Before I continue presenting another economic thinker, I'd like to provide some clear context for William Stanley Jevons's work.
It is around 1870, and that period became known as the Marginal Revolution. The main economic theories preceding the Marginal Revolution are largely grouped under what is now called "classical political economy".
Key figures were Adam Smith, David Ricardo, Thomas Malthus, John Stuart Mill, and, in some respects, Karl Marx.
I discussed them in the lectures beginning at 1232, but let me focus on one important aspect: the value of a product. What should the common citizen pay for a product, and how is that determined?
In classical political economy, the general point of view is that the value of a good comes from the cost of producing it: the labor, the tools, the rent.
The Classical economists believed value was a property of the object itself, like temperature is a property of water. You could measure it by counting the hours of work.
But here is an old riddle. Why is water, which is essential to life, so cheap that we literally give it away for nothing? Meanwhile, a diamond, which is a shiny rock you cannot eat, drink, or wear to keep warm, costs a fortune.
Value comes from labor, so the answer was: A diamond is expensive because it takes a lot of labor and risk to dig it out of the earth. Water is cheap because it just falls from the sky and is abundantly available.
But that answer doesn’t really satisfy, does it? After all, a $10,000 Rolex watch doesn’t cost $10,000 in labor to produce.
A Rolex is expensive not just because of labor, but because people value the last one highly, and because of branding, but that's a later lecture.
Diamonds have high marginal utility because they are rare. Water has low marginal utility because we have so much of it, not because water isn’t useful.
So value does not primarily come from labor or tools, in this case. And here appears the "Marginal Revolution" on the stage.
We already met one "revolutionary" in William Stanley Jevons, but independently from him, two more economic thinkers came up with similar ideas.
It is about decisions at the margin. "Marginal" simply means "the next one" or "the last one." The *marginal utility* is the satisfaction you get from consuming one additional unit, as we learned from Jevons.
The theory is this: "Should I do X at all?", an all-or-nothing decision, the question of the classic economist.
The marginal analysis asks: If I do a little bit more of X, do the extra benefits outweigh the extra costs?
If I do a little bit less of X, do I save more cost than I lose in benefits?
You continue an activity as long as the *marginal benefit (MB) is greater than the marginal cost (MC). You stop when MB = MC. You never do more once MC > MB.
Think: the first sip of coffee on a tired morning, high marginal benefit. The fifth cup? Much lower.
In the next lecture, I'll give some more examples of how this works in reality.
It is all about the utility of products: do they increase pleasure and reduce pain, as Jevons put it?
For the Classical economists, the economy was a world of *objects*: tons of coal, bushels of wheat, hours of labor.
For the Marginalists, the economy became a world of *subjects*: human feelings, preferences, choices, and trade-offs.
Understanding all these changes may lead to a better understanding of the current capitalist economic system.
Suddenly, economics didn’t forget about the nation, but it started asking: What makes individuals tick first? and started being about the individual standing in the supermarket, about consumers.
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
[13:17] .: Beertje :. (beertje.beaumont): Thank you Herman
[13:17] Particle Physicist Bejiita (bejiita.imako): ㋡
[13:17] herman Bergson: Not the easiest lecture today, I guess
[13:18] Particle Physicist Bejiita (bejiita.imako): hm
[13:18] herman Bergson: But the classic way of thinking was that value was created by labor
[13:18] .: Beertje :. (beertje.beaumont): can it be both?
[13:19] Particle Physicist Bejiita (bejiita.imako): it can I gueess
[13:19] Particle Physicist Bejiita (bejiita.imako): utility vs scarcity
[13:19] herman Bergson: While the new appoach means that value is created by utility of the product and the decicion of the consumer to buy another one or not
[13:19] herman Bergson: Yes scarcity is another ascpect of the equation
[13:20] Particle Physicist Bejiita (bejiita.imako): i say oe examplee of this is the metal titanium, although the elemment is as common as aluminium the mteal itself is so expensive it only find uses in thigs like areospace an high end golf clubs
[13:20] Particle Physicist Bejiita (bejiita.imako): the maufacturing process is MUCH trickier theem for aluminium = much higher cost
[13:21] Particle Physicist Bejiita (bejiita.imako): thats one example
[13:22] herman Bergson: But the value is not in the labor but in the preferences of the consumer....should I buy one....and another one...and then he stops...an extra one doesn't add more pleasure for him
[13:22] Particle Physicist Bejiita (bejiita.imako): aaa yes annd also body implants wich is why those are so expensive, titanium is the only metal not rejected by the body
[13:24] herman Bergson: What we learn from all this is that around 1870 in economic thought, the consumer became the main focus
[13:26] Particle Physicist Bejiita (bejiita.imako): haha
[13:26] herman Bergson: ok under control again.....
[13:27] herman Bergson: Well, let's make it an easy Thursday...and decide that we are done here for today
[13:28] herman Bergson: Economics is becoming more and more abstract and complex
[13:28] Particle Physicist Bejiita (bejiita.imako): I gueess so
[13:28] bergfrau Apfelbaum: mhm :-)
[13:29] herman Bergson: My lecture was rated 9,5/10 thouggh
[13:29] bergfrau Apfelbaum: yay
[13:29] .: Beertje :. (beertje.beaumont): very good:)
[13:29] herman Bergson: The previous one was even 10/10
[13:29] Particle Physicist Bejiita (bejiita.imako): oki ㋡
[13:29] Particle Physicist Bejiita (bejiita.imako): top
[13:29] .: Beertje :. (beertje.beaumont): mind your shoes:)
[13:29] Particle Physicist Bejiita (bejiita.imako): rated
[13:30] bergfrau Apfelbaum: s
[13:30] herman Bergson: I have that Chinese coach, you know....and he isn't biased at all
[13:30] herman Bergson: that "s" stands for sabotage Bergie ㋡
[13:30] bergfrau Apfelbaum: lol
[13:31] Particle Physicist Bejiita (bejiita.imako): ㋡
[13:31] Particle Physicist Bejiita (bejiita.imako): aaa yes Sabot = french for boot
[13:32] herman Bergson: Let's relax...
[13:32] herman Bergson: Class dismissed....
[13:32] Particle Physicist Bejiita (bejiita.imako): yes
[13:32] Particle Physicist Bejiita (bejiita.imako): oki
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