Gossen's Law as one of the fundamental postulates of the marginalist theory of the development of society

German Henry Gossen (1810-1858) received a law degree, and at the age of 37 retired and devoted himself entirely to economic science. He is the author of a single work, published in 1854, and in the same year seized from the sale because of a complete lack of demand.

The emergence of a new concept in the economy

By the efforts of the French economist Walras and the English philosopher-logic Jevons, a book that did not bring the author any fame or fortune, accidentally found in the library, was republished in 1927. This work was declared the beginning of the emergence of a completely new original approach to the basics of political economy, in particular, to explaining the utility of all consumed goods, their impact on demand. The author was recognized as the founder of the new concept. This theory completely rejected the basic concepts of classical political economy, where the capitalist producer was the main engine of progress that gave impetus to the development of society, and "vulgar" bourgeois political economy completely neglected production and focused on consumption. It was called vulgar by K. Marx, because the approach of the representatives of this school to the basic laws of the economy dictated the class limitations of their outlook. The change in concepts, approaches, interpretations, the main provisions of the economy was devastating. It deserved the definition of "revolution".

Merit of Gossen

Gossen developed and economically justified the theory of marginal utility and its main provisions. One of the main postulates was called followers: Gossen's law. The author's significance in the world of economics has grown so much that in 1997 his name was established with a face value of 10,000 euros. It is awarded, like the Nobel Prize in economics, for discoveries or brilliant theories in this field, the ultimate goal of which is the improvement of the life of any society or of humanity as a whole.

Contents of the basic postulates

Gossen's laws can be summarized as follows. The essence of the first: if the consumption of something is continuous in a certain period of time, then the value of each next portion will fall in relation to what has already been consumed. On the example of food - the value of the last piece (if the food is enough) is zero.

The essence of the second law boils down to the following: the best design of demand (consumption) is obtained by the correspondence of the marginal degrees of expediency of all available goods. Again, with food as an example, the main course and garnish should be combined in such quantities and for such money that their consumption will bring the maximum benefit.

The first and second laws of Gossen contributed to the further development of economic thought, formed the basis for pricing, explained certain provisions of the market economy, they are used for mathematical calculations of capitalist demand and supply. There is an opinion that the laws explained an incomprehensible provision until then on why in general a useless diamond is incomparably expensive compared to the water necessary for human life.

The theory of marginal utility

The first law of Gossen reflects the following proposition: if there are many benefits, then they are depreciated. He argues that if consumption of the public good increases, overall utility increases, but marginal utility decreases. All his conclusions Gossen justified mathematically with the help of algebraic calculations and schemes. Therefore, representatives of the mathematical school (political economy) consider it their direct predecessor.

At first, Gossen's law was comprehensive, that is, all human feelings and needs fell under its influence. Then this absolutism was revised, because in certain cases the effect of the law of diminishing utility brought quite opposite results. It was concluded that it is applicable only to a rather narrow range of necessary consumer goods (available food), and enjoyment is not subject to this law at all.

The interpretation of the Gossen theory

Representatives of various schools of "vulgar" bourgeois political economy argued that the law of Gossen helps the competent leader to ensure the growth of industry. This is as follows. If the marginal utility of any given good is higher than others, then the expansion of its production becomes profitable and necessary, the market is saturated, the value of the ultimate utility falls in relation to other types of goods, and their production becomes necessary. Then, because of the lack of the first good on the market (since its production was reduced), it becomes an urgent necessity. All this stimulates the growth of industrial production.

And here the law of Gossen comes into force, which is also grounded in mathematical calculations, has its own equations and schemes, including the "indifference curve". It consists of two options. The first examines a self-sufficient unit of management (subsistence farming), placed in conditions of strict isolation. The purpose of the experiment is to establish the necessary reasonable production and consumption of goods.

The next version of it provides for the existence of a certain subject with a specific amount of money, and the prices set in a commodity economy. That is, the limits of consumption of goods are prices and a purse. The goal is to find the optimal amount of goods available in these conditions, by means of samples, capable of delivering the maximum satisfaction to the individual.

The followers of Gossen placed these laws in the basis of demand and pricing calculations. If we consider this postulate on the example of a week's ration of a certain person, then with the total number of purchased products, the last portions will have an equal marginal utility, be it a delicacy or bread. This law was called the second law of Gossen.

Criticism of theory

The main criticism of the theory developed by Gossen and her basic postulates emphasizes the subjective-idealistic approach to the distribution and consumption of goods, considering them the basis for the development of society. At the same time, production and its social essence are completely ignored. With regard to the "vulgarity" of the marginal utility theory, K. Marx gave an example of the choice of utility between an apple and a violin. He considered the impossibility of even posing such a question within the limits of common sense.