Is utility in neoclassical economics a circular argument/concept? Neoclassical economics as a utility function that represents a consumer's preference ordering over a choice set.

Joan Robinson criticized utility for being a circular concept:


  "Utility is the quality in commodities that makes individuals want to
  buy them, and the fact that individuals want to buy commodities shows
  that they have utility"


This criticism is similar to that of the philosopher Hans Albert who argued that the ceteris paribus conditions on which the marginalist theory of demand rested rendered the theory itself an empty tautology and completely closed to experimental testing. In essence, demand and supply curve (theoretical line of quantity of a product which would have been offered or requested for given price) is purely ontological and could never been demonstrated empirically.

In my understanding, the neoclassical economics is based on utility. So if this concept is no testable, and circular, how neoclassical economics can explain anythings?

I'm not saying the system can not predict anythings, because if we record a lot of behaviors, we can certainly predict some behavior by comparing similar patterns (it's mainly the logic behind machine learning). But we should not call that a theory neither an explanation.

I end up with those interrogations:


Is utility a circular definition?
The theory has falsifiability?


Related content

As I'm exploring this question, and will add some content I stumble upon that I think add some context.


https://fixingtheeconomists.wordpress.com/2014/02/17/joan-robinsons-critique-of-marginal-utility-theory/
Let's be clear--the concept of utility is both unfalsifiable (as a singular proposition) and useful.

Joan Robinson is right, of course: Utility as a definition is circular. If you read a textbook that discusses the foundations of economic theory (such as the popular graduate text by Mas-Colell, Whinston, and Green), then you start not with utility, but with preferences. You would characterize an individual as being defined by a "preference relation" which describes, for every pair of potential allocations (i.e., sets of goods), which they prefer.

Some (not all!) preference relations are rational, which means that they are both complete (you have a well-defined preference over any pair of allocations), and transitive (if you like A more than B and B more than C, you like A more than C). A subset of those preference relations can be represented by a utility function (again, not all--the classic example is lexicographic preferences).

So a utility function is really just a thing that represents some underlying preferences. The statement "Steve's preferences are accurately modeled by a utility function" are not restrictive enough to be tested in any practical way. Rationality in general is hard to test as well, as you can always explain away seeming rationality violations with unusual preferences.

Instead, you should think about utility as a framework, not a theory. It's a language for developing theories. For example, you can describe Friedman's Permanent Income Hypothesis without invoking utility at all, but describing it in terms of utility is a lot clearer and simpler!

As an aside, the blog post you linked to is utter tripe, from a guy who seems to love bashing economics while not actually knowing all that much about it. I would avoid him like the plague.