Marginal utility of money

I believe it may be less credible, if it only works with money and not barter in capital goods.

 

How does the billionaire perceive that $1000 is of greater marginal utility or size than a person who doesn't have enough money to buy food and shelter?

 

Of course $1000 is going to have more marginal utility to a person who doesn't have enough to eat than it does to a billionaire. It's just inane to argue otherwise.

 

You keep claiming that "the Law of Diminishing Utility" must have constant sized marginal units. How about producing a description of constancy in a credible supporting citation. I have not found anything on line to refute Reisman's contention that marginal units must increase in size as wealth increases.

 

It's not related to the law of diminishing marginal utility any more than the fact that both concepts deal with marginal utility. The reason people are getting more satisfaction from the larger sized units than smaller sized units is because of the law of increasing total utility, which states precisely that. You are making a complete non sequitur argument.

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Reisman's contention that marginal units of money often increase in size as wealth increases is not something I take issue with, as I have said a thousands times now. Why you keep bringing that up is beyond me. The law of diminishing marginal utility literally is meaningless if you do not hold size constant. Every definition assumes size is constant except your bogus and erroneous one.

 

Relative to what?
Reisman's contention that marginal units increase with increases in marginal wealth may have some merit applied across an entire economy where a rising economy lifts all but a contention that marginal units increase with individual increases in wealth is nothing but an excrable perversion that feebly attempts to misapply a general economic conception into a principle for wealthy extravagance.

 

What is the marginal utility of money for the least wealthy versus the wealthiest.

Full employment of resources in human capital markets cannot be worse as a form of marginal utility regarding the general welfare.

 

First you must understand what I said. Then you have to learn what the economic significance of the principle. Then recognize the facts.

We are talking in general but it can be proved in specifics. First, it has nothing to do with wealthy extravagance. It has to do with perceptions. As wealth increases the wealthy in general, and the wealthy individuals, consider larger sized marginal units, and those marginal units give them satisfaction. It is human nature and is part of the fact that man (in general) desires limitless wealth.

Your question about relativity gives rise to the fact that you do not understand human behavior as it pertains to wealth. Having a desire for more wealth is the common denominator of man vs wealth.

 

Actually Daniel, that is a good question. A poor man may perceive satisfaction if he receives a bonus of $1,000. A very rich man would not perceive satisfaction with such a small marginal unit. Effectively that small marginal unit would have a diminishing marginal utility for the rich man even though for the poor man it means a whole lot. Thus the tendency for the wealthy to think in terms of larger marginal units, and when he does, and he acquires such a larger unit it satisfies him, thus his marginal utility for that larger sized marginal unit increases. It is really quite simple once you understand the principle.

This is totally irrelevant to the discussion of marginal utility, if for no other reason the general welfare has nothing to do with the issue.

 

If you understood what marginal utility is, you would find it easy to understand. Effectively, marginal utility is nothing more than the satisfaction (or lack thereof) perceived by the individual enjoying the receipt of that marginal unit. I would say that the $1,000 has more real utility to the poor man because he can satisfy many needs with that money, yet to the billionaire it likely would not be satisfactory thus the marginal utility of the small marginal unit of $1,000 would be diminished to the rich man. BUT, and this is the essence of the issue you and others tend to over look, and which was very well explained on page 51 of Reisman's Capitalism: A Treatise. The billionaire would look at a much larger marginal unit. Maybe as much as a million or 10 million, and with that sized marginal may well perceive satisfaction for having acquired that marginal unit thus the increase in marginal utility.

 

I'll make a deal with you, when you can refer me to a capitalist paradigm economists who says the marginal unit must remain constant in size in discussing the law of diminishing marginal utility, I will try to understand your point.

I do understand that socialist paradigm economists do like that contention, but frankly, I believe the who lot of them are somewhat behind the times in economics.

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Since I have proved to you categorically that fiscal year 2000 ended in a net deficit, I suggest you go back to that forum and make your argument.

 

So, why do you need to quibble or plead, specially, regarding this point? We know that relative wealth is similar to relative poverty, regarding diminishing marginal utility of money. In both cases, the marginal utility of money diminishes at the extreme ends.

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Full employment of resources in human capital markets cannot be worse as a form of marginal utility regarding the general welfare. If you believe this is "irrelevant" then, how can you claim relative wealth is more relevant than relative poverty?

 

A marginal unit is the same size. Sure, I agree if you change the definition of "marginal" in marginal utility issues you can get a different result. Just like if you change the definition of "surplus" you can say Clinton didn't have a surplus. If I change the definition of pink I can say the grass is pink.

But that isn't the common or accepted meaning of the concept. So what if $900 million has more utility to a billionaire than $10 does to someone who makes $20k? That isn't the point of the concept.

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That is absolutely untrue. You haven't proved that at all. To the contrary. All you proved is that you simply came with a bogus definition of "deficit" you got from some RW nutjob sources. Same thing you are doing in this thread with marginal utility. Your arguments are simply based on bogus definitions. Silly semantics. It's claiming that green is on the color spectrum between red and yellow and arguing that grass is orange colored.

 

It's unarguable that when new income no longer meets survival needs but is available for discretionary spending each unit of money has less utility. I find Abraham Maslow's Hierarchy of Needs instructive. Maslow distinguished five levels of human need: physiological (what we need to stay alive), safety, love/belonging, esteem, and self-actualization. We must meet lower level needs before pursuing higher levels. Now money is most necessary to survive and stay safe. But the higher needs are more social. Money is necessary but not sufficient to meet them. That makes money a bit less important.

The political and moral question is usually understood to be whether we may impair some people's pursuit of higher needs to better meet the lower needs of others. Framed that way, the answer seems obvious. But we must ask how much - if any - added tax revenue today would be used to meet anyone's basic needs. Vast sums are expended on bureaucratic infrastructure and on regulatory compliance (a hidden tax whose cost may exceed that of the income tax) and on pork barrel and on many projects of questionable worth, all this while primary benefits for the poor or elderly stay unchanged or have even been cut (Medicare). Politicians appeal to our compassion to explain their tax demands, but little of the money, once raised, is spent for compassionate purposes.

So if the question is whether it's conscionable to raise the already high taxes of the affluent because the marginal utility of their money is less, my reply is to ask for proof that the marginal utility of the extra tax revenue is higher than it is for those subject to discriminatory taxation.

 

You mean you don't already understand such a basic point? No. You show me an economist that says that the law of diminishing marginal utility does not hold size constant. Reisman is not one of them. I have yet to come across anyone defining the law of diminishing marginal utility to have two independent variables. It makes no sense whatsoever to make the measuring unit a changing variable. It would be like measuring something in meters, then measuring it again in millimeters and then claiming the length increased 1000 fold.

Again, the reason people are getting more satisfaction from the larger sized units than smaller sized units is because of the law of increasing total utility, which states precisely that. It simply has nothing to do with the law of diminishing marginal utility. You are making a complete non sequitur argument.

 

I neither quibble or plead. I simply state what a highly regarded economists has said supporting the potential increase in marginal utility as wealth increases. It is simply a statement of fact and does not add to or take away from any political supposition.

Full employment has nothing to do with marginal utility.

I have never claimed that Daniel. All I have claimed is the very simple fact that the individual who perceives that the marginal unit is producing him satisfaction is experiencing an increase in marginal utility.

 

Let's assume in one alternative, that our civic obligation can be met by merely abolishing official poverty in our republic. Full employment of resources is assumed by the theory of demand and supply; any public policy adhering to a fixed Standard of full employment of resources in any given market in our republic and claiming it is providing for the general welfare should be considered both necessary and proper in the pursuit of our "mission statement" and preamble to our supreme law of the land.

 

There has not been a change in the definition of "marginal" The marginal unit is nothing more than the next unit of the good or service or money. The definition does not change in my assertion that the marginal utility of that marginal unit can go up, stay the same or go down. All of which is the perception of the individual acquiring the next marginal unit. It has been clearly expressed by capitalist paradigm economists that as wealth increases, THE SIZE MARGINAL UNIT TENDS TO INCREASE. Why? Because if there is a given unit (constant sized marginal unit) the perceived marginal utility of that next unit would diminish, eventually almost to the point of zero marginal utility. Thus, as wealth increases it is imperative that the size of the marginal unit increase as well, thus giving he who acquires that marginal unit perceives it to be satisfying (having an increase in marginal utility)

No one has changed the definition of a surplus, unless you have. But because of an accounting convention the CBO and the OMB are asserting that all is needed for a surplus to exist is that the debt held by the public be paid down. But when speaking of NET SURPLUSES/DEFICITS, one must add back in that amount of money borrowed from intragovernmental holdings, over and above what was not used in the process of paying down the debt held by the public. Without changing any thing we can look at all of the receipts and outlays over the 8 years of Clinton's presidency and determine that at the end of FY 2000 there was an on budget surplus. But we can also say that at the end of FY 2000 there was A NET DEFICIT when all forms of debt are considered. As the treasury says,

The deficit is the fiscal year difference between what the United States Government (Government) takes in from taxes and other revenues, called receipts, and the amount of money the Government spends, called outlays. The items included in the deficit are considered either on-budget or off-budget.
You can think of the total debt as accumulated deficits plus accumulated off-budget surpluses. The on-budget deficits require the U.S. Treasury to borrow money to raise cash needed to keep the Government operating. We borrow the money by selling securities like Treasury bills, notes, bonds and savings bonds to the public.
The Treasury securities issued to the public and to the Government Trust Funds (Intragovernmental Holdings) then become part of the total debt. ​

You are already disingenuous in your posted opinions so making one more outlandish claim won't change the nature of your expressed thinking.

It is the point of the concept of the law of diminishing utility as it pertains to money or other mediums of exchange. The marginal utility of goods and services always diminish as the supply of those same goods increase beyond a useful point. But with money, that doesn't happen. Money can always be used to provide satisfaction, thus the capitalist paradigm economist will clearly say, "as wealth increases the size of the marginal unit considered will increase, " thus the marginal utility of money can increase.

Calling me a liar again by claiming my assertion is bogus, uh Iriemon? It won't do you any good, because even you know, though you won't admit it, that the US Treasury clearly says, "the total debt as accumulated deficits plus accumulated off-budget surpluses." http://www.treasurydirect.gov/govt/resources/faq/faq_publicdebt.htm#GenInfo

So your calling me a liar by saying my assertion is bogus is disproved with that US Treasury statement as per the link.

 

Maslow's hierarchy is quite accurate. But you are trying to compare total utility to human kind to marginal utility of an individual. They are two separate issues. Once the peak of Maslow's hierarchy has been reached human behavior changes.

Once one has all the wealth one requires to satisfy his NEEDs, the marginal unit will increase in size as wealth increases, and because of man's limitless desire or wealth continues, marginal utility of money can increase. Marginal utility is about the perception of satisfaction, not human needs.

 

You are simply incorrect. Reisman clearly says, and I quote from page 51 of his book Capitalism: A Treatise

"As people grow richer, the size of the marginal unit tends to incease."
" When differences in quality are considered, a house, a suit or a dress, a restaurant meal, practically everything, tends to be a larger-sized unit of wealth for a richer person than for a poorer person. When this is taken into account, it becomes clear that it is a great mistake to assume that as wealth increases, the utility of the marginal units actually dealt with diminishes."

"Furthermore, the fact that the utility of a marginal unit of wealth of a GIVEN SIZE (CONSTANT SIZE) diminishes as the quantity of wealth available to us increases is actually important aspect of the desirability of increasing our wealth. What we rationally want is to be in a position in which the marginal utility of a unit of wealth OF ANY GIVEN SIZE more and more approaches zero, while what we deal with more and more is progressively larger-sized units of wealth."

"Thus, we rationally want more wealth in order to be able to deal with MARGINAL UNITS OF WEALTH OF PROGRESSIVELY LARGER SIZE, and to be less and less concerned with units of wealth of ANY GIVEN SIZE. "​

Obviously the quote of Reisman above DOES say the marginal unit increases with increased wealth. What you have yet to to is provide a link or a citation to which I can go which says the marginal unit must remain constant.

 

I don't disagree with the need to eliminate poverty and do our best to establish full employment. Nor do I disagree with the need to take care of our needy who either can't work or who are insufficiently trained to make a living wage.

 

"Once one has all the wealth one requires to satisfy his NEEDs, the marginal unit will increase in size as wealth increases." Agreed. Another way to say this is that the marginal utility of one dollar decreases. The "marginal unit" must grow larger to achieve the same utility once found in smaller units.

I believe the concept of marginal utility can be applied to an entire society, community, or business as readily as to an individual. For example, one might compare the marginal utility of $1B to the United States and to Bangladesh. Estimates of impact may be as accurate for large social units as for individuals. I don't know whether economic professionals have looked at this, but it seems both feasible and politically relevant. If a class of people - Obama's "rich" - are being asked to sacrifice for the common good by paying taxes at a disproportionate rate, it's fair to ask how much actual good will be accomplished. If the sacrifice is greater than the good, then the extra taxes are indefensible.

I apologize if this is unacceptable to economists, but I think that when we look at tax policy we're comparing the marginal utility of three large groups - the class which will have its taxes altered, the institution of government, and the country.

 

You just proved my point. Reisman does not say in those quotes that the law of diminishing marginal utility involves the size of the units changing. He is not talking about the law of diminishing marginal utility, and no where does he even say "the law of diminishing marginal utility". What is simply incorrect is your bogus assumption that any talk about marginal utility is a reference to the law of diminishing marginal utility.

Size is constant as far as the law of diminishing marginal utility is concerned. Continually stating that the size of the unit increases is COMPLETELY irrelevant to the law of diminishing marginal utility.

 

What is unique about that position, under any form of Capitalism and relative wealth. Are you really claiming concentration of wealth is better than full employment (of resources) in the market for labor as a form of marginal utility of "wealth"?

 

Absolutely correct.

There you would run into trouble as ONLY the entity perceiving the satisfaction can determine marginal utility. You can't compare real needs of two individuals, nor can you compare real needs of different countries.

The problem is real utility and perceived utility are two distinct and different issues. Real utility is the accomplishing the satisfaction of a real need, like food for the hungry or shelter for the homeless. Whereas marginal utility is only a perception of satisfaction. Anytime one tries to mix the real need and the perception of satisfaction the issue becomes muddled.

The problem is, three groups marginal utility cannot be compared. Real economic need is a separate type of need as the need for satisfaction.