Axioms of Economics
Economics uses axiomatic approad to study human behavior, and its key postulates (axioms) are: individuals choose actions that maximize their utility subject to constraints; with respect to economic goods, more is preferred to less, something is preferred to nothing, and individuals value variety.
Economics uses an axiomatic approach to study human behavior. The axioms[^xie2019micro] are:
- Individuals choose actions that maximize their utility given constraints.
- With respect to economic goods, more is preferred to less, something is preferred to nothing, and individuals value variety.
The second postulate is to specify the humanity or preference. "More is preferred to less, something is preferred to nothing" can be understood in two ways:
- Nonsatiation, and
- The indifference curve is negatively sloped.
It is so because when a quantity of good X decrease, quantity another good Y has to increase to compensate for the utility loss.
Meanwhile, "individuals value variety" means the convexity of preferences.
As background, Samuelson notes that economists use the scientific approach to understand economic life[^samuelson2010], without specifying the details. Steven N.S. Cheung summarized these underlying postulates in his own way in a 1999 speech at Huazhong University of Science and Technology. Zuoshi Xie, building on Cheung, made these postulates explicit as axioms in a more accessible form.
