Thread: Marginal Utility

So you got nothing.

Your whole argument is based on interpreting "the limitless desire for wealth" as meaning "the marginal utility of wealth may decline, increase or remain the same."
Which it doesn't.
When Reisman says he is reconciling diminishing marginal utility with the limitless desire for wealth, he is accepting the premise of Mises that marginal utility diminishes.
Rothbard points out

The relative utilities of money units as against other goods determine each person's demand for cash balances, that is, how much of his income or wealth he will keep in cash balances as against how much he will spend. Applying the law of diminishing (ordinal) marginal utility of money and bearing in mind that money's "use" is to be held for future exchange, Mises arrived implicitly at a falling demand curve for money in relation to the purchasing power of the currency unit.

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

Since the utility of money is the utility of goods and services that it can be exchanged for, and since the marginal utility of goods and services diminishes, it only stands to reason that the marginal utility of money diminishes.

Originally Posted by goober

So you got nothing.

Your whole argument is based on interpreting "the limitless desire for wealth" as meaning "the marginal utility of wealth may decline, increase or remain the same."
Which it doesn't.
When Reisman says he is reconciling diminishing marginal utility with the limitless desire for wealth, he is accepting the premise of Mises that marginal utility diminishes.
Rothbard points out
The Austrian Theory of Money - Murray N. Rothbard - Mises Daily

Since the utility of money is the utility of goods and services that it can be exchanged for, and since the marginal utility of goods and services diminishes, it only stands to reason that the marginal utility of money diminishes.

It does not stand to reason except in a small mind which does not understand economics. He clearly states that it depends on the satisfaction derived by the individual attaining another unit of wealth. He further uses an example drawn from Böhm-Bawerk, the leading theorist of marginal utility, to illustrate the principle. "Imagine that an isolated frontiersman, say, of the old American West, requires five sacks of grain (barter goods to use as money), which must last him until his next harvest. He needs one sack to meet his minimum need for nutrition. Without it, he would die of starvation. He needs a second sack to be sure of having enough food to keep up his health and strength. A third sack enables him to raise some poultry and satisfy his hunger completely. With a fourth sack he can distill some brandy. With a fifth sack he can feed some parrots, from which he derives amusement." He not only says satisfaction is utility he says "amusement" is utility.

In addition he discusses Mises, "George Reisman was a student of Mises's, a translator of his work, and, as he demonstrates in this outstanding treatise, a leading theorist in the Misesian tradition. This mammoth exposition deals with the method and theory of economics, and particularly excels in its application to matters of policy. Its sections on price controls, money, banking, and environmentalism apply Misesian theory to new times and new literature. The author deals patiently but devastatingly with the arguments of the interventionists. The end result is an integrated understanding of the theory and ethics of the capitalist economy."

Böhm-Bawerk,"The subjectiveness of valuation rests in the nature of satisfaction--satisfaction is subjective and not open to numerical measurement. The extent to which a thing gives satisfaction is always personal. People derive satisfaction from different goods and services; that is, all people are not alike in terms of the types of things that please them. Experience also demonstrates that a person's preferences vary from time to time. His ranking of alternative choices may undergo a reshuffling at any given moment. His scale of values may also be altered by deletions or additions."

Eugen von Böhm-Bawerk was one of the leading members of the Austrian school of economics—an approach to economic thought founded by Carl Menger and augmented by Knut Wicksell, Ludwig von Mises, Friedrich A. Hayek, and Sir John Hicks.

IE satisfaction, amusement are both private determiners of utility. All of the above economists tell us that utility is in the eyes of the beholder and marginal utility of money (or barter goods used in lieu of money) can go up, go down or stay constant. That point is irrefutable no matter how much you would like to believe to the contrary.

Originally Posted by dnsmith

Yet he clearly states that it depends on the satisfaction derived by the individual attaining another unit of wealth. He further uses an example drawn from Böhm-Bawerk, the leading theorist of marginal utility to say, an example drawn from Böhm-Bawerk, the leading theorist of marginal utility, will illustrate the principle. "Imagine that an isolated frontiersman, say, of the old American West, requires five sacks of grain, which must last him until his next harvest. He needs one sack to meet his minimum need for nutrition. Without it, he would die of starvation. He needs a second sack to be sure of having enough food to keep up his health and strength. A third sack enables him to raise some poultry and satisfy his hunger completely. With a fourth sack he can distill some brandy. With a fifth sack he can feed some parrots, from which he derives amusement." He not only says satisfaction is utility he says "amusement" is utility.

A good example how these ideas, these theories that give some economists a job, many times paid by special interests, can allow america to commit economic suicide. Men get involved in the matters of higher intellectual thought, as the nation burns down. They will continue to argue such, paying little mind that their ideas, while nice to think about, are useless. In fact, even harmful, because of the misdirection involved. Nero fiddling as Rome burns. This is nothing more than fiddling. It is also real insanity.

Originally Posted by Blue Doggy

A good example how these ideas, these theories that give some economists a job, many times paid by special interests, can allow america to commit economic suicide. Men get involved in the matters of higher intellectual thought, as the nation burns down. They will continue to argue such, paying little mind that their ideas, while nice to think about, are useless. In fact, even harmful, because of the misdirection involved. Nero fiddling as Rome burns. This is nothing more than fiddling. It is also real insanity.

Your comment is unadulterated hogwash and shows the lack of ability to extrapolate meaning from text at the same lack of logic as Goober.

Originally Posted by dnsmith

Yet he clearly states that it depends on the satisfaction derived by the individual attaining another unit of wealth. He further uses an example drawn from Böhm-Bawerk, the leading theorist of marginal utility to say, an example drawn from Böhm-Bawerk, the leading theorist of marginal utility, will illustrate the principle. "Imagine that an isolated frontiersman, say, of the old American West, requires five sacks of grain, which must last him until his next harvest. He needs one sack to meet his minimum need for nutrition. Without it, he would die of starvation. He needs a second sack to be sure of having enough food to keep up his health and strength. A third sack enables him to raise some poultry and satisfy his hunger completely. With a fourth sack he can distill some brandy. With a fifth sack he can feed some parrots, from which he derives amusement." He not only says satisfaction is utility he says "amusement" is utility.

What you have just quoted is an example of diminishing marginal utility.
Each additional sack has less utility than the one before it, this is what their ordinal position in the example is based on. (unless you believe that he considers his survival to be of equal utility to feeding a parrot.)

Now Mises took this a step further.
If the frontiersman was about to depart, and he had procured all his supplies , he would have no need for money, so he can spend all his remaining money on grain.
If he has enough to buy one sack, that marginal utility of his money is his minimum need for nutrition, if he has enough for two sacks the utility is now a better diet, if he has enough for five sacks, the value of that marginal unit of money, is feeding a parrot. So the utility of his money diminishes.

Originally Posted by goober

What you have just quoted is an example of diminishing marginal utility.

Nope! it is a clear example of the marginal utility does not diminish, even to the point that the amusement he gets feeding parrots makes the utility continue unabated. It is a shame you don't understand English.

Each additional sack has less utility than the one before it, this is what their ordinal position in the example is based on. (unless you believe that he considers his survival to be of equal utility to feeding a parrot.)

How I (or you) would view the amusement of feeding a parrot is totally irrelevant. It is up to the guy with the grain to determine if that amusement is sufficient utility such that the 5th acquision satisfies him. (a barter good used as if it were money)

Now Mises took this a step further.
If the frontiersman was about to depart, and he had procured all his supplies , he would have no need for money, so he can spend all his remaining money on grain.
If he has enough to buy one sack, that marginal utility of his money is his minimum need for nutrition, if he has enough for two sacks the utility is now a better diet, if he has enough for five sacks, the value of that marginal unit of money, is feeding a parrot. So the utility of his money diminishes.

Not if he got amusement from feeding a parrot. U started out with not understanding & still have most of that understanding left.

Originally Posted by dnsmith

Nope! it is a clear example of the marginal utility does not diminish, even to the point that the amusement he gets feeding parrots makes the utility continue unabated. It is a shame you don't understand English.How I (or you) would view the amusement of feeding a parrot is totally irrelevant. It is up to the guy with the grain to determine if that amusement is sufficient utility such that the 5th acquision satisfies him. (a barter good used as if it were money)Not if he got amusement from feeding a parrot. U started out with not understanding & still have most of that understanding left.

Then why does he order the uses by diminishing utility?

Do you understand what diminishing marginal utility means?

do you see that list of uses as equal, that the order he chose to list them was random, that sustaining his life provided him with satisfaction equal (no more, no less) than feeding a parrot?
Or are you suggesting that if he only had one sack of grain, he might choose to die of starvation, while feeding a parrot?

Originally Posted by goober

Then why does he order the uses by diminishing utility?

OF GOODS AND SERVICES!

Do you understand what diminishing marginal utility means?

Of course I do, but it seems to totally elude you.

do you see that list of uses as equal, that the order he chose to list them was random, that sustaining his life provided him with satisfaction equal (no more, no less) than feeding a parrot?
Or are you suggesting that if he only had one sack of grain, he might choose to die of starvation, while feeding a parrot?

No, I am not saying that at all. Like I said, you do not understand the issue at all. When he got one sack of grain he got utility from it by providing for his needs for food. He got utility from his second sack by choosing to save it (propensity to save) in the event he needed it for health and strength. His third sack he got utility from by feeding chickens to satisfy a variety of food to sate his hunger completely. He got utility from his 4th sack of grain from which he distilled some brandy giving him pleasure. The fifth sack of grain gave him utility by amusing his desire to feed some parrots. All were utility based on the satisfaction he got from them.

What you are trying to do is extrapolate your personal opinion as to what YOU think is more important. We can all agree that when the original hunger is satisfied it is the more important human need to survive. But once that basic need is satisfied, the next important issue is the immediate satisfaction in which he chooses to indulge. You may be able to list needs according to what are absolute human needs, but that does not matter once the absolute needs are met. That is the whole point of the example, which went SWOOSH, right over your head.

Until you learn exactly what the hierarchy of needs are, and recognizing that once one rung is satisfied, the next rung becomes the more important to achieve you will never understand Capitalist philosophy. You are stuck back on the Marxist theory that ONLY basic survival needs are real utility. It is the basic premise of socialism, but NOT to capitalism.

Originally Posted by dnsmith

Your comment is unadulterated hogwash and shows the lack of ability to extrapolate meaning from text at the same lack of logic as Goober.

Hogwash? LOL. Sir, are you not even remotely aware that there are left and right economists, who if you got a whole passel of them together, that they would argue for days, each with their own stats, and at the end of the week of bickering, each would leave with their own "take" unchanged? Sir, are you even remotely aware of that ?

So, to say what you say is the height of stupidity. Spend the next year watching C Span Booknotes and other programs on C SPAN, the economists section. It might make you a bit smarter, IMO. You only read right wing shit. You only listen to right wing shit. It makes you stink like shit after awhile. ; And no offense intended. GOOD GRIEF. The size of that ego.

Originally Posted by Blue Doggy

Hogwash? LOL. Sir, are you not even remotely aware that there are left and right economists, who if you got a whole passel of them together, that they would argue for days, each with their own stats, and at the end of the week of bickering, each would leave with their own "take" unchanged? Sir, are you even remotely aware of that ?

So, to say what you say is the height of stupidity. Spend the next year watching C Span Booknotes and other programs on C SPAN, the economists section. It might make you a bit smarter, IMO. You only read right wing shit. You only listen to right wing shit. It makes you stink like shit after awhile. ; And no offense intended. GOOD GRIEF. The size of that ego.

All of your posts tend to be hogwash, and if you use anymore vulgarity in posts I will certainly tend to ignore them. Clean up your act if you want to discuss issues.

BTW, yes, I am quite aware that there are leftwingnut economists (who tend to use the basis of the socialist paradigm to support their opinions) and main stream economists who tend to accept the capitalist paradigm and their are rightwingnut economists who believe in the libertarian paradigm which totally eliminates government intervention in the corporate structure what so ever. I'll stick with the moderate main streamers thank you.

If you are not familiar with the socialist paradigm of which I have nothing but contempt, here it is, "The law of diminishing marginal utility provides ground for having socialism in the economy. The rich section of society has less marginal utility for a unit of money, whereas the poor section has more utility for the same amount of money, as poor have relatively less stock of money. If the money or income is redistributed in the favor of poor, the gain to the poor shall be more as compared to the loss to the rich. This process of redistribution will tend to equalize the marginal utility of poor and rich and maximize social welfare."

Originally Posted by dnsmith

OF GOODS AND SERVICES! Of course I do, but it seems to totally elude you. No, I am not saying that at all. Like I said, you do not understand the issue at all. When he got one sack of grain he got utility from it by providing for his needs for food. He got utility from his second sack by choosing to save it (propensity to save) in the event he needed it for health and strength. His third sack he got utility from by feeding chickens to satisfy a variety of food to sate his hunger completely. He got utility from his 4th sack of grain from which he distilled some brandy giving him pleasure. The fifth sack of grain gave him utility by amusing his desire to feed some parrots. All were utility based on the satisfaction he got from them.

What you are trying to do is extrapolate your personal opinion as to what YOU think is more important. We can all agree that when the original hunger is satisfied it is the more important human need to survive. But once that basic need is satisfied, the next important issue is the immediate satisfaction in which he chooses to indulge. You may be able to list needs according to what are absolute human needs, but that does not matter once the absolute needs are met. That is the whole point of the example, which went SWOOSH, right over your head.

Until you learn exactly what the hierarchy of needs are, and recognizing that once one rung is satisfied, the next rung becomes the more important to achieve you will never understand Capitalist philosophy. You are stuck back on the Marxist theory that ONLY basic survival needs are real utility. It is the basic premise of socialism, but NOT to capitalism.

The point of the example is that the utility of each additional sack of grain is less, that is why it is put in order, from the most utility, sustaining the life of the frontiersman, to the least utility, feeding a parrot for amusement.
He still gets utility from the 5th sack, but less than from the 4th sack. Hence the term diminishing marginal utility, each additional sack( the marginal sack) yields less utility than the previous sack.

I'm not extrapolating anything, it's right there in the example, how the uses are ordered.

With goods, marginal utility can decline sharply, there is great utility in owning a cell phone, but two cell phones aren't twice as good as one, and there really wouldn't be a point to having 30 cell phones.
Each additional cell phone is of less utility than the one that preceded it.
The utility of money drops off slower than any other good, because it can be traded for any good or service, so even when the frontiersman has 5 sacks of grain, and another sack of grain would be of little use, not even worth the bother of carrying it, he may use the money he would have used for the 6th sack to buy a knife, or a razor or something else that would have a higher utility than a 6th sack of grain, but not as much utility as a 5th sack of grain, or he would have purchased it before he purchased the 5th sack of grain.

Originally Posted by goober

The point of the example is that the utility of each additional sack of grain is less

Wrong! The utility may be of a lower order of satisfaction, but the satisfaction continues just the same.

that is why it is put in order, from the most utility, sustaining the life of the frontiersman, to the least utility, feeding a parrot for amusement.

From the highest order of satisfaction to the lowest order of satisfaction, yes. That the satisfaction derived as he progresses up the pyramid is just as high for the next order of utility continues to be equal is the point which you continue to miss when you screw up the meaning of the example.

He still gets utility from the 5th sack, but less than from the 4th sack. Hence the term diminishing marginal utility, each additional sack( the marginal sack) yields less utility than the previous sack.

Actually the example did not attempt to measure the utility derived from his amusement and it could be more, less or constant. After all it is his amusement, his satisfaction, his utility which counts, not what you think it should be.

With goods, marginal utility can decline sharply, there is great utility in owning a cell phone, but two cell phones aren't twice as good as one, and there really wouldn't be a point to having 30 cell phones. Each additional cell phone is of less utility than the one that preceded it.

Good example of the diminishing utility of a good.

The utility of money drops off slower than any other good, because it can be traded for any good or service, so even when the frontiersman has 5 sacks of grain, and another sack of grain would be of little use, not even worth the bother of carrying it, he may use the money he would have used for the 6th sack to buy a knife, or a razor or something else that would have a higher utility than a 6th sack of grain, but not as much utility as a 5th sack of grain, or he would have purchased it before he purchased the 5th sack of grain.

If that purchase (barter) satisfies him, the utility can remain constant, go up or go down, based on HIS SATISFACTION. You cannot measure HIS SATISFACTION. All you can do is look at what you perceive as the value of the order of hierarchy he achieves, not how much satisfaction he gets achieving it.

Once again, you have chosen to totally misunderstand the whole example and you have furnished nothing to support your assertion.

Originally Posted by dnsmith

Wrong! The utility may be of a lower order of satisfaction, but the satisfaction continues just the same.From the highest order of satisfaction to the lowest order of satisfaction, yes. That the satisfaction derived as he progresses up the pyramid is just as high for the next order of utility continues to be equal is the point which you continue to miss when you screw up the meaning of the example.Actually the example did not attempt to measure the utility derived from his amusement and it could be more, less or constant. After all it is his amusement, his satisfaction, his utility which counts, not what you think it should be.Good example of the diminishing utility of a good.If that purchase (barter) satisfies him, the utility can remain constant, go up or go down, based on HIS SATISFACTION. You cannot measure HIS SATISFACTION. All you can do is look at what you perceive as the value of the order of hierarchy he achieves, not how much satisfaction he gets achieving it.

Once again, you have chosen to totally misunderstand the whole example and you have furnished nothing to support your assertion.

Now you are just making stuff up, you don't have the integrity to admit you are wrong, and you are wrong....