When one first looks upon Marginalist thought, they tend to find the theory’s fundamental link to Utilitarianism obvious. The following will discussion will show how the conception of utility used by the Marginalists differs from the conception of utility used by the original Utilitarian thinker, Jeremy Bentham. From there, the discussion will analyze the role of utility within general equilibrium theory. Finally, we will see how the concept of utility plays into the notion of Pareto efficiency. The concept of utility is fundamental to both Marginalist thought as well as the Utilitarian ethical thought of Jeremy Bentham. In order to fully understand the minute ways in which these concepts of utility differ, it may be beneficial to first see
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Throughout Bentham’s discussions of utility, it seems as though his primary focus was on the concept of total utility. That is to say that Bentham was most focused on maximizing the total amount of utility gained by an individual or community (T, 202). This differs from the utility taken as the focus of Jevons, namely marginal utility. Jevons defines marginal utility as “the degree of utility of the last addition, or next possible addition of a very small, or infinitely small, quantity to the existing stock” (T, 213). In other words, marginal utility is the utility gained from the next unit of a commodity consumed. This distinction allows Jevons to show how utility can correspond to prices, which is something that cannot be shown if one relies on total utility (T, 214). In the words of Jevons, “Many commodities which are most useful to us are esteemed and desired but little” (T, 214). From this analysis, Jevons arrives at the principal of diminishing marginal utility, which states that as the quantity of a commodity consumed increases, the marginal utility of that commodity decreases (T, 214). Thus Jevons and the Marginalists are able to manipulate the measure of utility in such a way to solve economic conundrums, such as the diamond-water paradox. Reliance on total utility would not allow them to solve conundrums such as …show more content…
General equilibrium theory attempts to show how equilibrium prices are achieved in a market. The theory features a downward-sloping demand curve and an upward-sloping supply curve. The intersection of these curves shows the equilibrium price and quantity of a commodity in the market. If one thinks back to Jevons’ principle of diminishing marginal utility, it becomes quickly apparent why general equilibrium theory features a downward-sloping demand curve. As more and more units of a commodity become obtainable, the marginal utility of that commodity decreases. Marginal utility represents the value of a commodity from the consumer’s perspective, so less and less marginal utility means the commodity will be demanded less and less. Marginal utility represents the demand for a commodity in general equilibrium theory. From here, one can see that the equilibrium obtained between supply and demand is “a state that maximizes the utilities of buyers and sellers” (T, 227). Thus, utility, particularly marginal utility, plays a major role in the Marginalist’s general equilibrium
Throughout Bentham’s discussions of utility, it seems as though his primary focus was on the concept of total utility. That is to say that Bentham was most focused on maximizing the total amount of utility gained by an individual or community (T, 202). This differs from the utility taken as the focus of Jevons, namely marginal utility. Jevons defines marginal utility as “the degree of utility of the last addition, or next possible addition of a very small, or infinitely small, quantity to the existing stock” (T, 213). In other words, marginal utility is the utility gained from the next unit of a commodity consumed. This distinction allows Jevons to show how utility can correspond to prices, which is something that cannot be shown if one relies on total utility (T, 214). In the words of Jevons, “Many commodities which are most useful to us are esteemed and desired but little” (T, 214). From this analysis, Jevons arrives at the principal of diminishing marginal utility, which states that as the quantity of a commodity consumed increases, the marginal utility of that commodity decreases (T, 214). Thus Jevons and the Marginalists are able to manipulate the measure of utility in such a way to solve economic conundrums, such as the diamond-water paradox. Reliance on total utility would not allow them to solve conundrums such as …show more content…
General equilibrium theory attempts to show how equilibrium prices are achieved in a market. The theory features a downward-sloping demand curve and an upward-sloping supply curve. The intersection of these curves shows the equilibrium price and quantity of a commodity in the market. If one thinks back to Jevons’ principle of diminishing marginal utility, it becomes quickly apparent why general equilibrium theory features a downward-sloping demand curve. As more and more units of a commodity become obtainable, the marginal utility of that commodity decreases. Marginal utility represents the value of a commodity from the consumer’s perspective, so less and less marginal utility means the commodity will be demanded less and less. Marginal utility represents the demand for a commodity in general equilibrium theory. From here, one can see that the equilibrium obtained between supply and demand is “a state that maximizes the utilities of buyers and sellers” (T, 227). Thus, utility, particularly marginal utility, plays a major role in the Marginalist’s general equilibrium