Thread: Marginal Utility

Originally Posted by goober

really, So you look at the example of a millionaire lighting a cigar with a $100 dollar bill, as a demonstration that the marginal utility of money does not vary with income?

Actually it can vary and neither he nor I have suggested it can't vary. But we both, as well as all of the reasonable economists of the day will tell you, "that variation depends on the level of pleasure and satisfaction the individual who uses that bill garners to determine whether it is constant, goes up, or goes down.

Stick with one thing, don't respond to 50 different things, and run off on a tangent, to avoid the topic, you only fool yourself and dnsmith.

So far the only apparent fools around this thread are you and bluedoggy.

How does the example of using a $100 dollar bill demonstrate that the marginal utility of money does not vary inversely with income ?

It varies based on satisfaction derived. If there is satisfaction, that is utility. Once you learn the basics of economics maybe you will start to understand Adam Smith, Mises, Reisman and Menger. So far you have not reached the 5 grade level of reading so you can't possibly have learned any economics, and your responses prove it.

Originally Posted by goober

So you didn't answer the question, what tax scheme would you suggest to raise the money to fund the government and pay down the debt?

He answered it precisely such that anyone of 5th grade education or higher could understand it.

The only change I would make to his statement is, most flat tax proponents suggest we have gone so far into debt it would take an initial tax rate of about 22% and only income which if calculated after taxes would be more than the poverty level would be taxes by income taxes. FICA would be continued as they are premiums for future benefits, but I do believe the caps on the income from which they are collected should be eliminated.

Originally Posted by dnsmith

It is amazing that a grown man who says he got higher than the 5th grade can misread plain English so desperately bad. From Adam Smith through Mises and Menger and then Reisman only a fool could interpret the clear English to mean they believed in a diminishing marginal utility of money. Adam Smith coninued Marshall's term "constant" whereas Mises and Reisman used the term limitless need and desire for wealth and satisfaction to describe the fact that they did not accept that the marginal utility diminished. I really can't believe you are so stupid as to misinterpret Reisman and the others the way you assert. You are just too cowardly to admit to the facts.

LOL, you missed this

The Austrian theory of money virtually begins and ends with Ludwig von Mises's monumental Theory of Money and Credit, published in 1912.[1] Mises's fundamental accomplishment was to take the theory of marginal utility, built up by Austrian economists and other marginalists as the explanation for consumer demand and market price, and apply it to the demand for and the value, or the price, of money. No longer did the theory of money need to be separated from the general economic theory of individual action and utility, of supply, demand, and price; no longer did monetary theory have to suffer isolation in a context of "velocities of circulation," "price levels," and "equations of exchange."

The Austrian Theory of Money - Murray N. Rothbard - Mises Daily

Originally Posted by goober

You guys are so funny when you pretend to know stuff, that you clearly don't know.

I guess you aren't familiar with the Austrian School of Economics.

Ludwig Von Mises introduced the marginal utility of money in 1912.

It looks like you don't fully understand Mises either Goober. Here are some key explanations taken from the economists point of view.

"Mises used the Wicksteedian concept: supply is the total stock of a commodity at any given time; and demand is the total market demand to gain and hold cash balances, built up out of the marginal-utility rankings of units of money on the value scales of individuals on the market. "
"Mises was also able to explain the demand for cash balances as the resultant of marginal utilities on value scales that are strictly ordinal for each individual. " This sentence says what Maha and I have been saying, "any dimisment of the marginal utility of money is based on the individual assessment of satisfaction that person derives from addition units of mone." (He does acknowledge that the marginal utility of money CAN diminish, but again, that relates to the individual. Where your two economists erred was in the assertion that THEY could estimate for ANYONE ELSE, how much money they would need before its utility diminished. That Goober is what you have failed to realize since day one. The also erred when they used that theory as justification for 70% tax rates for the rich.)

"For, as Mises pointed out in a brilliant analysis whose lessons have still not been absorbed in the mainstream of economic theory, the purchasing power of the money unit is not simply the inverse of the so-called price level of goods and services."

The fallacy of the price-level concept is further shown by Mises's analysis of precisely how prices rise (that is, the purchasing power of money falls) in response to an increase in the quantity of money (assuming, of course, that the individual demand schedules for cash balances or, more generally, individual value scales remain constant). Gee, there is that individual scale of value (satisfaction or utility) remaining constant again.

"for each individual has a different value scale, a different ordinal ranking of utilities, including the relative marginal utilities of dollars and of all the other goods on his value scale."

The Austrian Theory of Money - Murray N. Rothbard - Mises Daily

I guess he was just another leftist nutter......huh?

If he uses the socialist paradigm which suggests that money automatically diminishes in marginal utility no matter who the individual is, yes, he would be a left wing nutter. But he doesn't as his text clearly states in my quotes above; which I got from your own link.

Originally Posted by dnsmith

It looks like you don't fully understand Mises either Goober. Here are some key explanations taken from the economists point of view.

"Mises used the Wicksteedian concept: supply is the total stock of a commodity at any given time; and demand is the total market demand to gain and hold cash balances, built up out of the marginal-utility rankings of units of money on the value scales of individuals on the market. "
"Mises was also able to explain the demand for cash balances as the resultant of marginal utilities on value scales that are strictly ordinal for each individual. " This sentence says what Maha and I have been saying, "any dimisment of the marginal utility of money is based on the individual assessment of satisfaction that person derives from addition units of mone." (He does acknowledge that the marginal utility of money CAN diminish, but again, that relates to the individual. Where your two economists erred was in the assertion that THEY could estimate for ANYONE ELSE, how much money they would need before its utility diminished. That Goober is what you have failed to realize since day one. The also erred when they used that theory as justification for 70% tax rates for the rich.)

"For, as Mises pointed out in a brilliant analysis whose lessons have still not been absorbed in the mainstream of economic theory, the purchasing power of the money unit is not simply the inverse of the so-called price level of goods and services."

The fallacy of the price-level concept is further shown by Mises's analysis of precisely how prices rise (that is, the purchasing power of money falls) in response to an increase in the quantity of money (assuming, of course, that the individual demand schedules for cash balances or, more generally, individual value scales remain constant). Gee, there is that individual scale of value (satisfaction or utility) remaining constant again.

"for each individual has a different value scale, a different ordinal ranking of utilities, including the relative marginal utilities of dollars and of all the other goods on his value scale."If he uses the socialist paradigm which suggests that money automatically diminishes in marginal utility no matter who the individual is, yes, he would be a left wing nutter. But he doesn't as his text clearly states in my quotes above; which I got from your own link.

What you don't realize, is that the excerpts you just posted agree with what I have been saying, and in no way suggest that the marginal utility of money is constant.

Except for the part that you wrote, that just shows that you don't have a clue what any of this means...

Originally Posted by goober

What you don't realize, is that the excerpts you just posted agree with what I have been saying, and in no way suggest that the marginal utility of money is constant.

Except for the part that you wrote, that just shows that you don't have a clue what any of this means...

Unfortunately you still cannot read for understanding. Oh well, I guess you will never learn. Even in that guys description of Mises considering some marginal utility diminishing with money he clearly said what Maha and I have said all along, IT IS ONLY BASED ON THE INDIVIDUAL AND HOW THAT INDIVIDUAL REGARDS THE SATISFACTION DERIVED FROM EACH NEW UNIT OF MONEY ACQUIRED. Can that be any more clear?

Originally Posted by dnsmith

Unfortunately you still cannot read for understanding. Oh well, I guess you will never learn. Even in that guys description of Mises considering some marginal utility diminishing with money he clearly said what Maha and I have said all along, IT IS ONLY BASED ON THE INDIVIDUAL AND HOW THAT INDIVIDUAL REGARDS THE SATISFACTION DERIVED FROM EACH NEW UNIT OF MONEY ACQUIRED. Can that be any more clear?

What is completely clear is that you don't have a clue.

What Mises did was treat money like another good, before Mises you had diminishing marginal utility for goods and services, but not money (Menger 1871).

Mises great insight was that money was just another good, that diminishing marginal utility applied.
That was 100 years ago.
Since then almost every economist has accepted that money behaves like another good, with marginal utility that diminishes as income rises.

Originally Posted by goober

What is completely clear is that you don't have a clue.

What Mises did was treat money like another good, before Mises you had diminishing marginal utility for goods and services, but not money (Menger 1871).

Mises great insight was that money was just another good, that diminishing marginal utility applied.
That was 100 years ago.
Since then almost every economist has accepted that money behaves like another good, with marginal utility that diminishes as income rises.

Only if the individual involved did not get sufficient satisfaction, which seems to be the point you cannot digest. Especially Reisman, who was crystal clear when he said, "The Limitless Need and Desire for Wealth",
The leading propositions laid down in Chapter 1 were that economics is the science that studies the production of wealth under a system of division of labor and that capitalism is the essential requirement for the successful functioning of a division-of-labor society, indeed, ultimately for its very existence. It is implicit in these propositions that the ultimate source of the importance of the division of labor and capitalism, and of the science of economics, is wealth. This is because, in the last analysis, the division of labor, capitalism, and the science of economics are all merely means to the production of wealth."

and

"The principle that man’s desire for wealth is limitless is fully consistent with the law of diminishing marginal utility (of goods), one of the most important and well-known principles of economics. The law of diminishing marginal utility states that the utility or, equivalently, the importance or personal value that an individual attaches to a unit of any good diminishes as the quantity of the good in his possession increases." (Note: importance or personal value again refers to the individuals satisfaction, not some arbitrary point someone else ascribes to "what is enough.")

Originally Posted by dnsmith

Only if the individual involved did not get sufficient satisfaction, which seems to be the point you cannot digest. Especially Reisman, who was crystal clear when he said, "The Limitless Need and Desire for Wealth",
The leading propositions laid down in Chapter 1 were that economics is the science that studies the production of wealth under a system of division of labor and that capitalism is the essential requirement for the successful functioning of a division-of-labor society, indeed, ultimately for its very existence. It is implicit in these propositions that the ultimate source of the importance of the division of labor and capitalism, and of the science of economics, is wealth. This is because, in the last analysis, the division of labor, capitalism, and the science of economics are all merely means to the production of wealth."

and

"The principle that man’s desire for wealth is limitless is fully consistent with the law of diminishing marginal utility (of goods), one of the most important and well-known principles of economics. The law of diminishing marginal utility states that the utility or, equivalently, the importance or personal value that an individual attaches to a unit of any good diminishes as the quantity of the good in his possession increases." (Note: importance or personal value again refers to the individuals satisfaction, not some arbitrary point someone else ascribes to "what is enough.")

Now you are being dishonest by doctoring quotes to change their meaning.

Originally Posted by goober

Now you are being dishonest by doctoring quotes to change their meaning.

No quotes were doctored and I highlighted parts you needed to understand what he was saying, and I put my comment in quotation marks.

If you ever learn one fact in your life Goober, it is that neither you, nor I, nor anyone else can judge whether or not there is a diminishing marginal utility in someone elses life. That is the one point Maha and I have both made many efforts to impress on you. As I have said clearly that for any given individual the marginal utility of money can tend to go up, can tend to remain constant, or can tend to go down and the pace at which it goes up, remains constant or goes down is directly related to the satisfaction to the satisfaction associated with acquiring the next unit of money. It is what Adam Smith said in his way, what Mises said in his way, what Menger said in his way and what Reisman said so very clearly in his treatise on capitalism. And because no one but the individual himself is able to judge the rate of satisfaction, no one else can reasonably use some arbitrary figure as a proper rate to tax anyone other than yourself. Those are absolutes Goober, neither you nor Maha nor I can change them. Now grow up and be a man instead of sniveling over and over about others and their understanding of economics. When you miss that one point, you miss it all.

*sigh* folks, please try and discuss the topic like adults, and leave the childish snipping and bickering in the playground.

Originally Posted by dnsmith

No quotes were doctored and I highlighted parts you needed to understand what he was saying, and I put my comment in quotation marks.

If you ever learn one fact in your life Goober, it is that neither you, nor I, nor anyone else can judge whether or not there is a diminishing marginal utility in someone elses life. That is the one point Maha and I have both made many efforts to impress on you. As I have said clearly that for any given individual the marginal utility of money can tend to go up, can tend to remain constant, or can tend to go down and the pace at which it goes up, remains constant or goes down is directly related to the satisfaction to the satisfaction associated with acquiring the next unit of money. It is what Adam Smith said in his way, what Mises said in his way, what Menger said in his way and what Reisman said so very clearly in his treatise on capitalism. And because no one but the individual himself is able to judge the rate of satisfaction, no one else can reasonably use some arbitrary figure as a proper rate to tax anyone other than yourself. Those are absolutes Goober, neither you nor Maha nor I can change them. Now grow up and be a man instead of sniveling over and over about others and their understanding of economics. When you miss that one point, you miss it all.

"satisfaction" is not utility, according to Mises

In treating marginal utility we deal neither with sensuous enjoyment nor with saturation and satiety. We do not transcend the sphere of praxeological reasoning in establishing the following definition: We call that employment of a unit of a homogeneous supply which a man makes if his supply is n units, but would not make if, other things being equal, his supply were only n-1 units, the least urgent employment or the marginal employment, and the utility derived from it marginal utility. In order to attain this knowledge we do not need any physiological or psychological experience, knowledge, or reasoning. It follows necessarily from our assumptions that people act (choose) and that in the first case acting man has n units of a homogeneous supply and in the second case n-1 units. Under these conditions no other result is thinkable. Our statement is formal and aprioristic and does not depend on any experience.

Ludwig von Mises

What Can the Law of Diminishing Marginal Utility Teach Us? - Thorsten Polleit - Mises Daily

So Goober marginal utility claims a 1000 cal meal is a 1000cal meal no matter the soource, means of delivery, or dining experience? A 1000 cal meal at M acDonalds is the same as a meal a clam shack, family restaurant, or when preprarred by a master chef? There is an awful lot seperating those dining experiences and the differences are far from meager.