IT IS MORE THAN HALF a century since the first formulations of utility analysis by Jevons, Menger, and Walras. In that time there has been much controversy for and against this concept. Although much of the discussion has not gone beyond a quasiphilosophical defense or rejection of the utility concept, it is nevertheless possible to discern clear lines of development in the literature. First, there has been a steady tendency toward the removal of moral, utilitarian, welfare connotations from the concept. Secondly, there has been a progressive movement toward the rejection of hedonistic, introspective, psychological elements. These tendencies are evidenced by the names suggested to replace utility and satisfaction-ophelimit6, desirability, wantability, etc. The question arises as to what is left when all these elements are removed. Does not the whole utility analysis become meaningless in the operational sense of modern science? A meaningless theory according to this criterion is one which has no empirical implications by which it could conceivably be refuted under ideal empirical conditions. Thus, it is meaningless to ask whether the earth really moves around the sun rather than the sun around the earth, since no hypothesis with respect to the facts of celestial behavior is implied by either of these conventions. Is the same true of utility analysis? Has it no empirical implications for price-quantity behavior? It is clear that in its early formulations it was thought to have very definite, even revolutionary, consequences for the analysis of price and value. Moreover, even today the instinct of the textbook writer is methodologically sound in his attempt to deduce the negatively sloping demand curve from the Weber-Fechner law and diminishing marginal utility; this does not alter the fact that the whole demonstration is hopelessly fallacious and illogical. That some modern formulations of the utility concept are empty, circular, and meaningless in the above sense, is hardly open to doubt.' Consider, for example, a typical view as follows. (1) People act according to a plan; (2) a plan is how people act; (3) hence, people act as

Kendall, M. G., and A. Stuart, Advanced Theory of Statistics, Vol. 2 (London: Charles Griffin, 1961). Labys, W. C., and C. W. J. Granger, Speculation, hledging and Price Forecasts (Lexington, Mass.: Heath Lexington, 1970). Samuelson, P. A., Proof that Properly Anticipated Prices Fluctuate Randomly, Industrial Mana-gement Review, 6 (Spr. 1965), 41-49. Stevenson, R. A., and R. M. Bear, Commodity Futures: Trends or Random Walks?, Journal of Finance, XXV (Mar. 1970), 65-81. Telser, L. G., The Supply of Speculative Services in Wheat, Corn and Soybeans, Food Research Institute Studies, VII, Supplement (1967), 131-176.

1. THE theory of public goods 1 is sometimes confused with the theory of joint production. This is in the nature of a pun, or a play on words: for, as I have insisted elsewhere, as we increase the number of persons on both sides of the market in the case of mutton and wool, we converge in the usual fashion to the conditions of perfect competition. But when we increase the number of persons in the case of a typical public good, we make the problem more indeterminate rather than less. To elucidate the difference, I shall fill in what appears to be a minor gap in the literature, namely a needed statement in terms of modern welfare economics of the various optimality conditions as they appear in the case of joint products. The analysis is straightforward; and after it is before us, we can clearly see the difference between it and the well-known optimality conditions for the case of public goods. 2. I begin with an examination question given recently at the Massachusetts Institute of Technology: Corn is produced by land and labor; and so are wool-bearing mutton-bearing sheep. Assume the totals of available land and labor to be fixed. Write down the various welfare optimality conditions in the case where all people happen always to consume wool and mutton in the same proportions that sheep bear these products. And then, by contrast, write down the conditions that would have to prevail if individuals' indifference contours for wool, mutton, and corn involve the usual variability of proportions. This proved a difficult question for first-year graduate students in economic theory. Still many perceived that in the first case they could essentially work with two rather than three goods, substituting sheep as a kind of composite good for wool and mutton, and thereby ending up with the standard welfare conditions for two ordinary (private) goods, corn and sheep.

Paul A. Samuelson, Samuelson on Induced Innovation: Rejoinder: Agreements, Disagreements, Doubts, and the Case of Induced Harrod-Neutral Technical Change, The Review of Economics and Statistics, Vol. 48, No. 4 (Nov., 1966), pp. 444-448