Saturday, September 11, 2010

Jevons and Menger, Discoverers of Diminishing Marginal Utility

I've been interested in exchanges of ideas between the neuroscience of motivation and economic theory for some time. The field of neuroeconomics of course is the current forum for such exchanges. I came across some of the first mentions of diminishing marginal utility in economics today and thought they were worth an entry.

"Every appetite or sense is more or less rapidly satiated. A certain quantity of an object received, a further quantity is indifferent to us, or may even excite disgust. Every successive application will commonly excite the feelings less intensely than the previous application. The utility of the last supply of an object, then, usually decreases in some proportion, or as some function of the whole quantity received. This variation theoretically existing even in the smallest quantities, we must recede to infinitesimals, and what we shall call the coefficient of utility, is the ratio between the last increment or infinitely small supply of the object, and the increment of pleasure which it occasions, both, of course, estimated in their appropriate units." William Jevons, A General Mathematical Theory of Political Economy (1862)

"The satisfaction of every man's need for food up to the point where his life is thereby assured has the full importance of the maintenance of his life. Consumption exceeding this amount, again up to a certain point, has the importance of preserving his health (that is, his continuing well-being). Consumption extending beyond even this point has merely the importance--as observation shows--of a progressively weaker pleasure, until it finally reaches a certain limit at which the satisfaction of the need for food is so complete that every further intake of food contributes neither to the maintenance of life nor the preservation of health--nor does it give pleasure to the consumer, becoming first a matter of indifference to him, eventually a cause of pain, a danger to his health, a danger to life itself." Carl Menger, Principles of Economics (1871)