As I understand it, marginal utility suggests that a dollar in a poor person's hand confers more utility than that same dollar in a wealthy person's hand. While I understand this is true from the perspective of that person, is it also true from the economy at large? In other words, does economic output increase alongside marginal utility?
"It was not long until the entire theory of marginal utility was abandoned, since it obviously rested on circular reasoning. Although it tried to explain prices, prices were necessary to explain marginal utility."
And Law of Value: the series says:
"When you are in the supermarket calculating your preference scales [...] you aren’t just considering your preferences for fish and coconuts in the abstract, as if on a desert island. You are also considering the market prices of these commodities. This market price already exists before you make your subjective value judgements. But this is problematic. Subjective valuations were supposed to explain price, but now we have to assume the prior existence of prices in order to explain subjective value judgements."
It really is that simple that marginal utility is circular resoning?
The two seem somewhat similar although distinct, and I wanted someone to flesh out the nuances to me. I find it to be important since marginal utility is such a foundational concept in mainstream Bourgeoise economics, whereas Marx does make mention of use value.
I believe many times when socialists who are familiar with marxist economics talk and interact with those mostly only familiar with mainstream neoclassical based economics, they are largely talking at each other instead of with each other in jargon and language that are only somewhat mutually intelligible to each other but much gets lost, confused, and frustrated in translation.
https://drive.google.com/file/d/1keV5Le3PFKhXrVnOBk2hhuUGVtt3xMiv/view What do yall think about this? And if yall could also help explain it a bit, math is hard.
For example, I'm moving in an appartement where the ex tenant is selling all her furniture. She want's to sell me this those night tables for 50$, I don't really have any use for it and told her I,m willing to take them for 20$ because of that even tho they might be worth more, it's as high as I'm willing to go for those table and on her side she says they are antiques and she's not willing to go under 40$. And I'm telling her I don't mind that they are antiques because they are not my style and i don't really need them. So what's the difference between our both percieved value of the tables called? Could i say the marginal utility of those table is lower for me than it is for her hence the reason why the trade doesn't occur? in other word what's the name of the difference between the subjective value of the seller and the buyer of the same item?
I gotta get this off my fucking chest. I'm watching Destiny's latest debate with Pogan, and in the middle they dance around if Marginal Utility does or does not include labor cost in it's ultimate determination of value. I am a BS in Economics from a research institution, so I think have some authority to explain the most basic concept of orthodox economics.
Lets first explain the Demand curve. Basic economics states that the demand curve represents the market's demand for a product at a given price. But when creating the demand curve, we necessarily incorporate the marginal utility for all actors. We can describe the demand curve and how the market works as such: At it's highest point, when quantity is lowest, only those which have the highest marginal utility for the item will necessarily purchase that item. For a real world example, we can look at the scalping of PS5s, where the people who purchase from a scalper have a higher marginal utility for the product (in some sense, but not for everyone) than people who choose to wait for buying at retail. In that real world example, lets ignore inequality and just try to understand the phenomena in the most general sense; people who buy from scalpers want the item more than people who wait, all else being equal. Conversely, we can examine the lowest point of the curve where almost the entire market will purchase the item because their marginal utility is higher than most of the lowest prices. IE, if a PS5 was offered for a dollar, almost everyone would purchase it. In fact, this phenomena creates the scalping black market from before. Scalpers understand the the current value of a PS5 is greater than the price it's being offered at, so they see an opportunity for arbitrage. Importantly, as Pogan said, the marginal utility that an individual has for an item DOES NOT INCORPORATE LABOR COST. If I value a PS5 at 1 million dollars, this is an expression of my personal preference of a price for which I would purchase the item, even if a PS5 costs much less to produce.
HOWEVER, TO DESTINY'S POINT, AND I CANNOT STRESS THIS ENOUGH, THE ULTIMATE DETERMINATION OF THE MARKET PRICE (IE WHAT WE GENERALLY UNDERSTAND AS MARKET VALUE IN A CAPITALIST ECONOMY) DOES NECCESSARILY INCLUDE LABOR COST BECAUSE MARKET TRANSACTIONS ARE DETERMINED WHERE SUPPLY=DEMAND. Fundamentally even, one can say in a perfect market, ie a perfectly competitive market, equilibrium is reached where Supply=Demand=Marginal Cost=Marginal Revenue. To expl
... keep reading on reddit ➡https://youtu.be/_12_k6ciacU?t=179 In the link is a video from Khan Academy about ap microeconomic, Sal talked about how one of the reasons why the Demand curve is a downward slope is because of Decreasing Marginal Utility. I don't understand how utility relates to the demand slope. If the more a person consumes the less utility they get, doesn't that mean the slope will just stop or something? Sal says the more candy someone consumes, the utility goes down but that graph is a Price x Quantity Demanded graph, it doesn't show utility.
Edit: Grammar error
There is a famous example of the marginal utility by Professor Jesus Huerta de Soto. If someone is thirsty, the individual is demanding cups of water. The first cup of water that he drinks will be the one makes him the less thirsty and would therefore be the one he values the most, why would the individual value more the second or the third cup of water if the thirst they take a way is less when compared to the first glass. Obviously the individual will value the most the first cup of water, if he is thirsty enough he could ask for a second or a third cup, and probably he wouldn’t even be able to finish the last cup he orders as he wouldn’t thirsty anymore. The thirst each cup of water satisfies would be declining by each cup the individual drinks until his thirst is gone, after his thirst is gone the individual would value another cup of water on a really low grade, probably something similar to zero. How could this be argued by leftists, why does this has to be empirical and why its not enough to be based on a priori statements. In this case, the thirst of the individual determines how much he values each cup of water, how much he is willing to give up to satisfy his thirst.
A farm has the highest utility for the first tractor it buys, and that decreases over multiple units of purchase.
I wonder if the same thing occurs for the benefit of market competition. Is there any literature suggesting that "more competition doesn't mean meaningful increase in output quality?"
The Marginal Utility of Money theory states that as your income rises, the amount of happiness it brings you begins to flatten. This is backed up by numerous studies. There was a recent article done by the Washington Post that states that once income has exceeded $75,000 per year, increasing income is not associated with increasing happiness (source: https://www.washingtonpost.com/local/social-issues/money-can-buy-happiness/2020/07/01/3c2fc554-bb5a-11ea-8cf5-9c1b8d7f84c6_story.html.)
Why is this important? As the new year comes around and people begin to get yearly raises, change jobs and look for new opportunities, remember that personal finance is more about how you allocate your resources than how many resources you have. If you get caught in the rat race of increasing your income, but increase your lifestyle at the same rate, you are stuck in a never ending cycle. My grandfather always told me as I was growing up, “The problem with today’s society is every-time someone spends a nickel, they turn around and borrow a dime.” Don’t fall into the trap that money buys happiness, because it doesn’t (past a certain point.) Healthy financial habits will go much further than an exorbitant income!
Utilitarianism wants total utility / happiness to be maximized for the greatest people.
Law of diminishing marginal utility (LDMU) suggests that the utility a person gets from a good (e.g. an apple) decreases with increasing consumption of that good.
So if two people share an apple, they can get more total utility than if one person eats it alone.
So any good consumed by one could produce greater total utility if it was shared.
Thus we maximize utility when all people are absolutely equal, i.e. communism.
Is this argument sound?
Fuck, I don’t feel like talking about economics.
How is marginal utility different from use-value? I understand that marginal utility is in essence trying to quantify use-value as the inherent economic value of a commodity (and why that's frankly wrong and impossible), but how do people supporting capitalism believe marginal utility debunks the labor theory of value? They seem to be measuring/describing two completely different qualities of a commodity.
To me, marginal utility seems like another word to describe use-value which describes the holisitic value of a commodity beyond its economic cost/value. Why would that impact the value of a commodity given the need for labor and materials to produce any commodity? Am I misunderstanding use-value or marginal utility?
Might be answering my own question here, I understand capitalists have a vested interest in keeping value away from anything material, but without resorting to moustache twirling accusations I’m looking for a solid understanding and refutal to that right wing talking point without assuming they would accept the labor theory of value as I find marginal utility an impossible thing to quantify. Also looking to better understand the place of use-value and marginality in the labor theory of value and Marxist political economics. Thank you!
As a background to my level of knowledge: it's been about 5 years since I took an introductory econ course, so this may be a very basic/sophomoric post; I apologize if it is too broad.
One of the basic concepts that stuck with me was the idea of marginal utility. It's usually used in the context of goods, like cookies or somesuch, but it seems natural to apply it to money/wealth as a whole. My first question is: has anyone tried to quantify this? Googling "marginal utility of money" brings up several blog-style pages, but they only discuss the idea qualitatively and don't cite any good references on the subject. I'm imagining a study where they normalize dollars to the value that someone with average wealth assigns to it. So a poor person might value a dollar as 1.5x the value to the reference person, while a wealthy person might value the dollar as 0.5x the value of the reference person. I'd imagine it's difficult with variations in cost of living and standards of living in various places, but it also seems like a pretty important thing to study so there must be data out there -- I'm probably just not using the right search strategy.
My followup question is this: if there is a discrepancy in the marginal utility of money between individuals, doesn't that create a market opportunity? In the context of lending/investment, it seems like you have a situation where both individuals think the deal is worthwhile due to their different utility of money, yet at the end of the deal the wealthy person becomes even more wealthy, potentially widening the discrepancy in utility even further. (It probably depends most strongly on what the end state is for the borrower. Do they "catch up" on the utility scale, or do they fall behind? Is the next transaction between these two individuals more favorable to the borrower, or less?)
Once I starting thinking down this line of reasoning, it seems like you could apply it to other types of transaction. A wealthy person can pay a desperately poor person to do things he would never be willing to do himself, e.g. taking severe risks to one's health in order to accomplish a task cheaply. ("Reach your hand into this dangerous machinery to fix it while it's running.") So you end up with situations like "Sixteen Tons" where people are exploited by virtue of sheer inequality.
So, it seems like you could develop an entire theory on this -- which means it probably has been done. I guess my
... keep reading on reddit ➡Hi all,
So just to establish my background, I have an undergrad degree in econ and also did a small amount of work on a Masters at the same time.
I've long wondered why the behavior of the super-rich doesn't seem to line up with the concept of diminishing marginal returns in practice; specifically, I wondered why the drive to acquire money does not seem to wane even as the "initial" endowment gets extremely large. I understand that the LoDMR can be derived from the standard preference axioms, so clearly it's valid inside the normal theoretical framework.
After a while I started to consider how the LoDMR might misbehave in systems designed to protect generational wealth transfers. If a consumer can easily transfer generational endowments without much loss, then it seems to me that economic actors shouldn't be considered as individuals maximizing personal utility, they should be considered as infinite chains of consumers making decisions to maximize utility for themselves as well as their descendents in the chain. I haven't tried to rigorously define a "consumer chain" yet, nor study the effects of such a change in definition on the standard models, and if ya'll think this a worthy line of questioning, I'll definitely get to work on that next. However even just intuitively, the re-formulation of individual actors as infinite consumer chains (in systems with easy generational wealth transfers) seems like it would reasonably result in an extreme weakening of the LoDMR for generationally transferrable goods.
That's the extremely rough concept, and I was hoping to get a gut check before putting any serious work on it. So, is this idea anything worth continuing to consider and work on? Or is quarantine just starting to rot my brain?
I’ve come to the conclusion that the Economics department is incompetent and does not care about their students.
I am aware that the labor theory of value (LTV) is largely ignored today. Adam Smith, of course, proposed that in Wealth of Nations and Marx used it in Das Kapital in an attempt to skewer capitalism.
Generally, I think people might discount LTV because if I mine gold and you mine gold, I might produce far more gold if I have access to a better mine, so mining my kilo of gold would have far less labor involved than your kilo of gold, but at the end of the day, both are a kilo of gold.
Or maybe I can sell my gold cheaper, from a bad mine, because I use slave labor and thus, morally, you might object to paying any price for my gold. Labor isn't a sufficient stand-alone indicator for value.
And then there's the case of Salvador Dali, who allegedly would draw on his restaurant checks, on the theory that no one would cash those valuable checks. Thus, his minimal effort (low current amount of labor plus a lifetime of study plus fame) meant he often wouldn't have to pay for meals at restaurants. But nonetheless, the restaurants had costs they could not cover.
Today, however, LTV seems to be supplanted by supply/demand plus marginal utility. Or as my economics professors at college always described it "the price of a good is whatever someone is willing to pay."
If someone wants to sell a bottle of water for a dollar, I might be willing to pay that, but you've just stumbled in from the desert, dying of thirst, and are willing to pay five dollars for that bottle.
Is it fair that the vendor accepts a huge profit off of your misery?
Or worse, I still want that water and now I'm willing to pay twice whatever you're paying, even though you clearly have a greater need for it. Is it fair that the vendor than accept my price because it's higher?
I realize that value and price aren't the same thing, but marginal utility seems to be included in the calculations and that impacts price (in my mind) and not value.
Are there theories of value that protect both the needs of the seller and the buyer?
What is the difference between Marginal Utility and Marginal Cost ?, Pls give examples
