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Wicksteed on the subjective theory of value and on opportunity costs (1910)

Philip H. Wicksteed (1844-1927) was a pioneer English economist who made contributions to the development of a subjective theory of cost. In this example of a shopper going to market, he not only correctly discusses how she has ranked the desirability of purchasing each item according to her own subjective preferences, but she also is aware of the opportunity costs of purchasing food instead of some other good:

We have seen that the skilful marketer has a portion of her scale of preferences definitely and even minutely present in her consciousness as she enters the market. She knows with considerable nicety the terms on which this or that alternative purchase is preferable, and the immensely complex system of combinations which can be commanded by the money she has to spend is fairly well under her ken. She may therefore come out of the marketplace having done something like the best that was possible with her money. But in order for this result to represent the most effective administration of her resources in general for all the purposes of her life, other opportunities than those of the market in which she actually stood must also have been present in her mind with adequate preciseness; for her total expenditure in the market-place is not rigidly fixed in advance.

We have seen that the skilful marketer has a portion of her scale of preferences definitely and even minutely present in her consciousness as she enters the market. She knows with considerable nicety the terms on which this or that alternative purchase is preferable, and the immensely complex system of combinations which can be commanded by the money she has to spend is fairly well under her ken. She may therefore come out of the marketplace having done something like the best that was possible with her money. But in order for this result to represent the most effective administration of her resources in general for all the purposes of her life, other opportunities than those of the market in which she actually stood must also have been present in her mind with adequate preciseness; for her total expenditure in the market-place is not rigidly fixed in advance. It is related to her expenditure on other things (furniture, clothes, education, literature, holidays, etc.), and should be kept in close and continuous connection with it. And just as her expenditure on provisions is affected by the price of all these other things, so likewise her expenditure on them is affected by the price of provisions. The price of one or many of the commodities in the market may be considerably different from what she expected. If she finds that she can fill her basket for less than she expected she may feel at liberty to buy something else that she would not otherwise have allowed herself; and if prices are so high that the money she had meant to spend will make too poor a provision she must cast about for some saving elsewhere to enable her to spend a little more in the market-place. So when she learns the prices at the stalls, she may find she “can get that scarf for Bob after all,” or, on the contrary,that with things at such prices, she “must put off binding Grimm’s Fairy Tales a little longer.” The ideal marketer therefore will have in her mind, as she enters the market, a perfectly clear and precise realisation of that portion of her scale of preferences which is immediately concerned, while those portions of it which are adjacent and bear most directly and closely upon it will be within easy reach; and the whole range will be subconsciously present in what psychologists call “the fringe.” So much for recapitulation.

About this Quotation:

2010 is the 100th anniversary of the publication of Wicksteed’s Commonsense of Political Economy. Philip Wicksteed was a polymath who translated Dante and Aristotle and made significant advances in economic theory as well. He is recognized by modern Austrian economists for his contributions to the subject theory of prices which had begun to emerge in the 1870s with the work of William Stanley Jevons, Carl Menger, and Léon Walras who began the so-called “marginal revolution”. There is another quite interesting aspect to this quotation, Wicksteed’s use of the pronoun “she” in his example of a shopper in the marketplace. Perhaps this is an example of early “gender inclusive language”?

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