Formalizing irrationality inside a utility function collapses it back into rationality

Evidence

This portmanteau utility function raised an objection that had long been a subject of discussion in the methodology literature: Wasn’t “irrationality” in the neoclassical lexicon an oxymoron, since the moment one formalized it in the utility function, didn’t it effectively get subsumed under some perverse version of meta-rationality? Richard Posner, an especially perceptive critic from the right, pushed this point home in a review of Animal Spirits. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 732

Categorization

• DEFINE: Defines the ‘portmanteau utility function’ problem: the oxymoron of formalized irrationality in neoclassical economics.
• XREF: This methodological critique connects to Mirowski’s ongoing argument about the neoclassical thought collective absorbing dissent, and parallels the demonstration problem in the philosophy of economics (Lakatos, McCloskey).