Marginal utility of money

See my post above.

There you go again. Deceptively using the word "need" when you really mean "desire".

I've already pointed out that "need" and "desire" are not the same thing for utility analysis.

 

He directly addressed you post with a relevant response explaining what Resiman meant.

Which is basically saying the same thing I did:

He's saying that the marginally utility of a given amount (e.g. $100) diminishes as we get richer, but we always want more.

So what? What does that have to do with tax policy?

 

Galbraith is a quack. As is Krugman.

So you admit, you cannot figure out what Reisman is saying by, "It is necessary to stress this point in view of the misconception spread by Galbraith that increasing wealth, and the consequent fall in the marginal utility of a unit of wealth, makes the pursuit of wealth progressively less important."

I really don't care what you think of Reisman, only if you are capable of understanding what he said.

- - - Updated - - -

He said what he said and you can't figure out what the simple English comment means.

 

"...the law of diminishing marginal utility"

Reisman there is referring to the well known law of diminishing utility, which states that for an equivalent marginal increase, the utility produced diminishes.

" is perfectly consistent with the fact that man’s need for wealth is limitless."

That law is consistent with, or non inconsistent with, a limitless "need" for wealth.

Although why Reisman would say "need" when according to you he apparently means "desire" suggests that he is either deceptive or has poor language skills. Or just plain wrong. Certainly man does not have an unlimited "need" for wealth.

In either case, it shows that his statements and claims are or questionable accuracy.

"It is necessary to stress this point in view of the misconception spread by Galbraith that increasing wealth, and the consequent fall in the marginal utility of a unit of wealth, makes the pursuit of wealth progressively less important."

I think he is saying a few things here:

1) that Galbraith has the point of view that increasing wealth, makes the pursuit of wealth progressively less important.

2) He is acknowledging the fact that under the law of diminishing returns, there is a consequent fall in the marginal utility of a unit of wealth.

3) The law of diminishing returns does not, in Reisman's view, support the proposition that increasing wealth makes the pursuit of wealth progressively less important.

However, Reisman here once again shows a poor command of the English language by writing a ambiguous phrase. It could mean that Galbraith's misconception includes "the consequent fall in the marginal utility of a unit of wealth" as opposed to that being an independently stated fact.

His phrase could be read either way. However, if what he meant was that Galbraith's misconception was the "consequent fall in the marginal utility of a unit of wealth" I think he probably would not have written it the way he did. He would have instead written something like: "in view of the misconception spread by Galbraith that increasing wealth diminishes the marginal utility of a unit of wealth ..." Instead, he writes: "... in view of the misconception spread by Galbraith that increasing wealth, and the consequent fall in the marginal utility of a unit of wealth, makes the pursuit of wealth progressively less important." I think what he is saying is that the misconception is that these things (increasing wealth and the fall of marginal utility) makes the pursuit of wealth progressively less important.

In other words, I think Galbraith is saying that the misconception is his conclusion, not the premise. He is probably not saying that the premise is the misconception. If that were the case, he would not have started out by making the point about the law of diminishing returns being consistent with a limitless "need" for wealth. The purpose of that point is to show that the premise (diminishing returns) is *not* inconsistent with limitless desire for more money.

This position is further buttressed by the fact that Reismann explicitly states in other passages that the marginal utility of a given unit diminishes.

But again, poorly worded phraseology.

 

What is really amazing is how some folks think that such poorly worded sentence structure is simple English.

 

You mean you cannot see the clear ambiguity of that poorly written phrase?

 

He said the "law of diminishing marginal utility" he didn't say it didn't apply, he didn't say it was different.
He didn't even have a problem with Galbraith saying that the marginal utility of a unit of wealth fell.
He's arguing over something that is different from what you are saying which is

Reisman doesn't say that.

 

When discussing marginal utility it is a perception of satisfaction; whereas actual utility is that which can satisfy a need of survival.

Of course you would, because you have yet to understand what the man is saying. I doubt you ever will, your command of the language is inadequate.

Neither is a bold conclusory assertion an argument.

Apparently no one can educate you.

That is your judgement, not the tendency of most human behavior.

Oh? So tell me, what would the marginal unit of wealth for me? Of course you know know. I am the only one who knows that.

It is obvious that the $100 would mean more to the hungry man than to the billionaire, why are you arguing that point?

Anyone who understands human behavior can predict with relative accuracy that some things will occur. We don't have to know what the marginal unit is which makes a millionaire satisfied by the utility of that marginal unit. But we reasonably know that point can exist.

Marginal utility can be ranked by the player as higher, lower or constant without empirical numerical designations of value. We are not speaking of empirical measurements, which are not possible. But we can certainly theorize what will please an individual based on his status in life and human behavior. We can say, being hit by a car hurts. We cannot measure that pain empirically, but the one who is hurt can tell you it is severe or maybe not so severe. [/quote]

See my statement above. You are just trying to have it both ways. You want to use the argument that MU cannot be measured against arguments showing why your position is bogus, and then you turn around and measure it for your own purposes. You can't have it both ways. Either we can measure MU however you want to do it, or we can't.[/quote]We can't measure it empirically but we can rank it for better or worse, high or higher, low or lower etc.

Please read! I did not quote Mises. I quoted Reisman and what he said Mises told him.

Because they are perceptual of the individual. We can logically say that a lessor amount will satisfy a poor person than it would take to satisfy a rich person, but we cannot go beyond noting what a person says satisfies himself as opposed to making a judgement from outside looking in.

I have never disagree that if one uses a constant marginal unit as wealth increases that the marginal utility of that constant unit will diminish. That is the whole point Reisman is making when he makes the point that as wealth increases the size of the marginal unit increases and the marginal utility can increase as well.

Anyone who wants to fully understand marginal utility. It is obvious you don't. All you want to do is establish that a given unit does not mean as much to a rich man as it does to a poor man so you can tax the crap out of him. That is not the discussion of marginal utility, which was the point of the thread.

Because you can't seem to read a simple sentence and tell us what it says without reading into the sentence and adding your opinion, as if that opinion meant anything in the context of the sentence.

OK by me. Do you prefer to be called a progressive?

Actual utility is what a specific amount of money will do for an individual. Marginal utility is the perception of satisfaction for what ever the size the marginal unit is to the player. There is a difference. When the rich man perceives a given amount as the marginal unit, it doesn't matter that it could support a poor man for a year.

No, it is the perceived satisfaction gotten from the marginal unit.

One can only compare feelings of one person to himself, not to anyone else.

The rich man should be taxed more because he can afford to pay because he gets more value from the infrastructure without regard to his perceptions of marginal utility.

Of course not. But then now he is a millionaire, a different person with a different perspective of the value of the marginal unit.

Marginal utility is never an excuse to tax anyone.

Of course I have. We can make presumptions about rankings, but we cannot measure MU. So yes, depending on the size of the marginal unit the marginal utility can increase, remain constant or even diminish. It depends of the mind set of the player, no one outside of his mind can do it for him.

When using a constant sized marginal unit any outcome will be skewed toward diminishing MU, which is not really the case as wealth increases.

We is who ever we were discussing at the time. I don't recall, thus the "we is the plural of I."

As I said, anyone interested in discussing marginal utility cares, and it still is not an excuse for taxation issues.

We don't need marginal utility to tax a billionaire at a higher rate.

MU is not an excuse for a higher tax rate. If we were to determine that we will tax the marginal unit which has a diminishing marginal utility then we may miss out on a lot of taxes as millionaires or billionaires may not every have a diminishing MU of wealth. Thus not a good excuse.

The person who is discussing marginal utility would care.

For tax purposes we don't need to know marginal utility at all. As far as taxation is concerned MU is irrelevant.

I am not a bit confused. I understand the difference between actual utility, marginal utility and the reasons for taxing the rich at a higher rate.

Believe what you wish. If you can't understand the difference between what a man actually needs to survive or what another man may personally perceive as satisfaction have at it.

 

You are still sticking to discussing your point of view. I asked solely for you to tell me what the English language of the Reisman quotes mean. Think you can do that?

 

To whom are you addressing? I dissected it in detail, explaining how his poorly written sentences were ambiguous, but explained the probable reading. Did you miss my post?

 

*sigh* It's only a matter of time before we start hearing about the marginal utility of kidneys.


​

 

False. The only difference between marginal utiltity and utility is that "marginal" refers the the utility of the next additional unit.

1. Very small.
2. Referring to the next additional smallest unit added to the current total. Incremental.

Read more: http://www.investorwords.com/5651/marginal.html#ixzz2ckQVRypQ

Now we'll have a 50 page discussion on what "marginal" means.

I've said numerous times if you change the definition, can can argue a different conclusion.

I agree his writing skill is poor. But I understand it just fine, thanks.

The fact you've utterly failed to show where Reisman says anything like that proves my point.

Not so inadequate to prove how you are wrong.

Agreed. Both are bald conclusions.

Was someone just saying something about command of the language? LOL

It's not a matter of educating me. It's a failure of you to even begin to defend your position.

Disagree, and submit your statement is self evidently false. When you have zero, you need money to be able to survive. When you already have a billion, you don't really need more.

That is a facially inane question. Why would you have a certain marginal unit of wealth? A marginal unit of wealth for what?

Of course it is.

Foundation.

Agreed.

Just as we don't have to know the exact utility he gets to know that the MU the billionaire gets from $100 is less than the utility the starving man gets. Which you have conceded and which is the law of diminishing returns.

 

Two people have told you what that quote means.
You just don't understand what Reisman was saying, because long ago, you decided to argue that the marginal utility of money rose as wealth increased, so you googled and found Reisman, who seemed to say that to you, and you have stuck to a half dozen or so quotes from Reisman, that you misconstrue as supporting your position, and ignore all the places where Reisman contradicts your position.

When Reisman says the law of diminishing marginal utility applies to wealth, you claim he doesn't mean it in the same way as it applies to everything else, but you can't find Reisman saying that, because Reisman would tell you that's stupid.
If you had read and understood Reisman, you would know that.

 

Do you have any point to make? Otherwise it's safe to assume that your resort to little smilies is an indication you have no argument you can make to rebut my point.

Exactly how can you do that when you cannot measure it because it is subjective to the person?

Sure. We can theorize and use logic and point to psychological studies. All of which support the point that the marginal utility of $100 decreases the richer you get.

We can't measure it empirically but we can rank it for better or worse, high or higher, low or lower etc.[/quote][/QUOTE]

Fine.

You just said "we can rank it for better or worse, high or higher, low or lower etc." So what can't we do that for people in general?

Wealth does not increase the size of the marginal unit when you are comparing the marginal utility of an extra $100 in income.

How do you figure? Or are you once again resorting to baseless insults because you have nothing valid to argue?

If we are trying to decide what tax rate the billionaire should pay on his next $100 of marginal income versus what the starving man should pay on his next $100 of marginal income, why wouldn't you use $100 as the unit?

I thought you supported taxing the crap out of billionaires?

If we are talking about the marginal utility of $100 to a billionaire versus a starving man, that is not the discussion of marginal utility? What in your view is it the discussion of?

How is me giving my opinion what it means any different than you giving your opinion what it means?

Nope. Iriemon. That is my handle.

So if you have x amount of utility from y amount of money, and then you have y+$100 amount of money, is not the marginal utility that additional actual utility that is added from that marginal addition of money?

You keep saying this. What exactly does that mean. What does " rich man perceives a given amount as the marginal unit" mean? The marginal unit of what? It is meaningless in isolation.

When you are talking about the law of diminishing returns, you are talking about the fact that the same unit provides less utility the more of it someone has.

A marginal increase of $100 to the billionaire has less MU to the starving man, as you have conceded. If that is not the law of diminishing returns, what do you call it?

As you have conceded, the perceived satsifaction gotten from the marginal unit of $100 dollars is very small for the billionaire, and very large for the starving man.

Which is why it makes sense that the billionaire pay a higher tax rate on the marginal income of $100.

Bingo. And he can afford to pay it because the marginal increase of $100 to the billionaire is virtually nothing while it keeps the starving man from starving. Because the MU is so low, the billionaire could pay a 99% tax on it and it wouldn't affect his overall utility much. But a small tax rate on the starving man means he goes without food.

Strawman. He is not a different person. He is the same person. He just has more money. And as you've conceded, now that he is a millionaire, to that same person, that same $100 has far less MU.

Which is why he should pay higher taxes on it.

As you've demonstrated, it's a pretty good argument for a progressive tax! The $100 marginal income to the starving man has very high MU and keeps him from starving. He shouldn't pay a high tax. That same $100 marginal income to the millionaire is so insignificant to him he lights his cigars with them. He doesn't need the additional $100, it has a very low MU, and therefore compared to the starving man, should pay a higher tax rate on it.

It's a pretty good argument you've developed on why MU justifies a progressive tax.

No problem. We don't need to "measure" it. We'll just make presumptions about rankings for comparison purposes.

And we both now agree that the ranking of MU of $100 to the starving man is far higher than to the billionaire.

Not if the marginal unit is the same, as you and Reisman concede. And for tax purposes as to what rate of tax should be paid on the next $100 of income, it is.

You've already concede it is. Sorry. You don't get to go back and pretty that $100 has a high MU to a billionaire than a starving person. We are well past that.

You and I weren't discussing anyone. Which is why it was strange that you used the pronoun "we" when you were talking about "your" argument.

We may not need it, but we've established why it is a good argument for it. Apologies to Reisman. He can come in and explain why we are wrong if he wants.

Why isn't it a good argument for it?

We wouldn't, because as you have conceded, $100 marginal income to a billionaire has a far lower MU than it does to a starving person.

No one could logically disagree with that point, right?

Why? If we want to compare the marginal utility of $100 to the starving person to the billionaire, why do we care what marginal unit the billionaire might choose?

 

LOL -- I'm sure you didn't mean to actually make it a point of discussion, but it's a good point. The marginal value of a kidney is less than the marginal value of a heart. You have two kidneys. You could lose one and you'd lose some MU. But lose your one heart and utility pretty much goes to -0-.​

 

The redundancy in kidneys is why I mention it. Marginal utility is offered as a reason why it might be fair to take from a wealthy man to give a less wealthy person what he "needs." When folks make that argument I think of kidneys.

There are folks with zero kidneys. Some have only one. Others have an extra kidney of marginal utility. Marginal utility is an academic game some play to excuse what should be a crime. That false entitlement leads to a bad end.


​

 

Of course, it is only one of many arguments on the issue. There are many other justifications for a progressive tax, and some against it.

But having said that, if we look at an objective of maximizing overall utility, the law of diminishing returns is an argument favoring progressive taxes.​

 

That is interesting! You are saying Reisman did not say Galbraith was wrong, is that it? Here are his words, "It is necessary to stress this point in view of the misconception spread by Galbraith that increasing wealth, and the consequent fall in the marginal utility of a unit of wealth, makes the pursuit of wealth progressively less important."

Really now, are you seriously saying Reisman did not say Galbraith's opinion was NOT a misconception?

 

You explained your opinions, not what he said. His sentences were not ambiguous to anyone who can read English. Will you please go point by point and tell us what he actually said without interjecting with your opinion? At this point I know what your opinion is, I just keep wondering how you can so terribly interpret what Reisman said.

- - - Updated - - -

I agree!

 

Finally, you have to admit you do not have a clue as to the value of a marginal unit of wealth would be for me. The same thing is true for anyone else. No one can know that but the individual player.

What I have conceded, right from the beginning, is, when someone besides the player suggests a marginal unit smaller than the player himself would consider it will always skew the argument toward a diminishing marginal utility. Just like you just did. It proves my point completely. The rich man DOES NOT HAVE TO BE SATISFIED WITH A SMALL MARGINAL UNIT, EVEN ONE WHICH WOULD BE VERY GOOD FOR THE POOR MAN.

 

I have owned his book since before the internet created the forums for people like you to come on and post garbage. Not a single word in his book contradicts my position.

OK smart guy, tell me what he means by this: " In this way, increases in the ability to produce raise the marginal utility of additional wealth along with providing it." Do you actually believe he is saying that the marginal utility of additional will diminish?

 

No, my little smilies were laughing at your inability to understand. I could absolutely make the argument you deny.

One can only do it based on the tendency of human nature, and only the player knows for sure.

And I agree with that. You are learning. Keep it up. We can't measure it empirically but we can rank it for better or worse, high or higher, low or lower etc.

I do, but not with phoney justification by claiming their marginal utility of money always diminishes.

It is a useless discussion if trying to compare two people and their personal sized marginal unit or the marginal utility of that unit.

There is no difference, but I asked you to answer some simple questions about what the writer of those quotes was saying; not my opinion or your opinion. Neither you nor Goober has done that yet.

It could be the marginal utility or the actual utility depending on how you phrase it. If you are talking about what the poor man needs feed himself it may be the actual utility. If you are talking about how the poor man FEELS ABOUT ITS SATISFACTION it would be the marginal utility.

 

Here Is What Prominent Readers and Publications Say About
CAPITALISM: A TREATISE ON ECONOMICS

"Reisman's exposure of modern mercantilist fallacies takes its place alongside that of Adam Smith."

- James Buchanan,
Nobel Laureate in Economics, 1986

"A magnum opus on the nature of capitalism, one that has depth, breadth, foresight and style. It is a book on economics that stands head and shoulders above all others as a monumental tribute to the human capacity to engage in productive work and the moral worth of a system of principles wherein such work is fully appreciated. While detailed and touching on nearly every possible nuance of the subject, this is a very readable book which anticipates all the questions and objections educated, thoughtful people may have about an economic system that has not been given its full and proper due by anyone before Reisman took up the task. Ludwig von Mises would be gratified to know how one of his students has carried forth the task he began."

- Tibor Machan,
Professor of Philosophy,
Auburn University

"Reisman develops powerful and highly original theories of aggregate profit and interest, savings and capital accumulation, wages, and aggregate economic accounting. At once an introductory, intermediate, and advanced text, as well as a mine of information on current political and economic issues, Capitalism advances economic theory by several leagues and paves the way for a genuine twenty-first century liberalism."

- Jerry Kirkpatrick,
Professor of Marketing,
California State Polytechnic University

"Reisman's Capitalism is the most rigorous and relentless case for laissez-faire capitalism written in our time. It is both a brilliant rebuttal of the charges against the market order and a discerning master plan for the restoration of capitalism."

- Hans Sennholz,
President,
Foundation for Economic Education

"Reisman has compiled one of the best defenses of the economics and morality of liberty I've seen written in recent years."

- Walter E. Williams,
Professor of Economics,
George Mason University

"For two full academic years prior to its publication I had the fortunate opportunity to use working manuscripts of Capitalism as primary readings for my graduate business economics classes at Johns Hopkins University. The student response has been overwhelmingly positive. Capitalism's value as a treatise that provides a comprehensive, logically consistent view of the economic world cannot be overstated. It is brilliantly structured and offers the best integration of important new economic insights and time-tested truths available anywhere."

- Robert D. Miller,
Lecturer
Johns Hopkins University

"The most important tome about Austrian economics since Ludwig von Mises' Human Action and Murray Rothbard's Man, Economy, and State."

- 1997 Foundation for Economic Education Book Catalogue

"A sweeping and compelling case for the free market, which, as Professor Reisman shows, is the key to civilization."

- Llewellyn H. Rockwell, Jr.,
President,
Ludwig von Mises Institute

"There are only a few truly great economic classics. Reisman's Capitalism takes its place among them as the leading defense of capitalism. . . . Reisman has taken a complex subject and made it understandable. In my experience, students who have read this work come away believing that economic principles are important and that economics actually makes sense."

- George A. Mangiero,
Associate Professor of Economics,
Iona College

"George Reisman's Capitalism is probably the most remarkable textbook written by any economist in this century. It is a book that will broaden the horizons of economics students at the same time that it challenges and provokes their professors. It is, quite simply, must reading for anyone interested in economics."

- Larry J. Sechrest,
Associate Professor of Economics,
Sul Ross State University

"George Reisman has written a profound, often brilliant work, full of fascinating and valuable insights, wisdom and vision. It is seldom that I find myself underlining or putting exclamation points in the margins of nearly every page of a book. . . . I have learned much from Reisman's magnum opus and recommend it highly to all readers who want to expand their vision of economic reality."

- Mark Skousen, Adjunct Professor of Economics and Finance
Rollins College

"A synthesis of Austrian and classical economics, including refutations of all the leading fallacies of our era."

- Liberty Tree Review and Catalog

"Dr. Reisman has accumulated new evidence, building on Adam Smith and von Mises to give us the economic masterwork of our age. . . . Capitalism is meant to be a lifetime companion."

- Conservative Book Club

"An expositon and defense of capitalism on a par with those of Mises and Hayek . . . ."

- The Free Radical

"Reisman's ringing manifesto for laissez-faire capitalism free of all government influence is at once a conservative polemic and a monumental treatise, brimming with original theories, that is remarkable for its depth, scope and rigorous argument."

- Publishers Weekly (click to see the full text of this review)

"Overall, Capitalism is a book you would want in your library if you want to know what a consistent, intelligent advocate of capitalism would say on almost any economic issue."

- Fortune http://www.capitalism.net/Fortune Review of Capitlism.htm

"Reisman offers the most comprehensive defense of capitalism ever written. . . Capitalism is a classic."

- The Freeman ..http://www.capitalism.net/freeman.htm

http://www.amazon.com/gp/product/customer-reviews/0915463733/ref=cm_cr_dp_pt/002-1597675-4955244?_encoding=UTF8&n=283155&s=books

Goodnight!

 

I read it (being a native English speaker) that the part he disagrees with is "makes pursuit of wealth progressively less important".
Obviously increasing wealth is the situation he's speaking of, "the consequent fall in the marginal utility of a unit of wealth" Reisman seems to accept as a given.

 

I suppose. But once you accept that argument for seizure of private property as needed, the illusion that any private property exists is shattered. Makes me think of kidneys again.​