Marginal utility of money

Your attack on the empirical process is just the same ole guff given by those that have read Mises. Its really not difficult. If we couldn't use the happiness measure we wouldn't get such consistent results: both across data sets and across methodologies.

What socialist paradigm economists are those? Of course you're only showing your ideological limitation as Britain has been neo-liberal since the 80s

 

Whence any basis for trade, if marginal utility increases?

 

Daniel, marginal utility has nothing to do with trade. Not positive or negative. Marginal utility is nothing more than an increase in satisfaction level based on the size of the marginal unit. Depending on whether one chooses to use a constant sized marginal unit which would suggest a diminishing marginal utility as wealth increases or if one chooses an ever increasing sized marginal unit as wealth increases which would suggest an increasing marginal utility. It is totally and solely based on the perception of the individual as to the relative satisfaction received. Again, not related to trade or any other aspect of economics.

 

George Gerald Reisman (/ˈriːsmən/; born January 13, 1937)[1] is an American economist and Professor Emeritus of Economics at Pepperdine University. He is the author of The Government Against the Economy (1979), which was praised by both F. A. Hayek and Henry Hazlitt, and Capitalism: A Treatise on Economics (1996).[2] He is known as an advocate of free market or laissez-faire capitalism.

http://en.wikipedia.org/wiki/George_Reisman

Murray Newton Rothbard (/ˈmɜri ˈrɑːθˌbɑːrd/; March 2, 1926 – January 7, 1995) was an American economist[2] of the Austrian School[3] as well as a philosopher[4] and political theorist.[5] His writings and personal influence helped create modern libertarianism[6] and he was a central figure in it. He wrote over twenty books.[7]

Rothbard was a leading influence on the development of anarcho-capitalism.[1][8][9] In the words of Hans-Hermann Hoppe, "There would be no anarcho-capitalist movement to speak of without Rothbard."[10] He wrote that the state is "the organization of robbery systematized and writ large" and the locus of unscrupulous individuals.[11][12][13][14] Rothbard asserted that all services provided by what he called the "monopoly system of the corporate state" could be provided more efficiently by the private sector.[15][16][17] He considered central banking and fractional reserve banking under a monopoly fiat money system a form of financial fraud, antithetical to libertarian principles and ethics.[18][19][20][21] Rothbard opposed military, political, and economic interventionism in the affairs of other nations.[22][23]

http://en.wikipedia.org/wiki/Murray_Rothbard

Strange heroes for someone who holds himself out to be a moderate Democrat.

 

Moderate democrats like myself accept that free market politics is best for our economy. But I don't accept all of either Reisman or Rothbard, but we do recognize especially that part which recognizes that free trade enhances an economy over the long haul.

What I will do is point out that anyone who believes 100% any theory of economics or politics is a fool waiting for a place to happen.

 

Economic heroes who support laizzes-faire economics and minimizing or eliminating the government from having any meaningful role? Strange view of "moderate Democrats".

We often see folks pretending to be moderate or Democrats or progressive when they are right far right wing partisans as a (lame) attempt to have some credibility.

 

I don't have to "claim" anything, nor do I have to "pretend" anything. I am what I am, and because I am moderate I will not adhere to partisan voting simply because of the party to which I have belonged all my life. I believe that those who vote based strictly on party preference and doing our country a great disservice whether they are democrat or republican.

Government can certainly play a meaningful role, especially when doing their constitutionally authorized functions. Minimizing the role of government is not one of my contentions.

 

Please answer my little question: name these socialist paradigm economists that you have referred to (Note that the answer is likely to kick 'moderate' into touch)

 

So why are your economic heroes guys who want to dramatically limit or eliminate government and go back to the good old days of Dickensonian laissez-faire capitalism?

 

A partisan hack.

Did it ever occur to you that it is entirely possible for someone to find something true and agreeable, coming from someone that they would otherwise disagree with?

When Bill Clinton in the 90s, said we needed to deal with Saddam in Iraq, I agreed with him, even though in nearly everything else, I was completely against him.

Just because this other poster finds something agreeable in a particular economist, doesn't mean he agrees with absolutely everything that economist says. You need to stop being so limited by your partisanship.

 

Diamond and Saez for starters. Then Frey and Stutzer, and don't forget Inglehart. Anytime you see an economist try to convince people that the marginal utility of money diminishes as wealth increases, and then suggest that because of that alleged diminishment the higher incomes should be taxed at draconian rates. That is the first clue, and when you read their pieces they quickly prove your first clue was correct.

Many people try to throw water on my moderation politically, but they have failed at every turn. I believe in social justice and I believe in capitalism as the only valid way to accrue enough revenues to accomplish that social justice. I believe that we should stop trying to police the world, but I also believe we should maintain the strongest military possible. I believe in integration and a good education for all and I also agree we need to have a form of medical coverage which covers all our citizens. All in all my progressive opinions are at least as strong as my conservative opinions. I believe our national salvation will lie in the hands of the Blue Dog Democrats who tend to have similar opinions to mine.

 

Known for his analysis into labour market frictions. Naff all to do with socialism

A basic reference to neoclassical economics. Naff all to do with socialism

 

What part of those guys does dnsmith agree with, and what part does he not?

 

I agree with their take on marginal utility

 

It has to do with marginal utility and opportunity costs.

 

Nope daniel. Marginal utility has only to do with the satisfaction or lack there of of the last marginal unit.

 

Ok, but Reisman did not claim that the law of diminishing marginal utility does not apply to money.

Reisman did compare different goods when comparing the different types of cars. And you quoted Reisman...

Hence why it was odd that Reisman compared two different types of cars, and claimed one had more utility than the other.

And if that is all he is saying then he is just explaining the law of increasing total utility. That does not invalidate that law of diminishing marginal utility. That the rich think in terms of more dollars does not change that at all.

The law of diminishing marginal utility always refers to a unit of given size...whether it be money or butter. For example, say I am rich and I have all my wealth in butter. Because of this, I think in terms of 10 butters not 1, and therefore as I gain more butter my marginal utility increases. I can use the same misunderstood logic you are using to debunk the entire law of diminishing marginal utility. The issue is you are comparing units of different sizes, and then saying because the bigger size has more utility marginal utility is increasing. That doesn't make sense, and that is not what Reisman is saying. Sure, the wealthy man has more total utility, the the marginal utility of one dollar is far less as his wealth increases. Hence why Reisman included the example of a wealthy man lighting his cigar with a $100 bill--that is how much marginal utility was diminished.

Yes, that is exactly the law of diminishing marginal utility. The law of diminishing marginal utility always applies to a fixed unit. That is what you aren't fully understanding.

Say a man has a bag of $100. A unit of $10 means a decent amount to this man. Now say that someone dumps an additional 1 million dollars into the bag. The same unit of $10 is nearly worthless. In fact, so worthless is such a unit that the man no longer things in terms of $10. He thinks in terms of $1000. But the fact that he is using larger units in his own judgments of utility does not mean the law of diminishing marginal utility does not apply.

 

I thought you didn't believe in communism. How do you get any market based metrics, without any market based opportunity costs, and their evaluation through rational choice theory to discover marginal utility?

 

Of course he didn't.

Yes he does and I did.

Obviously you misunderstood Reisman or what marginal utility is. Utility is the satisfaction of the individual, not a specific utility as defined by anyone else.

What does change is the size of the marginal unit as wealth increases.

1. the marginal unit does increase as wealth increases.
2. Not only do the wealthy have a higher TOTAL utility, they perceive a larger marginal unit such that their personal satisfaction can be related that unit. That "$100" bill means nothing to the rich man, ergo the need for larger marginal units.

That is where you are wrong. As Rothbard, Reisman and Mises all explains, the marginal unit necessarily does change (increase) with wealth.

Of course that unit is worthless, or near so. That is why he who has more wealth will consider a marginal unit which is larger.

It applies only in the sense that if as you wish to do, the marginal unit remains constant. But since the marginal unit increases in size TO THE INDIVIDUAL, as that individual gets more wealthy, his perception of satisfaction (utility) will change based on the increased marginal unit.

The Law of Diminishing Marginal Utility

The law of diminishing marginal utility can be logically deduced from the axiom of human action. To show this, let us start with some remarks on utility.

Utility is a subjective concept. It denotes "satisfaction" (or "happiness" or "contentment"). It rises if and when an individual increases his or her state of satisfaction. Conversely, if and when someone considers himself in a worse state of affairs, his utility decreases.

What is more, utility is an ordinal concept, meaning that utility cannot be measured in terms of higher or lower utility from the viewpoint of an individual; and changes in utility among different people cannot be measured. All one can say is that utility is higher or lower from the viewpoint of an individual.

Rothbard explained why this is:

In order for any measurement to be possible, there must be an eternally fixed and objectively given unit with which other units may be compared. There is no such objective unit in the field of human valuation. The individual must determine subjectively for himself whether he is better or worse off as a result of any change.

Marginal utility means the utility of increments of goods; it means the utility of enjoying an additional good. Marginal utility does not mean increments of utility — which would imply measurability of utility.

​

 

Two people who don't know the basics arguing amongst themselves....

This isn't conducive to economic efficiency!

 

You must be talking about yourself and Iriemon.

 

The stuff you've come out with is cretinous. The other fellow is just someone who spews the Austrian garbage without thought. Together you just argue about guff

 

ROTFLMAO!

 

That is what you have been arguing. So do you now agree that the law of diminishing marginal utility applies to money?

In your previous post you specifically said you didn't. I don't need to quote you, just follow the thread. You are being dishonest.

I never said otherwise. Reisman in his example seemed to be comparing two different types of goods (two types of cars) as if there was a specific utility--defined by him. That's my whole point. Reisman assumed the expensive car had more utility...that is not necessarily the case, and that is an example of someone else defining utility.

What changes is the marginal unit the person thinks in terms of. And the reason the person in thinking in larger terms is because the utility of the smaller marginal unit has diminished.

Ok, but the marginal utility of the constant unit is still diminished. It doesn't make sense to make the unit a non-constant when talking about the law of marginal utility.

Right. But that doesn't invalidate the law of diminishing marginal utility with regards to money, because the law of diminishing marginal utility always applies to a fixed unit. It's in the definition of the law.

That's all correct but irrelevant. The law of diminishing marginal utility does in fact apply to money, contrary to what you previously claimed. And the law of diminishing marginal utility applies to a constant unit. Always. That individuals change the size of the unit they are using is completely irrelevant to the law of diminishing marginal utility. That is what you don't get.

Let me reiterate. It is correct as people gain more money they think in terms of more money. But the reason they do this is precisely because of the law of diminishing marginal utility. If I think in terms of $1, and then I become a millionaire, the unit $1 has so decreased in marginal utility that I think in larger terms. And those new units have more value than the old units because they are larger (the law of increasing total utility). That people think in larger terms supports the law of diminishing marginal utility--it does not refute it.

 

Diminishing marginal utility explains a rational choice for trade; only dragons may be said to have increasing marginal utility of their hoard without any circulation.