<p>I watched a <a href="https://youtu.be/e8nZDhFIjps" rel="nofollow noreferrer">video from the Mises Institute</a> where the lecturer mentioned that in Austrian economics, the consumer behavior that is observed is a result of their perception of the utility of the purchase, which is expressed by an ordering of preferences (this is my understanding of it and in my words).</p>
<p>For example, if the consumer has ten dollars in his pocket and is considering purchasing a box of chocolates, the utility of the box of chocolates could be labelled in an ordinal way as 10, 6, and 2. Ten represents the utility of giving the box to his wife (case A), six is where is consumes it himself (case B) and two is for giving it to his kids (case C). The numbers are only used to describe the relative ordering. They have no other use.</p>
<p>So, the ordering of preferences which includes the 10 dollars could be written as:</p>
<pre><code>case A
10 dollars
case B
5 dollars
case C
4.5 dollars
</code></pre>
<p>The utility decreases as you go down the list.</p>
<p>This means the consumer would be willing to give up USD 10 to buy the box for his wife, USD 5 to buy a box for himself, and USD 4.50 to buy a box for his kids. So, if he had just 15 dollars dollars, he would buy two boxes, one for his wife and one for himself, but not one for his kids.</p>
<p>Could someone please explain if it works the same way for producers (with a similar example)?</p>

CC BY-SA 4.0
2022-07-22T06:03:17.660Z
Hi! Your question is a bit unclear to me. You give a long example of consumer preferences, then ask about producer preferences without giving any explanation of what exactly you mean by that (only 1 line of the 16 lines is about this). It is usually assumed that producers want to maximize profits; this is what describes their preferences. Is this what you meant? Or do you have a reason to assume the producer preferences are something different in Austrian economics?
Giskard
CC BY-SA 4.0
2022-07-22T06:08:44.830Z
I was thinking along the lines of: would a factory prefer production method A vs B, and so on. But I guess the profit maximization criterion would take this into account quite easily, right?
Joebevo
CC BY-SA 4.0
2022-07-22T06:17:38.303Z
You could always assumed some biased producer who would rather use tech A instead of tech B or sell to person A rather than person B; I don't know if any models actually do this, let alone the Austrian school. It would go against foundational free market thinking.
Giskard
CC BY-SA 4.0
2022-07-24T22:38:19.677Z
The utility exchanged *value* decreases, not the *utility* which increases for every marginal utility. The corollary producer is sorted by fixed startup costs that diminish marginally. We do consider supply concavity as a single producer maximizing marginal product revenue as we do demand convexity maximizing utility between substitutive markets as a total utility, by normal indifferences as in outliers of most inelastic at the market onset at 0qx.
Nick Carducci for Carface Bank
<utility><preferences><producer-theory><austrian>
In Austrian economics, do producers have an ordering of preferences similar to consumers?
Joebevo
# In Austrian economics, do producers have an ordering of preferences similar to consumers?

(Asked by: username_0 on 2022-07-22)

I watched a [video from the Mises Institute](https://youtu.be/e8nZDhFIjps) where the lecturer mentioned that in Austrian economics, the consumer behavior that is observed is a result of their perception of the utility of the purchase, which is expressed by an ordering of preferences (this is my understanding of it and in my words).

For example, if the consumer has ten dollars in his pocket and is considering purchasing a box of chocolates, the utility of the box of chocolates could be labelled in an ordinal way as 10, 6, and 2. Ten represents the utility of giving the box to his wife (case A), six is where is consumes it himself (case B) and two is for giving it to his kids (case C). The numbers are only used to describe the relative ordering. They have no other use.

So, the ordering of preferences which includes the 10 dollars could be written as:

```
case A
10 dollars
case B
5 dollars
case C
4.5 dollars

```

The utility decreases as you go down the list.

This means the consumer would be willing to give up USD 10 to buy the box for his wife, USD 5 to buy a box for himself, and USD 4.50 to buy a box for his kids. So, if he had just 15 dollars dollars, he would buy two boxes, one for his wife and one for himself, but not one for his kids.

Could someone please explain if it works the same way for producers (with a similar example)?

**Tags:** utility, preferences, producer-theory, austrian

> **Comments:**
> **username_1**: Hi! Your question is a bit unclear to me. You give a long example of consumer preferences, then ask about producer preferences without giving any explanation of what exactly you mean by that (only 1 line of the 16 lines is about this). It is usually assumed that producers want to maximize profits; this is what describes their preferences. Is this what you meant? Or do you have a reason to assume the producer preferences are something different in Austrian economics?  
> **username_0**: I was thinking along the lines of: would a factory prefer production method A vs B, and so on. But I guess the profit maximization criterion would take this into account quite easily, right?  
> **username_1**: You could always assumed some biased producer who would rather use tech A instead of tech B or sell to person A rather than person B; I don't know if any models actually do this, let alone the Austrian school. It would go against foundational free market thinking.  
> **username_2**: The utility exchanged *value* decreases, not the *utility* which increases for every marginal utility. The corollary producer is sorted by fixed startup costs that diminish marginally. We do consider supply concavity as a single producer maximizing marginal product revenue as we do demand convexity maximizing utility between substitutive markets as a total utility, by normal indifferences as in outliers of most inelastic at the market onset at 0qx.  

---

## 0 answers

