The Empirical Evidence Against Neoclassical Utility Theory: A Review of the Literature

This paper surveys a wide range of empirical evidence that challenges the descriptive adequacy of neoclassical utility theory as a model of human behavior. Contrary to its textbook presentation as a positive, empirically grounded theory, utility maximization rests on normative assumptions about rationality that are systematically violated in observed decision-making. Drawing on findings from behavioral economics, experimental game theory, psychology, and cross-cultural studies, the paper documents persistent divergences between theoretical predictions and actual behavior across domains including fairness, altruism, cooperation, intertemporal choice, risk assessment, and preference formation. These anomalies are not isolated but form a coherent pattern: human motivations are plural and socially embedded; cognitive capacities are bounded; and preferences are context-dependent and often constructed rather than given. The cumulative weight of this evidence undermines the claim that utility theory provides even an approximate first-order model of behavior. The paper argues that attempts to accommodate these findings within the orthodox framework have had limited success, and that the scale and systematic nature of the empirical failures place increasing pressure on its core assumptions. Notably, much of this evidence has accumulated over several decades, yet remains largely absent from standard textbook presentations of economic theory. This suggests the need for a reconsideration of the conceptual foundations of economics. More broadly, the case raises philosophical questions about the status of economic models, the role of normative assumptions in ostensibly positive science, and the criteria by which theories are retained despite persistent empirical refutation.