effects of montetary policy on employment and growth. Models with heterogeneous agents certainly don't assume willingness to pay is the same as utility. I'm an econometrician not a macroeconomist though so perhaps I'm missing something.
As everything in economics, it depends on which branch you're talking about, but this assumption is the core of the marginalist revolution which is fundamental to the whole classical branch and it's derivatives
Marginalism is saying something much more precise than that. It is saying that (in the given example) the two people value their marginal dollars differently than they value one marginal unit of coffee. A statement which is certainly objectively true, but doesn't capture the apparent contradiction present in the original example.
You seem to talk about Menger's view of marginalism, but Menger isn't really part of the classical branch I am talking about: he founded the Autrian School and was pretty skeptical about the neoclassic school at its time.
I suppose you could be right. My understanding is that literally that is what marginalism is. Where are you getting the idea that there are multiple branches of it?
Where are you getting the idea that there are multiple branches of it?
That's common economics history: Marginalism was “invented” by Jevons and Menger pretty much at the same time (and Walras came a bit later with no prior knowledge of the two others' work at time of writing).
Jevons' work lead to the birth of the neoclassical school, while Menger's founded the Austrian school, and those two where pretty antagonistic for a while (One of Keynes' biggest achievement is probably the reconciliation these two branches in order to fight against his legacy ;).
This isn't accurate. Whatever Jevons and Menger thought of each other, the Austrians and the British were not completely distinct schools. People would call both groups "neoclassical".
The Austrian school in the modern sense only broke with the mainstream with Keynes. They had their own alternate explanation of the Great Depression that never caught on. I think the leaders of the school just moved to the US and became increasingly dogmatic, so modern Austrianism is a small niche.
There was a more recent form of macro that is anti-Keynesian that can be called "neoclassical", which would be the real business cycle theory, but it doesn't owe much to the modern Austrians. If you want to identify it with a specific marginalist, it's closest to Walras.
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As everything in economics, it depends on which branch you're talking about, but this assumption is the core of the marginalist revolution which is fundamental to the whole classical branch and it's derivatives, which makes the vast majority of mainstream economics nowadays, because the neoclassical synthesis made the biggest part of the Keynesian school move toward this assumption (say hello to micro-founded macro).
Anecdotally, claims that [insert a foundational hypothesis of classical economics] isn't really that important in the whole model has been the favorite defense of neoclassical economics against criticism since at least Friedman in 53 ( it might have existed before, but none of them had the popularity of his Essays in positive economics)
Classical economics is something different -- think Smith and Ricardo. Marginalism is sometimes called neoclassical, but is distinct from classical economics. The neoclassical synthesis was macroeconomics from the 1940s until the stagflation era. Micro-founded macro was later. I don't think neoclassical has a very clear meaning -- I would call any kind of Keynesianism non-neoclassical, personally.
Anecdotally, it's because so many people are bullshitting when they claim that something is a foundational hypothesis of the mainstream. People prefer to argue against a caricature rather than the real thing.
I don't see how micro-founded macro models equate utility with willingness to pay? Work-horse New Keynesian models begin with a representative agent so willingness to pay of different consumers doesn't even make sense in this context. Moreover, these models are (to my knowledge) seldom used for welfare analysis but rather to examine things like the effects of montetary policy on employment and growth. Models with heterogeneous agents certainly don't assume willingness to pay is the same as utility. I'm an econometrician not a macroeconomist though so perhaps I'm missing something.
They don't equate the two in macro.
Marginalism is saying something much more precise than that. It is saying that (in the given example) the two people value their marginal dollars differently than they value one marginal unit of coffee. A statement which is certainly objectively true, but doesn't capture the apparent contradiction present in the original example.
You seem to talk about Menger's view of marginalism, but Menger isn't really part of the classical branch I am talking about: he founded the Autrian School and was pretty skeptical about the neoclassic school at its time.
I suppose you could be right. My understanding is that literally that is what marginalism is. Where are you getting the idea that there are multiple branches of it?
That's common economics history: Marginalism was “invented” by Jevons and Menger pretty much at the same time (and Walras came a bit later with no prior knowledge of the two others' work at time of writing).
Jevons' work lead to the birth of the neoclassical school, while Menger's founded the Austrian school, and those two where pretty antagonistic for a while (One of Keynes' biggest achievement is probably the reconciliation these two branches in order to fight against his legacy ;).
This isn't accurate. Whatever Jevons and Menger thought of each other, the Austrians and the British were not completely distinct schools. People would call both groups "neoclassical".
The Austrian school in the modern sense only broke with the mainstream with Keynes. They had their own alternate explanation of the Great Depression that never caught on. I think the leaders of the school just moved to the US and became increasingly dogmatic, so modern Austrianism is a small niche.
There was a more recent form of macro that is anti-Keynesian that can be called "neoclassical", which would be the real business cycle theory, but it doesn't owe much to the modern Austrians. If you want to identify it with a specific marginalist, it's closest to Walras.
Nope.