Utility, the capacity to produce pleasure and prevent pain, arises from products being brought in suitable quantities and at the proper times into the possession of persons needing them.
And it is by exchange, which means trade in this context, more than any other means, that this is effected. Exchange or trade are cornerstones of economics.
So, according to Jevons, it is impossible to have a correct idea of the science of Economics without a perfect compre-
hension of the Theory of Exchange.
A starting point in a theory of exchange is value. To keep it short, the word Value merely expresses the circumstance of its exchanging in a certain ratio for some other substance.
Or as John Stuart Mill said: "Value is a relative term. The value of a thing means the quantity of some other thing, or of things in general, which it exchanges for", but Jevons gave this a completely different interpretation.
Suppose you exchange a ton of iron for an ounce of gold. Then we are inclined to say that the value of a ton of iron is an ounce of gold.
We thus convert value in a concrete thing: value of iron = one ounce of gold.
According to Jevons, the more correct and safe expression is that the value of a ton of iron is equal to the value of one ounce of gold.
To make this clearer, replace the word "value" with Jevons' term "utility". To speak of the value of gold as such makes little sense.
What Jevons meant was that the ratio should replace the term value at which two utilities meet, two products with the capacity to produce pleasure and prevent pain.
Taking the gold, its utility is limited. However, a great quantity of goods may often be exchanged for it, while, on the other hand, water is very useful.
So you would expect it to have a high value, but scarcely anything can be had in exchange for it. This means that we can differentiate between a value in use and a value in exchange.
But Jevons went a step further. His goal was to show that "value in exchange" is entirely dependent on the Final Degree of Utility of the last unit consumed.
Everybody wants that first glass of water. Nobody is interested in that fifth glass of water, which has reached its final degree of utility in this situation. At that point, you aren't looking for a drink; you're looking for a drain.
So, we may conclude that in Jevons' view, products as such have no value. For instance, the value of a product is not determined by its cost of production.
Its value is determined by its exchange ratio, and this is where the markets come in, to which I referred in the previous lecture.
And that is the beginning of modern economic thought. The shift from old to new is that for Jevons, value looks forward to the consumer, not backward to the factory.
Thank you for your attention again....the floor is yours, but... I'll give it to you with a question:
If Jevons is right, that value looks forward to the consumer and not backward to the factory, what does that say about a company that spends ten years and a billion dollars
developing a product that no one wants?
Is that product worth a billion dollars because of the effort, or is it worth zero? And if it's worth zero, does that mean the labor of the workers was 'valueless'?
Main Sources:
MacMillan The Encyclopedia of Philosophy, 2nd edition
of Economic Thought (2012)
TABLE OF CONTENTS -----------------------------------------------------------------
1 - 100 Philosophers 9 May 2009 Start of
2 - 25+ Women Philosophers 10 May 2009 this blog
3 - 25 Adventures in Thinking 10 May 2009
4 - Modern Theories of Ethics 29 Oct 2009
5 - The Ideal State 24 Febr 2010 / 234
6 - The Mystery of the Brain 3 Sept 2010 / 266
7 - The Utopia of the Free Market 16 Febr 2012 / 383
8. - The Aftermath of Neo-liberalism 5 Sept 2012 / 413
9. - The Art Not to Be an Egoist 6 Nov 2012 / 426
10 - Non-Western Philosophy 29 May 2013 / 477
11 - Why Science is Right 2 Sept 2014 / 534
12 - A Philosopher looks at Atheism 1 Jan 2015 / 557
13 - EVIL, a philosophical investigation 17 Apr 2015 / 580
14 - Existentialism and Free Will 2 Sept 2015 / 586
15 - Spinoza 2 Sept 2016 / 615
16 - The Meaning of Life 13 Febr 2017 / 637
17 - In Search of my Self 6 Sept 2017 / 670
18 - The 20th Century Revisited 3 Apr 2018 / 706
19 - The Pessimist 11 Jan 2020 / 819
20 - The Optimist 9 Febr 2020 / 824
21 - Awakening from a Neoliberal Dream 8 Oct 2020 / 872
22 - A World Full of Patterns 1 Apr 2021 / 912
23 - The Concept of Freedom 8 Jan 2022 / 965
24 - Materialism 7 Sept 2022 / 1011
25 - Historical Materialism 5 Oct 2023 / 1088
26 - The Bonobo and the Atheist 9 Jan 2024 / 1102
27 - Artificial Intelligence 9 Feb 2024 / 1108
28 - Why Am I Here 6 Sept 2024 / 1139
The Discussion
[13:16] Stranger Nightfire shouts: I was just thinking what is the value of a hammer if there are no nials that need to be driven
[13:16] herman Bergson: Go ahead ㋡
[13:16] herman Bergson: zero
[13:16] Particle Physicist Bejiita (bejiita.imako): aaa yes true
[13:16] Max Chatnoir: Well, the workers did produce the product.
[13:17] herman Bergson: according to Jevons
[13:17] herman Bergson: They did, yes
[13:17] Max Chatnoir: I have another question. If the price of gas doubles, does its utility really change?
[13:17] Stranger Nightfire shouts: on the other hand what is the real value of a pet rock or a labubu doll
[13:18] Particle Physicist Bejiita (bejiita.imako): indeed Stranger
[13:18] Max Chatnoir: Well, that's the "demand" side.
[13:18] Stranger Nightfire shouts: however you spell that
[13:19] Particle Physicist Bejiita (bejiita.imako): I think the word ad phenomenon Hype did ot really exist at Jevons time
[13:19] herman Bergson: Sorry had to turn on my desk lamp :-)
[13:19] herman Bergson: @Max...what when the gas price double....
[13:20] Particle Physicist Bejiita (bejiita.imako): we see this with AI. People protesting about taking all hardware and electricity and turig the entire planet to a datacenter but all the tech billionaires respond is "AI AI AI AI MORE AI AI AI!"
[13:20] herman Bergson: Gas has the capacity to produce pleasure....it only changes its ratio of exchange in relation to the consumer who offers dollars for it
[13:21] Particle Physicist Bejiita (bejiita.imako): The greed have gotten them insane, and they have created a demand that only makes CEOS happy, to be able to fire all workers and replace them with AI
[13:21] Particle Physicist Bejiita (bejiita.imako): this hype I don't think existed in Jevons ' days
[13:22] herman Bergson: So you don't pay for the costs of gas production but you pay for the utility of gas
[13:23] Max Chatnoir: But is that utility really changing?
[13:24] Particle Physicist Bejiita (bejiita.imako): same with gas, it still take u an equal distance per litre
[13:24] herman Bergson: To an oil company gas is worthless..it is just gas....for the consumer it makes his car drive...and dollars are a pleasure for the oil company...so there is an exchange....
[13:25] herman Bergson: Take water....what is its utility?
[13:25] Particle Physicist Bejiita (bejiita.imako): but is it really worthless then?
[13:25] herman Bergson: But when in the desert...then...what is its utility....
[13:25] Particle Physicist Bejiita (bejiita.imako): no water - no life
[13:25] Max Chatnoir: I do still have a water bill.
[13:26] herman Bergson: same with gas...low production of refineries...less at the gas station....
[13:26] Particle Physicist Bejiita (bejiita.imako): and indeed here if in thirsty I just open the faucet but in the desert it is indeed another story
[13:26] Stranger Nightfire shouts: water has one important quality, you can not live very long at all without it
[13:26] Particle Physicist Bejiita (bejiita.imako): true
[13:27] Particle Physicist Bejiita (bejiita.imako): we can live without food longer than without water
[13:27] Stranger Nightfire shouts: why the arab oil states are in a dire situation today
[13:27] herman Bergson: Yes you have Max, because there is a company that produces the water and that company finds more pleasure in dollars than water
[13:27] Stranger Nightfire: did not mean to shout that
[13:27] .: Beertje :. (beertje.beaumont): ツ
[13:28] Max Chatnoir: They don't really make it, but they do collect it and deliver it and make sure it is more or less drinkable.
[13:28] herman Bergson: Value is a relation of exchange..
[13:28] herman Bergson: more or less drinkable?
[13:28] Particle Physicist Bejiita (bejiita.imako): also a thing with these AI datacenters, they dont recirculate the cooling water but just blast it into the air in the form of steam and so a single AI datacenter can require millions of litres of fresh water pr day just for cooling
[13:29] herman Bergson: Slow down Bejiita, please
[13:29] Particle Physicist Bejiita (bejiita.imako): but the tech giants don't care blinde by their greed for AI
[13:29] Max Chatnoir: Not toxic or infectious....
[13:29] Particle Physicist Bejiita (bejiita.imako): its wasteful
[13:29] .: Beertje :. (beertje.beaumont): Does it taste good Max?
[13:30] Max Chatnoir: Depends on what part of town you are in. Here, not so great. In an apartment I had across town it was great!
[13:30] .: Beertje :. (beertje.beaumont): i heard there is chlorine in the water in the US
[13:30] herman Bergson: another question....
[13:30] herman Bergson: Jevons says the fifth glass of water is worth less to you than the first. If we apply this to money, is the 'last dollar' of a billionaire worth less to them than the 'first dollar' of a person in poverty?
[13:30] Particle Physicist Bejiita (bejiita.imako): chlorine is necessary for ensuring it's safe to drink; we use it here also
[13:31] herman Bergson: Does Jevons’ theory of utility provide a scientific argument for taxing the rich, or is that a step too far?
[13:31] Particle Physicist Bejiita (bejiita.imako): but I don't taste it
[13:31] Max Chatnoir: Ah, taxes are a different issue.
[13:32] Particle Physicist Bejiita (bejiita.imako): hmm ok
[13:32] Particle Physicist Bejiita (bejiita.imako): well
[13:32] herman Bergson: When you possess 50 million dollars... is the next million less value?
[13:32] herman Bergson: When you have only 1 dollar, is the next dollars than more valuable?
[13:33] Particle Physicist Bejiita (bejiita.imako): interesting thought
[13:33] .: Beertje :. (beertje.beaumont): you get used to the million dollars
[13:33] Max Chatnoir: Maybe if it lets you get with two dollars something you couldn't get for one.
[13:33] Max Chatnoir: lets
[13:34] herman Bergson: Which is obvious, I guess Max....does it apply also to 50 and 51 million?
[13:34] Stranger Nightfire: those with hundreds of billions of dollars still seem to desperately crave every new one they can get
[13:34] Particle Physicist Bejiita (bejiita.imako): yes
[13:34] herman Bergson: Mihael Sandel writes about that phenomenon indeed Stranger...
[13:35] Particle Physicist Bejiita (bejiita.imako): but by then its just greed, they have more than they can ever spend
[13:35] Particle Physicist Bejiita (bejiita.imako): I say
[13:35] Particle Physicist Bejiita (bejiita.imako): greed vs need
[13:35] Stranger Nightfire: the billionaires in fact seem desperate to stop the idea of a 2 percent wealth tax
[13:35] herman Bergson: Apparently it is the kick to score that drives them
[13:35] Particle Physicist Bejiita (bejiita.imako): something like that
[13:36] Particle Physicist Bejiita (bejiita.imako): or idk what it is
[13:37] Particle Physicist Bejiita (bejiita.imako): that want u to hoard everything
[13:37] herman Bergson: Oh funny thought.... billionaires as money-hoarders
[13:38] Particle Physicist Bejiita (bejiita.imako): yes that's what they do
[13:38] .: Beertje :. (beertje.beaumont): time to clean out their houses
[13:39] Particle Physicist Bejiita (bejiita.imako): aha
[13:39] Stranger Nightfire: There was a period in Bill Gates when he had the richest man in the world, And he was doing absolutely nothing with it just sitting on it
[13:39] Stranger Nightfire: I remember saying to somebody hell, if I had that much money I could run my own space program
[13:39] Stranger Nightfire: Of course we've now seen billionaires get around to that
[13:40] Particle Physicist Bejiita (bejiita.imako): hmm
[13:40] herman Bergson: total waste of money, I'd say
[13:40] Particle Physicist Bejiita (bejiita.imako): Sure, I'm for space exploration but not by greedy assholes
[13:40] herman Bergson: They'd better spend it on schools, hospitals, social care and things like that
[13:41] bergfrau Apfelbaum: they should collect stamps instead
[13:41] herman Bergson: Fact is that they obtained all this money from "us" , the consumers
[13:41] Particle Physicist Bejiita (bejiita.imako): that's the most important thing indeed, all the people
[13:41] Stranger Nightfire: My point was that at that time Gates was doing absolutely nothing with his money
[13:41] Stranger Nightfire: so I would have made more sense to me that he would spend it on a wasteful hobby Then I'm nothing at all
[13:41] herman Bergson: so if you don't know what to do with ot...give it back to the consumers
[13:42] Particle Physicist Bejiita (bejiita.imako): yes
[13:42] Max Chatnoir: Was th
[13:42] .: Beertje :. (beertje.beaumont): they never give it back
[13:42] Max Chatnoir: at because so much more was coming in than he had anticipated?
[13:43] Stranger Nightfire: Well, when Ted Turner was first told that he had $2 billion, he immediately said that's ridiculous and gave half of it to the UN
[13:43] Stranger Nightfire: He was a somewhat different billionaire than most
[13:43] Stranger Nightfire: and in those days a billion was a lot of money
[13:44] Stranger Nightfire: For that matter, for all her falls JK Rowling, when she was told she was a billionaire, was disturbed by it and gave some of it away
[13:45] herman Bergson: Back to the main issue of today....
[13:46] herman Bergson: Economic thought has moved from labor to consumer in Jevons' thoughts
[13:46] Max Chatnoir: Yes, but you can't ignore labor.
[13:48] herman Bergson: No you can't..but how would you feel if your own boss told you that your hard work over the last month was worth nothing because the "market changed.?
[13:48] Stranger Nightfire: Well to the greatest extent possible, the capitalists are trying to get rid of Labor
[13:49] herman Bergson: The degree of exchange of the product had gone to almost zero?
[13:49] herman Bergson: Indeed Stranger ..my impression too
[13:50] Particle Physicist Bejiita (bejiita.imako): yes
[13:50] Particle Physicist Bejiita (bejiita.imako): as said, they want to replace everyone with AI - no labor
[13:50] Max Chatnoir: Well, you can't just reduce people's salary because the consumers didn't like your produce.
[13:50] Stranger Nightfire: For capitalists, in fact human beings i've always been the thing that was most expandable
[13:51] Max Chatnoir: product.
[13:51] Particle Physicist Bejiita (bejiita.imako): thats their dream at least but luckily it seems not to really work as they thought
[13:51] Particle Physicist Bejiita (bejiita.imako): the backlash is coming
[13:51] herman Bergson: So, whatever...labor should be rewarded, Max?
[13:52] Max Chatnoir: They did the work, and they made the product. Why aren't people buying it?
[13:52] herman Bergson: Because the product doesn't give much pleasure
[13:52] Particle Physicist Bejiita (bejiita.imako): because they didn't ask us if we wanted it, it's as I say, just hype, hype and more hype
[13:52] Max Chatnoir: Maybe they don't find it useful?
[13:52] herman Bergson: yes, something like that
[13:53] Stranger Nightfire: The product one is making can become obsolete before it hits the market
[13:53] Particle Physicist Bejiita (bejiita.imako): that also
[13:53] Stranger Nightfire: Reminds me of an interesting thing the business writer Tom Peters said he would advise corporate clients -- you need to be the person that puts company out of business
[13:54] Particle Physicist Bejiita (bejiita.imako): I have some good examples of the opposite, it's a kind of niche market
[13:54] Stranger Nightfire: In other words you'd better innovate and create a better product before your competitor does
[13:54] Particle Physicist Bejiita (bejiita.imako): the music machine Roland SP404 is quite old but it constantly gets updates and is thus as actual today
[13:54] herman Bergson: Not yet solved...the value of labor and the Marginal value, how the market acts...
[13:54] Particle Physicist Bejiita (bejiita.imako): machine
[13:54] Particle Physicist Bejiita (bejiita.imako): but as said thats a very special product
[13:55] Max Chatnoir: Risky when you're making something really new.
[13:55] Max Chatnoir: making
[13:55] Stranger Nightfire: Some interesting cases but the fact that the digital watch was invented by someone at a Swiss watch company but they would not build them
[13:55] Particle Physicist Bejiita (bejiita.imako): yes, u dont know the demand or if people are gonna like it
[13:55] Particle Physicist Bejiita (bejiita.imako): ect
[13:55] Stranger Nightfire: and the digital camera was invented at Kodak but they resisted creating them
[13:55] Stranger Nightfire: Both were great gifts to the Japanese
[13:56] Particle Physicist Bejiita (bejiita.imako): yes because they had all their investment in film and thus wanted it to stay like that
[13:56] Particle Physicist Bejiita (bejiita.imako): big mistake
[13:56] .: Beertje :. (beertje.beaumont): First they create a need and then advertise as much as they can with it
[13:57] Particle Physicist Bejiita (bejiita.imako): even film photography is still a thing
[13:57] .: Beertje :. (beertje.beaumont): { the pillow with the hole in it }
[13:57] Particle Physicist Bejiita (bejiita.imako): aaah
[13:57] Particle Physicist Bejiita (bejiita.imako): yes
[13:57] Particle Physicist Bejiita (bejiita.imako): things like that
[13:57] herman Bergson: Well, Beertje, today we took the first stap to understand how we got there....
[13:57] Stranger Nightfire: I wonder what it costs to get film processed these days
[13:58] herman Bergson: JEvons ...and there are others... is one of these steps....the consumer first...
[13:58] Particle Physicist Bejiita (bejiita.imako): I found some cool series on YouTube how film works and is made at Kodak
[13:58] Particle Physicist Bejiita (bejiita.imako): they walk you through the entire process in the factory, very interesting
[13:59] Max Chatnoir: But that's why utility is important.
[13:59] herman Bergson: I have no Kodak shares, so I guess I thank you all again for your participation...
[13:59] Particle Physicist Bejiita (bejiita.imako): https://www.youtube.com/watch?v=TCxoZlFqzwA
[13:59] Particle Physicist Bejiita (bejiita.imako): https://www.youtube.com/watch?v=HQKy1KJpSVc
[13:59] Stranger Nightfire: I remember when I was a kid I used to like a TV show that was called Industry on Parade and was all about following products along an assembly line explaining how they were made
[13:59] Particle Physicist Bejiita (bejiita.imako): its a 4 part series in total I think
[13:59] herman Bergson: I wish you a pleasant and healthy weekend :-)
[13:59] herman Bergson: Class dismissed...
[13:59] Max Chatnoir: Even if it's utility that you create, like microwave ovens.
[14:00] Particle Physicist Bejiita (bejiita.imako): there is a show called How It's Made I watched all the time before on YouTube also
[14:00] .: Beertje :. (beertje.beaumont): Thank you, Herman
[14:00] Max Chatnoir: Thanks you, Herman. This has been fascinating.
[14:00] herman Bergson: Get ready for next Tuesday..there will be more :-))
[14:01] Max Chatnoir: Oh, boy!
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