Charles H. Karelis

As intriguing as the premise is, I gave up reading this book halfway through and only skimmed the rest after discovering that the author is a philosophy professor who seems to base his conception of economic theory on a combination of freshman economics textbooks and the great economists of 100 years ago (e.g. Edgeworth and Marshall). While there is much to be appreciated in the work of the classical economists, economic theory has come a long way since then!

Thus, Karelis repeatedly, but erroneously, claims that the kind of "indifference curve" analysis taught in a standard intermediate microeconomics course rests on the assumption that the marginal utility of a good declines as more is consumed. Not only is such an assumption unnecessary, it is insufficient--as he would have discovered had he consulted even such a "classic" text as George Stigler's Theory of Price (c. 1960s).

His presentation of economic theory is also wrong, or at best muddled, in other respects. He seems to conflate issues of consumption smoothing that would apply under certainty with decision-making under uncertainty. He also seems to assume that diminishing marginal utility of income implies that those with less income will be more risk averse than those with more income. Leaving aside the issues of interpersonal utility comparisons, this is not even true for the same individual at different levels of income: whether risk aversion increases or decreases with wealth will depend on the particular utility function assumed. In general, it's not even clear to me whether Karelis understands that, though economists still use the word "utility", this term now refers to a somewhat different concept than when folks like Bentham used it.

It's a shame that his presentation of economic theory is such a mess, because he does seem to have interesting intuitions about poverty and some original ideas about policy. I would respectfully suggest that he team up with an actual economist and work out his ideas in a way that is informed by modern economics, rather than classical writers or conventional wisdom.… (mehr)