The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface to the First Edition (1871)
• Preface to the Second Edition (1879)
• Preface to the Third Edition By Harriet Jevons
• Errata
• Chapter I: Introduction
• Mathematical Character of the Science.
• Confusion Between Mathematical and Exact Sciences.
• Capability of Exact Measurement.
• Measurement of Feeling and Motives.
• Logical Method of Economics.
• Relation of Economics to Ethics.
• Chapter II: Theory of Pleasure and Pain
• Pleasure and Pain As Quantities.
• Pain the Negative of Pleasure.
• Anticipated Feeling.
• Uncertainty of Future Events.
• Chapter III: Theory of Utility
• Definition of Terms.
• The Laws of Human Want.
• Utility Is Not an Intrinsic Quality.
• Law of the Variation of Utility.
• Total Utility and Degree of Utility.
• Variation of the Final Degree of Utility.
• Disutility and Discommodity.
• Distribution of Commodity In Different Uses.
• Theory of Dimensions of Economic Quantities.
• Actual, Prospective, and Potential Utility.
• Distribution of a Commodity In Time.
• Chapter IV: Theory of Exchange
• Importance of Exchange In Economics.
• Ambiguity of the Term Value.
• Value Expresses Ratio of Exchange.
• Popular Use of the Term Value.
• Dimension of Value.
• Definition of Market.
• Definition of Trading Body.
• The Law of Indifference.
• The Theory of Exchange.
• Symbolic Statement of the Theory.
• Analogy to the Theory of the Lever.
• Impediments to Exchange.
• Illustrations of the Theory of Exchange.
• Problems In the Theory of Exchange.
• Complex Cases of the Theory.
• Competition In Exchange.
• Failure of the Equations of Exchange.
• Negative and Zero Value.
• Equivalence of Commodities.
• Acquired Utility of Commodities.
• The Gain By Exchange.
• Numerical Determination of the Laws of Utility.
• Opinions As to the Variation of Price.
• Variation of the Price of Corn.
• The Origin of Value.
• Chapter V: Theory of Labour
• Definition of Labour.
• Quantitative Notions of Labour.
• Symbolic Statement of the Theory.
• Dimensions of Labour.
• Balance Between Need and Labour.
• Distribution of Labour.
• Relation of the Theories of Labour and Exchange.
• Relations of Economic Quantities.
• Various Cases of the Theory.
• Joint Production.
• Over-production.
• Limits to the Intensity of Labour.
• Chapter VI: Theory of Rent
• Accepted Opinions Concerning Rent.
• Symbolic Statement of the Theory.
• Illustrations of the Theory.
• Chapter VII: Theory of Capital
• The Function of Capital.
• Capital Is Concerned With Time.
• Quantitative Notions Concerning Capital.
• Expression For Amount of Investment.
• Dimensions of Capital, Credit and Debit.
• Effect of the Duration of Work.
• Illustrations of the Investment of Capital.
• Fixed and Circulating Capital.
• Free and Invested Capital.
• Uniformity of the Rate of Interest.
• General Expression For the Rate of Interest.
• Dimension of Interest.
• Peacock On the Dimensions of Interest.
• Tendency of Profits to a Minimum.
• Advantage of Capital to Industry.
• Are Articles In the Consumers' Hands Capital?
• Chapter VIII: Concluding Remarks
• The Doctrine of Population.
• Relation of Wages and Profit.
• Professor Hearn's Views.
• The Noxious Influence of Authority.
• Appendix I
• Appendix Ii

Variation of the Final Degree of Utility.

The final degree of utility is that function upon which the Theory of Economics will be found to turn. Economists, generally speaking, have failed to discriminate between this function and the total utility, and from this confusion has arisen much perplexity. Many commodities which are most useful to us are esteemed and desired but little. We cannot live without water, and yet in ordinary circumstances we set no value on it. Why is this? Simply because we usually have so much of it that its final degree of utility is reduced nearly to zero. We enjoy, every day, the almost infinite utility of water, but then we do not need to consume more than we have. Let the supply run short by drought, and we begin to feel the higher degrees of utility, of which we think but little at other times.

The variation of the function expressing the final degree of utility is the all-important point in economic problems. We may state as a general law, that the degree of utility varies with the quantity of commodity, and ultimately decreases as that quantity increases. No commodity can be named which we continue to desire with the same force, whatever be the quantity already in use or possession. All our appetites are capable of satisfaction or satiety sooner or later, in fact, both these words mean, etymologically, that we have had enough, so that more is of no use to us. It does not follow, indeed, that the degree of utility will always sink to zero. This may be the case with some things, especially the simple animal requirements, such as food, water, air, etc. But the more refined and intellectual our needs become, the less are they capable of satiety. To the desire for articles of taste, science, or curiosity, when once excited, there is hardly a limit.

This great principle of the ultimate decrease of the final degree of utility of any commodity is implied in the writings of many economists, though seldom distinctly stated. It is the real law which lies at the basis of Senior's so-called "Law of Variety." Indeed, Senior incidentally states the law itself. He says: "It is obvious that our desires do not aim so much at quantity as at diversity. Not only are there limits to the pleasure which commodities of any given class can afford, but the pleasure diminishes in a rapidly increasing ratio long before those limits are reached. Two articles of the same kind will seldom afford twice the pleasure of one, and still less will ten give five times the pleasure of two. In proportion, therefore, as any article is abundant, the number of those who are provided with it, and do not wish, or wish but little, to increase their provision, is likely to be great; and, so far as they are concerned, the additional supply loses all, or nearly all, its utility. And, in proportion to its scarcity, the number of those who are in want of it, and the degree in which they want it, are likely to be increased; and its utility, or, in other words, the pleasure which the possession of a given quantity of it will afford, increases proportionally."1

Banfield's "Law of the Subordination of Wants" also rests upon the same basis. It cannot be said, with accuracy, that the satisfaction of a lower want creates a higher want; it merely permits the higher want to manifest itself. We distribute our labour and possessions in such a way as to satisfy the more pressing wants first. If food runs short, the all-absorbing question is, how to obtain more, because, at the moment, more pleasure or pain depends upon food than upon any other commodity. But, when food is moderately abundant, its final degree of utility falls very low, and wants of a more complex and less satiable nature become comparatively prominent.

The writer, however, who appears to me to have most clearly appreciated the nature and importance of the law of utility, is Richard Jennings, who, in 1855, published a small book called the Natural Elements of Political Economy.1 This work treats of the physical groundwork of Economics, showing its dependence on physiological laws. It displays great insight into the real basis of Economics; yet I am not aware that economists have bestowed the slightest attention on Jennings's views.2 I give, therefore, a full extract from his remarks on the nature of utility. It will be seen that the law, as I state it, is no novelty, and that careful deduction from principles in our possession is alone needed to give us a correct Theory of Economics.

"To turn from the relative effect of commodities, in producing sensations, to those which are absolute, or dependent only on the quantity of each commodity, it is but too well known to every condition of men, that the degree of each sensation which is produced, is by no means commensurate with the quantity of the commodity applied to the senses.... These effects require to be closely observed, because they are the foundation of the changes of money price, which valuable objects command in times of varied scarcity and abundance; we shall therefore here direct our attention to them for the purpose of ascertaining the nature of the law according to which the sensations that attend on consumption vary in degree with changes in the quantity of the commodity consumed.

"We may gaze upon an object until we can no longer discern it, listen until we can no longer hear, smell until the sense of odour is exhausted, taste until the object becomes nauseous, and touch until it becomes painful; we may consume food until we are fully satisfied, and use stimulants until more would cause pain. On the other hand, the same object offered to the special senses for a moderate duration of time, and the same food or stimulants consumed when we are exhausted or weary, may convey much gratification. If the whole quantity of the commodity consumed during the interval of these two states of sensation, the state of satiety and the state of inanition, be conceived to be divided into a number of equal parts, each marked with its proper degrees of sensation, the question to be determined will be, what relation does the difference in the degrees of the sensation bear to the difference in the quantities of the commodity?

"First, with respect to all commodities, our feelings show that the degrees of satisfaction do not proceed pari passu with the quantities consumed; they do not advance equally with each instalment of the commodity offered to the senses, and then suddenly stop; but diminish gradually, until they ultimately disappear, and further instalments can produce no further satisfaction. In this progressive scale the increments of sensation resulting from equal increments of the commodity are obviously less and less at each step,—each degree of sensation is less than the preceding degree. Placing ourselves at that middle point of sensation, the juste milieu, the aurea mediocritas, the of sages, which is the most usual status of the mass of mankind, and which, therefore, is the best position that can be chosen for measuring deviations from the usual amount, we may say that the law which expresses the relation of degrees of sensation to quantities of commodities is of this character: if the average or temperate quantity of commodities be increased, the satisfaction derived is increased in a less degree, and ultimately ceases to be increased at all; if the average or temperate quantity be diminished, the loss of more and more satisfaction will continually ensue, and the detriment thence arising will ultimately become exceedingly great."1

[[1]]Encyclopœdia Metropolitana, p. 133. Reprint, p. 12.

[[1]]London: Longmans.

[[2]]Cairnes is, however, an exception. See his work on The Character and Logical Method of Political Economy. London, 1857, p. 81. 2d ed. (Macmillan), 1875, pp. 56, 110, 224 App. B.

[[1]]Pp. 96-99.