American Economic Review: Vol. 96 No. 4 (September 2006)
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Cardinality versus Ordinality: A Suggested Compromise
Mandler, Michael. 2006. "Cardinality versus Ordinality: A Suggested Compromise." American Economic Review, 96(4): 1114-1136.
By taking sets of utility functions as primitive, we define an ordering over assumptions on utility functions that gauges their measurement requirements. Cardinal and ordinal assumptions constitute two levels of measurability, but other assumptions lie between these extremes. We apply the ordering to explanations of why preferences should be convex. The assumption that utility is concave qualifies as a compromise between cardinality and ordinality, while the Arrow-Koopmans explanation, supposedly an ordinal theory, relies on utilities in the cardinal measurement class. In social choice theory, a concavity compromise between ordinality and cardinality is also possible and rationalizes the core utilitarian policies. (JEL D01)
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