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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
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
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
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
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.
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