To Overthrow General Equilibrium Theory, Hans Mayer Attacked Indifference Curve Analysis

Mayer said mental facts, or self-observation, sufficed to establish two things. First, want satisfactions of different kinds were interdependent and, second, they were linked, not in the simultaneous manner suggested by indifference curves, but in a dynamic, causal, fashion: the relationship between wants and their satisfaction was not one of general, mutual dependence as suggested by indifference mapping, but one in which new wants emerged in time, depending on the degree to which existing desires had been satisfied. It was thus invalid to assume that all wants were present at the beginning of the “problem.” The “postulate of the law of equal marginal utility . . . becomes impossible in the real world of the psyche.” Given that it was the basis on which the theory of general equilibrium depended, if “this fundamental law of the equalization of the level of marginal utility did not hold, the whole theoretical system of equilibrium prices would lose its main support.”

—Robert Leonard, Von Neumann, Morgenstern, and the Creation of Game Theory: From Chess to Social Science, 1900-1960, Historical Perspectives on Modern Economics (New York: Cambridge University Press, 2010), 85.