Marginal utility of money

Discussion in 'Economics & Trade' started by dnsmith, Jul 13, 2013.

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  1. dnsmith

    dnsmith New Member

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    As I have told you before, I don't buy your argument that the law of diminishing marginal utility requires a constant sized marginal unit. In fact it is patently ridiculous that one can make an assumption like that in the face of having read the entire chapter starting on page 51 of Reisman's book. The few quotes I made told you that as wealth increases the size of the marginal unit concerned increases. It is in the chapter discussing marginal utility. Obviously you have not gone to the page and read the chapter or you would not continue to make such assertions. You have also not provided even one supporting citation to back up your point about constancy. So since my original OP did not say anything about your pet phrase, "law of diminishing marginal utility" there is really is little point in discussing that part further. This is my original post with my original assertion. Can you find anything about it that references your pet phrase?

    Marginal utility of money

    There have been discussions in some areas as to the validity of the economic position that the marginal utility of money always diminishes as wealth increases, and which has been suggested that income taxes on the wealthy would be justification for much higher %s of income tax than even what the Administration wants to do.

    My position is, as wealth increases the marginal unit itself increases proportionally such that the marginal utility of money either remains the same or increases. ​
    I really don't care what you think about your pet law. It is totally irrelevant to the OP, even though I disagree with your contention. You will have to find some quotable support from an authority to even pique my interest. However, I do believe you have confused the concept of constancy by misreading the law as stated in Investopedia. Please note, the constant as stated is not of the marginal unit in question and also note it discusses products (goods and services). "Definition of 'Law Of Diminishing Marginal Utility'
    A law of economics stating that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each additional unit of that product.http://www.investopedia.com/terms/l/lawofdiminishingutility.asp

    You also have to recognize that the marginal utility of money is different from the marginal utility of a commodity, which is some cases in which empirical measurements are attempted use constant unit sizes. So when you get your support, be sure it references money, and not goods are services. Why is money different? It is a medium of exchange and varying amounts of money may be required to buy the same quantity of a commodity.
     
  2. dnsmith

    dnsmith New Member

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    I am saying the discussion of marginal utility has absolutely nothing to do with your questions. It only has to do with the personal perception of an individual determining how s/he feels about the next marginal unit acquired.
     
  3. danielpalos

    danielpalos Banned

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    I am not limiting my argument to special pleading without a point. Providing for the general welfare implies that form of "marginal utility" from our tax monies.
     
  4. dnsmith

    dnsmith New Member

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    The marginal utility of any good, service or even money has absolutely nothing to do with providing for the general welfare. It only has to do with the perception of the INDIVIDUAL WHO IS RECEIVING THE MARGINAL UNIT.
     
  5. dnsmith

    dnsmith New Member

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    Let's start off by posting the original OP of this thread.

    "There have been discussions in some areas as to the validity of the economic position that the marginal utility of money always diminishes as wealth increases, and which has been suggested that income taxes on the wealthy would be justification for much higher %s of income tax than even what the Administration wants to do. My position is, as wealth increases the marginal unit itself increases proportionally such that the marginal utility of money either remains the same or increases." Not only did I say that, but it is supported by some of the most highly recognized economists of the capitalist paradigm.

    Let's move on to the logic of that assertion by discussing the difference between marginal utility of goods and services and the marginal utility of money.

    A good or service can satisfy the individual only up to a point, thus after acquiring X amount (the quantity required to comfortably fill a person at a meal) of steak and eating it one can achieve satisfaction until full. An additional steak will be less satisfactory because there is no more comfortable space in the body beyond a certain point. Recognize that different people can eat different quantities before being full, thus marginal utility can only be associated with the individual whose perception of satisfaction is being discussed. We can clearly say," the law of diminishing marginal utility applies." After satiation the marginal utility is no longer perceived to be greatly satisfying. Making the size of the marginal unit larger does nothing to change the perception of satisfaction.

    That is where it ends as one now discusses the marginal utility of money. Because man has a limitless desire for wealth, he can attain satisfaction to the same or in an increasing level as his wealth increases. Money, or any medium of exchange can always buy something one does not have or a commodity of greater value or quality such that his satisfaction can continue to increase. As Reisman says,

    "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. When this is taken into, it becomes clear that it becomes clear it would be a great mistake to assume that as wealth increases, the utility of the marginal units actually dealt with diminishes. On the contrary, the utility of these units actually increases.
    (when thinking about utility it is actually the perception of satisfaction, not a specific measurable utility. A Chevrolet will get you from point a to point b, but that is not the utility of which we are speaking. Marginal Utility is all about what the INDIVIDUAL perceives his satisfaction to be.

    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 an 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 ANY GIVEN SIZE (CONSTANT SIZE) more and more approaches zero, while what we deal with more and more is progressively larger-sized units of wealth.


    The same cannot be applied to goods and services because unlike a medium of exchange satiation has a limited range. IE once satisfied with the steak dinner an additional steak dinner will not be as satisfying. But because money is a medium of exchange, and since a medium of exchange can be used to buy goods and services of which we do not currently have, that medium of exchange can continue to bring us more and more satisfaction.

    In addition, since the very rich think in terms of larger amounts of the marginal unit size marginal utility can increase.

    Why would any economist want to claim that when considering money we must maintain a constant sized marginal unit? Simply because they are not thinking of the individual rich mans satisfaction, they are trying to apply it to the less rich, and that is where they screw up. Some economists do it intentionally in the desperate attempt to justify taxing the very rich at progressively higher rates. Though the rich SHOULD pay higher rates for no other reason than he who gets more income tend to get more value from our infrastructure. Trying to be arbitrary about the size of the marginal unit to justify higher taxes is part of the philosophy of the socialist paradigm economists. (Make note, I am not claiming they are socialist, but the socialist paradigm economists are those who believe the government must more and more regulate incomes to make them more equal.)

    Gossin is one such economist.

    The tendency for the utility of successive units to decline is known in Economics as the Law of diminishing marginal utility. The law of diminishing marginal utility is based on general observations of human behavior. The assertion that products are characterized by diminishing marginal utility as consumption rises, is an empirical one.

    Eyes become tired of beautiful pictures or scenes and ears are deadened by even the sweetest music in course of time. The law states that as we have more of a thing the less is the utility we derive from the additional increments of it. A German economist Gossen was the first to explain this law.

    Alfred Marshall in his book ‘Principles of Economics’ gave a precise explanation of this law. “The additional benefit which a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has.”

    Thus, the law states that as a person consumes more of any good the total utility he derives increases but increase in total utility is not proportionate to the increase in his consumption.

    The law of diminishing marginal utility is also called the law of satiable wants since the want for a particular commodity will get satiated as the consumer has more and more of it and he will not like to have any more of it, after a certain stage.​

    Prof. K.E.Boulding points out two important reasons for the operation of the law of diminishing marginal utility.

    1. Commodities are imperfect substitutes for one another

    Commodities are not perfectly substitutable for one another. There are certain appropriate proportions in which commodities tend to be consumed, say bread and butter. If we increase the consumption of butter while keeping the consumption of bread and other things constant, when the best proportions of butter to bread had been passed, the successive doses of butter would add less and less to our enjoyment.

    2. Satiability of particular wants

    Another fundamental reason is that wants are satiable, and we cannot consume an infinite amount. The point of satiety in consumption is the point where the total utility cannot be increased by further consumption, and therefore, the marginal utility becomes zero.​

    Now, looking at even this guy, it is obvious he is talking about products or services. It is equally obvious, and logical that money is different in the way satisfaction is perceived, if for no other reason than to buy better quality goods which is more satisfying.​
     
  6. danielpalos

    danielpalos Banned

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    Only if you limit your argument to special pleading; the electorate of the United States should learn to better appreciate the delegated power to provide for the general welfare of the United States.
     
  7. Iriemon

    Iriemon Well-Known Member Past Donor

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    Then you are not talking about marginal utility. What you are doing is changing the common definition of marginal utility to say the size of the marginal unit changes. That is not what marginal utility is. It is the measure of utility of the same size unit.

    I agree when you make up new definitions you can argue that you get a different result. Just like you do with deficit. I could say that "green" is on the color spectrum between yellow and blue and argue that grass is orange.

    That is absolutely untrue. A false statement. CBO and OMB "assert" no such thing. Prove they say that.

    Once again you are making up a new definition in a lame attempt to make an argument.
    We can't say that at all. Once again you are making up a different definition in a lame attempt to try to make an argument.

    Right. And you know what the Treasury Department says:

    Front page:
    [​IMG]

    http://www.fms.treas.gov/mts/mts0900.pdf

    That is absolutely untrue. I have not been "disingenuous" about one thing. You are making a false statement.

    That isn't economists clearly say when measuring marginal utiltity at all. You are making up a different definition to try to make an argument. The grass is orange.

    That is absolutely untrue. Another false statement. I never called you a liar. Prove you didn't just make another false statement by linking to my post where I called you a liar.

    I clearly says you can think of the overall debt that way. It doesn't say that is how you measure the surplus in any given year. If it did, the US Treasury would show a deficit in FY2000. But as you know, and as proved above, the Treasury Department absolutely shows a surplus in FY2000,.

    Your own source proves your definition is bogus.

    That is another false statement and absolutely untrue. I never called you a liar. I could say the same thing about you. You are the one making personal attacks calling me "disingenuous."
     
  8. danielpalos

    danielpalos Banned

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    How does this statement apply to any form of capitalism, not just the institution of money based markets? If it isn't sound for any form of Capitalism, why should it be sound for only some forms of capitalism?
     
  9. Iriemon

    Iriemon Well-Known Member Past Donor

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    Of course. Because if you acknowledge that that is in fact that common meaning of the marginal utitlity (which it is) it blows your whole position out of the water.

    It's just like you don't accept that the Treasury Department says there was a surplus in FY2000 because that blows your whole position that there was no surplus under Clinton out of the water.

    Front page:
    [​IMG]

    Page 2:
    [​IMG]

    Page 3:
    [​IMG]

    Page 5:
    [​IMG]

    If you change the definition and don't accept facts then you can argue that grass in orange.
     
  10. dnsmith

    dnsmith New Member

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    Thanks again for posting charts and tables which prove my point Iriemon. I have never changed any definition, all I have done is show there is more than one way to come up with net deficits/surpluse of exactly the same numbers you keep posting. You are also proving you know nothing about marginal utility of money (or any other medium of exchange). You just hate it when your own sources prove you wrong.

    BTW, why do you keep going to Photo Bucket for your charts and tables? Why not get them directly from the US Treasury? They all say the same thing, there was a net deficit in FY 2000.

    Don't let your mind wander, it's far too small to be let out on its own.
     
  11. Iriemon

    Iriemon Well-Known Member Past Donor

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    LOL, yep, they sure shows how the Treasury Department says there was a deficit in FY2000:


    Front page:
    [​IMG]

    Page 2:
    [​IMG]

    Page 3:
    [​IMG]

    Page 5:
    [​IMG]

    I agree if you come up with a different bogus definition you can say the grass is orange too. That doesn't prove it is orange.
     
  12. Iriemon

    Iriemon Well-Known Member Past Donor

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    Dnsmith resorting to insults and games, typical MO.

    He knows those pages I posted are direct images I got from a US Treasury Department report (except I added yellow highlighting) because I've posted the link (which I found on the very page he relies upon for his bogus definition of "deficit") for him a dozen times.

    Anyone can prove it for themselves by clinking on this link and looking at the pages I identified: http://www.fms.treas.gov/mts/mts0900.pdf

    He also knows that his claim that the US Treasury Department "says" there was a deficit in FY2000 is absolutely untrue, another false statement. He's been called out on that one before and has never produced a page where the US Treasury Department says there was a deficit in FY2000. All he does is cite to the Treasury's debt pages, which don't even have the word "deficit" in them.

    But that doesn't stop him from repeatedly making this same false statement.
     
  13. dnsmith

    dnsmith New Member

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    Since I have not come up with any "bogus" anything and your charts and tables prove I am correct all you are doing by re-posting them is embarrassing yourself.
     
  14. Iriemon

    Iriemon Well-Known Member Past Donor

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    LOL, these US Treasury Department charts and tables sure are saying there was a deficit in FY2000.

    Front page:
    [​IMG]

    Page 2:
    [​IMG]

    Page 3:
    [​IMG]

    Page 5:
    [​IMG]

    http://www.fms.treas.gov/mts/mts0900.pdf

    Dnsmith cannot even be objective enough to admit the source he relies upon, the US Treasury says there was surplus in FY2000.
     
  15. dnsmith

    dnsmith New Member

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    Calling me a liar again? How disingenuous of you.

    BTW, thanks for the link to larger charts. They make it much easier for anyone who looks at them to see I am correct.
     
  16. dnsmith

    dnsmith New Member

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    Actually, I have said several times, your chart on page 1 does prove there was a surplus on the on-budget side. What you refuse to accept is the fact that the new debt created when the general treasury borrowed surplus off budget funds was greater than the on-budget surplus. >>?MOD EDIT: INSULT<<<
     
  17. Iriemon

    Iriemon Well-Known Member Past Donor

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    Making an absolutely untrue false claim that I am calling you a liar again?

    LOL, yep, they sure show how the Treasury department is saying there was a deficit in FY2000.

    - - - Updated - - -

    So you now admit the Treasury department says there was a surplus in FY2000?

    I accept when you come up with bogus definitions like you do you can say that grass is orange.
     
  18. dnsmith

    dnsmith New Member

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    When you say I made a false claim, you are calling me a liar.
    I have never said the treasury department did not show AN ON-BUDGET SURPLUS.
    I have never denied that on budget surplus.
    Calling me a liar again by suggesting I have posted bogus anything.

    But anyway, thanks again for that link to the actual Treasury Tables and Charts. They once again prove me correct.

    What Iriemon does not want people to recognize, with the charts and tables he himself linked us to, do not support his assertions.

    Page 2 Table 1 Shows total receipts (including trust fund receipts) of $2.025038 trillion for FY 2000 (of which $652,851 billions are trust fund incomes), of which. It reflects outlays of $1.788045 outlays. The because the trust fund receipts are loaned to the general treasury the year to date line shows a $236.993 Billion deficit as reflected by the -Minus sign in frot of the figure.

    Table 2. shows totals of FY 2000 on budget surplus of $87.175 Billion and an off budget surplus of $149.818 which was loaned to the general treasury and when correctly applied (new intragovermental debt) suggests a deficit of $62.643 deficit.

    Table 3. shows on budget receipts of $1.544455 trillion and off budget receipts of $480.583 billion. It goes on to show on budget surplus of of $87.175 billion and an off budget surplus (which became new debt to the on budget side when loaned to the on budget side) of $149,818 billions, which again calculates to a net deficit of $64.643 billions.

    Table 9 Summary shows total outlays of $1.788 trillion with total receipts of $2.025 Trillion, of which $652,851 billions. that means that the income from the on-budget side is $1.32 trillion. That also shows that the on budget receipts were less than on budget outlays.

    What is strange to me is, even with the various tables of their own making, there are differences between tables of the same classification of money.

    Still, even with variations between tables, all of the information proves my contention correct. There WAS AN ON BUDGET SURPLUS BUT THERE WAS A NET DEFICIT AS NEW INTRA-GOVERNMENTAL DEBT WENT UP BY A GREATER AMOUNT.

    If you are not willing to accept the facts Iriemon, go play with yourself.....literally.
     
  19. Iriemon

    Iriemon Well-Known Member Past Donor

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    That is absolutely untrue. Feel free to post where I called you a liar. That is a completely false statement. Quit trying to bait the mods.
    You claimed that the Treasury said there was a deficit. I've proved unambiguously the Treasury department says there was a surplus.

    The fact that you cannot be objective enough to even admit that simple fact just shows what a waste of time it is arguing with someone who is simply using bogus definitions.

    Sure thing. Because everyone can see how the Treasury Department is saying there is a "net deficit":

    Front page:
    [​IMG]

    http://www.fms.treas.gov/mts/mts0900.pdf
     
  20. danielpalos

    danielpalos Banned

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    I believe many of the OPs point of view tend to be full of fallacy.
     
  21. Liberalis

    Liberalis Well-Known Member

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    It is implicit in every single definition of the law of diminishing marginal utility assumes size is constant, otherwise there can be no meaningful law at all. Again, your quotes from Reisman do not involve the law of diminishing marginal utility. Your questioned in the OP that "the validity of the economic position that the marginal utility of money always diminishes as wealth increases". That economic position is the law of diminishing marginal utility. To try and say you were not referencing the law of diminishing marginal utility is a dishonest attempt to save face.

    To call the law of diminishing marginal utility my "pet law" is probably one of the most ignorant comments I have come across on this forum. The law of diminishing marginal utility is one of the most fundamental principles of free market economics--not something I am just making up. I am not misreading anything. The consumption of the product is measured in units of said product, and for something to be measured meaningfully the units must be constant. That is true for the measurement of anything. If I am measuring the height of a building, I hold the size of the unit of measurement constant. That money is a medium of exchange does not change the reality that the law of diminishing marginal utility applies to money just like everything else.
     
  22. dnsmith

    dnsmith New Member

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    For goods and services that would be true, but not for money or any medium of exchange.
    Yet you just said again, my contention is not the Law of Diminishing Utility. Now which is it. The law or not the law. What we do know is that when discussing money, as wealth increases the marginal units increase in size thus the marginal utility of money can increase.
    Wrong, and it is so obvious that you nor anyone else can define what a marginal unit means for anyone else. Nor can you stop them from being concerned with ever increasing marginal unit size as wealth increases. You are barking up the wrong tree. You will never find a rich man forgoing satisfaction based on the marginal units he perceives.

    MY OP questioned, "the validity of the economic position that the marginal utility of money always diminishes as wealth increases" The marginal utility of money does not necessarily diminish, especially as Reisman and others say the marginal unit of money increases in size as wealth increases. If you wish to believe that is not the law of diminishing marginal utility, be my guest. Nothing you have said or referenced us to says that the marginal unit of money (or any medium of exchange MUST REMAIN CONSTANT.

    I do acknowledge that the "law of diminishing marginal utility" for goods and services describes what happens with those goods or services.
     
  23. danielpalos

    danielpalos Banned

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    How much marginal utility does money have for the wealthiest one percent?
     
  24. dnsmith

    dnsmith New Member

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    That depends on the size of their marginal unit. It the marginal unit is big, probably a lot.
     
  25. danielpalos

    danielpalos Banned

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    I meant, when you can no longer find anyone else for relative wealth purposes?
     
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