Cardinal Versus Ordinal Utility: António Horta Osório's Contribution

Abstract

The history of economic thought remembers António Horta Osório for Schumpeter's reference to him in the History of Economic Analysis, in the context of a general appraisal of available works using mathematical instruments and language. This, however, does not do him justice, as he should also be praised for his pioneering interpretation of Pareto's general equilibrium. According to Stigler (1965), the definitive substitution of the cardinal utility hypothesis for the ordinal utility perspective was achieved by Johnson (1913) and Slutsky (1915). Weber (2001) discusses how far Pareto used cardinality, elects Slutsky (1915) as a pioneer of demand theory and prefers to reserve to R. G. Allen (1932–34), L. R. Klein and H. Rubin (1947–48), Samuelson (1947–48), R. C. Geary (1950–51), and Richard Stone (1954) the role of establishing ordinal utility in studying the utility function. This paper shows that Osório (1911) considered the subject of ordinalism before Johnson and Slutsky addressed the issue, as he had rejected the possibility of measuring utility and clearly stated that general equilibrium is not affected if cardinality is replaced by the ordinal conception for utility, according to Pareto's last formulation. Upon reading his book it becomes clear that not only was he perfectly aware of Edgeworth's contribution on the utility indifference curves, but also of Pareto's attempts to preserve general equilibrium from Fisher's criticism against cardinalism. Historians of economic thought have forgotten one of the early twentieth-century neoclassical economists. In this way the History of Economics has neglected an interesting proof of the consolidation of the Paretian ideas on ordinality, an issue that was an exciting and uncharted territory at that moment.