Marginal utility of money

So answer the questions smart guy:

Capitalism: A Treatise on Economics
Page 51

George Reisman says, "As people grow richer, the size of the marginal unit tends to increase." What do you think that means?


He also says, "Furthermore, the fact that the utility of a marginal unit of wealth OF A GIVEN SIZE (CONSTANT) diminishes as the quantity of wealth available to us increases is actually an important aspect of the desirability of increasing our wealth." What does this mean to you?

What we rationally want is to be in a position in which marginal utility of a unit of wealth of any given (constant) size more and more approaches zero." Explain this comment he made.

Therefore, we rationally want more wealth in order 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. (constant size)What does this mean to you?

 

I believe a desire may be "limitless" only to the extent there is any imperfection in capital management and any lack of endeavors to accomplish with capital.

From my understanding, marginal utility is not about wealth, but about the usefulness of capital with any given amount of wealth.

Most people are only limited by their means.

 

Greed affects the subjective value of morals upon which your premise relies.

It has to with the Peoples' marginal utility of their tax monies given the wealth of the United States.

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How does your line of reasoning cover options and leverage?

 

You don't understand the concept of limitless desire for wealth.

That is quite good understanding.

Maybe, but it is not relevant what most people have when it comes to marginal utility of money. It is about the satisfaction ONE person feels. Two people cannot be compared and what another person needs or considers utility is irrelevant.

 

Only if you choose to believe that rich people are all greedy. I don't believe that.

Also not relevant to marginal utility except in the minds of socialist paradigm economists who can't stand to see some people more wealthy that most others.

My reasoning of marginal utility has nothing to do with options and leverage.

Why don't you try to objectively answer the questions?

Page 51

George Reisman says, "As people grow richer, the size of the marginal unit tends to increase." What do you think that means?


He also says, "Furthermore, the fact that the utility of a marginal unit of wealth OF A GIVEN SIZE (CONSTANT) diminishes as the quantity of wealth available to us increases is actually an important aspect of the desirability of increasing our wealth." What does this mean to you?

What we rationally want is to be in a position in which marginal utility of a unit of wealth of any given (constant) size more and more approaches zero." Explain this comment he made.

Therefore, we rationally want more wealth in order 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. (constant size)What does this mean to you?

 

Should "Perfection in Money Management" not encompass the concept of desire for wealth, with some endeavor to accomplish?

 

Man's limitless desire for wealth exists whether they are perfect in money management or not. You try to read too much into what human behavior is.

After I earned my MBA with Economics as a minor, I sent on to post graduate study in psychology because human behavior is so closely tied to what a person does relating to Economics.

 

it means that rich people pay more for cars, houses, shoes and lunch than people of moderate means do.

He says the marginal utility of money always diminishes as wealth increases, it's a law ...it never increases, it doesn't stay the same, it always diminishes.
And this fact makes it desirable to increase our wealth.

He says it's rational to want more wealth, no matter how much we have.

He means that while the marginal utility of money always diminishes it never reaches zero, so there is always added utility in obtaining more wealth, however, the marginal unit must increase as the old units approach zero utility, example, using $100 bill to light a cigar, the once desirable $100 marginal unit is reduced to the utility of a kitchen match.

 

Nope. Can't you understand what you read?

Nope, still can't read.

Nope! And you suggested anyone besides you is profoundly ignorant?

Try again as you choose to either leave out parts of what he said or read things into what he said.

Page 51

George Reisman says, "As people grow richer, the size of the marginal unit tends to increase." What do you think that means?


He also says, "Furthermore, the fact that the utility of a marginal unit of wealth OF A GIVEN SIZE (CONSTANT) diminishes as the quantity of wealth available to us increases is actually an important aspect of the desirability of increasing our wealth." What does this mean to you?

What we rationally want is to be in a position in which marginal utility of a unit of wealth of any given (constant) size more and more approaches zero." Explain this comment he made.

Therefore, we rationally want more wealth in order 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. (constant size)What does this mean to you?

You do realize that as others read what you answered they recognize your intellectual dishonest. Reisman meant exactly what he said and your attempts to obfuscate it proves how little you understand about economics.

 

I believe those statements mean exactly what they said.

"As people grow richer, the size of the marginal unit tends to increase." That means that as people grow more rich the marginal unit increases in value.

"Furthermore, the fact that the utility of a marginal unit of wealth OF A GIVEN SIZE (CONSTANT) diminishes as the quantity of wealth available to us increases is actually an important aspect of the desirability of increasing our wealth." This means that so long as the marginal unit remains constant there will be a diminishing marginal utility.

"What we rationally want is to be in a position in which marginal utility of a unit of wealth of any given (constant) size more and more approaches zero." This anticipates that if we wish to keep a marginal unit constant we want it to become less and less desirable.

"Therefore, we rationally want more wealth in order 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." Wealthy people want more money, and as that wealth increases they will always want the units of wealth to increase instead of being concerned about a marginal unit of a constant size.

That is what he says, but I don't necessarily believe he is correct. It appears to me than even for the very wealthy, eventually the increase in wealth is less satisfying.

 

Here, in his own words Riesman says that it is a fact that the marginal utility of a given size unit dimishes as the quantity of wealth available increases.


He doesn't say it can increase or stay the same, he says it's a fact that it always diminishes.

 

How can you cease something you have never understood?

We understand your frustration about answering those questions honestly because we know it blows your opinion sky high.

 

I gave it one more try, see if you understand what Riesman meant when he said

 

Duh! Of course he says that, thus the importance of the marginal unit increasing in size as wealth increases in which case marginal utility can increase.


He doesn't say it can increase or stay the same, he says it's a fact that it always diminishes.[/QUOTE]

 

Yep, I understood that perfectly. When the marginal unit stays the same size marginal utility diminishes. "the fact that the utility of a marginal unit of wealth OF A GIVEN SIZE (CONSTANT) diminishes as the quantity of wealth available to us increases"

Your forgot the rest of it, "Therefore, we rationally want more wealth in order 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. (constant size)

 

I get it, 100%, you people WANT THE MARGINAL UTILITY TO DIMINISH, as an EXCUSE to charge draconian income taxes on the wealthiest Americans. The fact is, we can tax them what we want without trying to justify it on the basis of diminishing marginal utility.

What you quoted from my post, "the fact that the utility of a marginal unit of wealth OF A GIVEN SIZE (CONSTANT) diminishes as the quantity of wealth available to us increases"

So we both agree that with a marginal unit of any GIVEN SIZE, the marginal utility of money diminishes. But he goes on to say, "THEREFORE we rationally want more wealth in order 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."

When you take things out of context you screw up.

 

No what you don't understand is what "marginal utility" means.

You are confusing it with total utility.
So while wealth increases, marginal utility always diminishes, as Riesman says, but total utility always increases.
That was what Riesman was saying.

 

That is a fair comment. You did understand what Reisman said. That is the point of the entire exercise.

 

He says marginal utility increases because with increased wealth the marginal unit increases in size. " "THEREFORE we rationally want more wealth in order to deal with marginal units of wealth of progressively larger size" I can understand someone who does not agree with Reisman. I just find it fascinating that no matter what he says, some people will claim he said something different. How can "marginal units of wealth of progressively larger size" come out to mean total utility? It can't.

 

So we can agree with what Reisman said. But why do you believe he is right in what he says? Why do you believe that even if the size of marginal units do get larger it follows that marginal utility increases?

 

Nowhere in the entire Reisman book does he say that marginal utility increases for the individual as wealth increases. That's your theory.
Marginal utility is always measured by comparing units of the same size, that's the only way it makes sense.
Reisman does comment on marginal utility increasing as a society increases it's wealth, and marginal utility increasing due to technological change, but these don't apply to the case of an individual.
You are trying to save face by taking a few phrases out of context.
Reisman says marginal units increase in size as wealth increases, because the units, the cost of a car, the cost of a house, etc. are larger, but comparing a chevy to a Cadillac is not a measure of marginal utility. But the larger units don't result increased marginal utility.
Just as the second $1000 provides less utility than the first $1000, the second $1,000,000 provides less utility than the first $1,000,000.
You don't compare $1000 to a $1000000 and say marginal utility increased, the marginal unit increased, but marginal utility still diminishes, that's why Reisman calls it "The Law of Diminishing Marginal Utility".

 

WWW.mises.org/books/capitalism.pdf

4. The Law of Diminishing Marginal Utility and the Limitless Need for Wealth

The principle that man’s desire for wealth is limitless is fully consistent with the law of diminishing marginal utility, one of the most important and well-known principles of economics.

As previously stated, the law of diminishing marginal utility is perfectly consistent with the fact that man’s need for wealth is limitless. It is necessary to stress this point in view of the misconception spread by Galbraith that increasing wealth, and the consequent fall in the marginal utility of a unit of wealth, makes the pursuit of wealth progressively less important.

Furthermore, it should be realized that the very process of increasing the amount of wealth that is available to the average member of any society entails the opening up of new uses for additional wealth, which has the effect of increasing the marginal utility of additional units of wealth.

Thus, the effect of a growing ability to produce is not only more wealth (TOTAL UTILITY), but also a higher marginal utility of the additional wealth in comparison with what it would otherwise have been (if somehow the additional wealth had been able to come into existence without such technological advances). And, as these examples imply, the effect of a growing ability to produce is a tendency toward an increase in the size of the marginal unit of wealth, as well.

This last point requires elaboration. The size of the marginal unit is never something fixed and immutable. It is always a matter of context, and the context is always the circumstances and conditions with which the individual is confronted.
As people grow richer, the size of the marginal unit tends to increase. Not only do they deal with things like automobiles instead of oxcarts, but richer people deal with Cadillac- or Mercedes-level automobiles rather than Chevrolet- or Toyota-level automobiles. 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.

 

WRONG! Cut and pasted from Reisman, "Furthermore, it should be realized that the very process of increasing the amount of wealth that is available to the average member of any society entails the opening up of new uses for additional wealth, which has the effect of increasing the marginal utility of additional units of wealth."

Wrong! He says several times and in several ways that the marginal unit increases in size.[quote]
Reisman does comment on marginal utility increasing as a society increases it's wealth, and marginal utility increasing due to technological change, but these don't apply to the case of an individual.[/quote]Marginal utility is always the perception of the individual, not society.

Effectively that is exactly what Reisman says. Higher quality gives perceived higher satisfaction. It may be that the actual utility of a Chevy is as good as a Cadillac, but the pleasure of owning a higher quality can create the perception of greater satisfaction.

Why would the second marginal unit be the same as the first? There is no excuse to ever saddle someone with constant sized marginal units.

In context Reisman says exactly, cut and pasted in the post above.

 

If the wealth of the average member of a society goes up, meaning the society has more wealth, marginal utility goes up, that is quite different from the wealth of an individual going up, where Reisman insists the law of diminishing marginal utility applies.
In this case he is comparing societies, compare Mexico to the US, and there is greater marginal utility in the US because there is more that the money can be spent on.
And then he uses automobiles, houses and restaurants to explain the changing size of the marginal unit, will you reconsider your post #284 now? Apparently Reisman agrees with me, and why not, he's an economist....

 

Yeah sure, so the wealth of THE average MEMBER of a society is now the whole of society? Who taught you to read for understanding. He is not comparing societies, period. I can't believe you can read what the man says and still deny it.

Marginal utility is a perception of satisfaction, not more money to spend. Now whose talking about total utility.

Yep, he uses automobiles compared to ox carts, houses compared to hovels, and fine restaurants compared to a diner, all of better quality are of a larger valued marginal unit, and yet you still choose to play dumb and not believe what he said. Reisman does not agree with you, and his quotes prove so many times.