Marginal Utility Vs. Utility Theory

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Fifty years after Jeremy Bentham’s initial defention of utility, the German economist Hermann Heinrich Gossen introduced the term marginal utility and the law of diminishing marginal utility. The term marginal utility is defined as “the pleasure or pain from an additional unit or ‘dose’ of a good.” The introduction of marginal utility to economic thought and vocabulary was revolutionary, reducing the need to measure total pleasure or pain because “Even if marginal utilities were measured on a cardinal scale, they would tell us nothing about how much total utility there was (even if it was maximized) because they are still only measured up to an additive constant.” An additional benefit of marginal utility was the introduction of the principle of marginal utility theory, which Gossen explained as, “Man maximizes his total life pleasure if he distributes his entire money income ... among the various enjoyments ... so that the last atom of money spent on each single pleasure yields the same amount of pleasure.” Marginal utility was considered easier to measure than utility as a whole, although still very difficult to define. At the same time, Gossen was also introducing the law of diminishing marginal utility, which was one of the most important steps in developing the economic theory around utility. At the time that Gossen introduced the law of diminishing marginal returns, there an equivalent law, called Turgot’s law, had already been developed for the producer’s side of
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