# University of Virginia Library

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1. The notion of utility, under whatever form, could
never have acquired its importance in economics
if it had not been for the law that came to be attached
to it. This law, which is known as the Principle of
Decreasing Marginal Utility, simply states that for any
given individual, each additional unit of a commodity
increases utility by a decreasing magnitude.
Curiously,
it was a mathematician, Daniel Bernoulli, who first
formulated the principle (1738). As he tried to solve
Bernoulli was led to argue that the emolumentum
(Latin for “advantage”) of the ducat a gambler gains
is smaller than the emolumentum of the ducat he loses.
Owing to the lack of mathematical interest of the
remained unknown to them for almost two centuries.
So, as far as social scientists are concerned, Bentham
was the first to formulate the Principle of Decreasing
Marginal Utility for the case of money (Principles of
the Civil Code,
1802), and Lloyd (op. cit., 1833) the
first to formulate it for a commodity.

Behind the apparently simple enunciation of the
principle, there lie some strong assumptions and some
intricate issues. The least vulnerable of these assump-
tions is that every commodity is cardinally measurable,
which in common terms means that every instance of
a commodity is a sum of perfectly identical parts (or
units). Obviously, this is not true for a vacation or a
stamp collection, for instance.

The truly vulnerable assumption, that utility, too,
is cardinally measurable (in some fictitious units that
have come to be called “utils”), goes back to Bernoulli
and to Bentham. But Bentham went further and main-
tained that the utilities of all individuals have a com-
mon measure and hence can be added together to yield
the total pleasure of a community, just as the addition
of all individual farm areas yields the total farm area
of a country. Once, he did admit that “you might as
well pretend to add twenty apples to twenty pears”
and even denounced the measurability of the individ-
ual's utility; but he set a lasting pattern for social
scientists in arguing that without the addibility of
different utilities “all political reasoning is at a stand-
still.” Certainly, without this addibility Bentham's
principle of the greatest happiness of the greatest
number becomes vacuous. He therefore had a reason
for dreaming about a “political thermometer.” Vain
though such a hope is, economists have kept looking
for a “welfare function” by which to measure the
welfare level of any economy. Even Alfred Marshall
(1879), in a controversial argument which was first
advanced by a French engineer, J. Dupuit (1844),
claimed that the total utility of any community is
measured by the amount of money its members would
pay for each commodity rather than go without it.

2. Benthamism was so much in the air, both in
England and on the Continent, that (with the notable
exception of Carl Menger) the early writers on utility
followed Bentham's hedonism and equated utility with
the pleasure experienced by an individual during the
act of consumption. This is especially true of Gossen
and Edgeworth and, to some extent, of Jevons. It is
from this position that Edgeworth, with whom hedo-
nism reached its apogee in economics, was able to
defend the cardinal measurability of utility by invoking
the law of sensations enunciated by G. T. Fechner and
E. H. Weber in 1860. Utility is measurable, he con-
tended, because an actual pleasure may be measured
in terms of its “atoms,” i.e., in terms of “just percep-
tible increments” (Mathematical Psychics, 1881). And,
even though not quite in the same vein as Bentham,
Edgeworth expressed his belief in the eventual con-
struction of a hedonimeter for measuring actual pleas-
ures.

But economics could not go on indefinitely with a
notion of utility which implies that the consumer de-
cides whether or not to buy more coffee while drinking
coffee. The modern notion of utility embodies an idea
laboriously outlined by Richard Jennings in an essay
that received hardly any attention at the time (1855).
Utility (Jennings used “value”) is the expression of the
expected pleasure at which the individual arrives on
the basis of his past actual pleasures. However, it is
the unique, yet totally ignored, merit of Gossen to have
perceived that one can go deeper than that. Indeed,
Gossen alone saw that actual pleasure is governed by
a second diminishing principle: Any pleasure dimin-
ishes in intensity and duration with its repetition, and
the sooner the repetition, the greater the diminution.

When all is said and done and utility is taken in
Jennings' sense, the fact that milk tastes better if con-
sumed less frequently has more to do with the Principle
of Decreasing Marginal Utility than the fact that the
intensity of the pleasure of drinking milk decreases as
one is drinking milk.

3. Still another idea of how man values things is that
of Carl Menger (1871), who never accepted the view
that value (by which he meant utility) is measurable.
Menger's position was that man's wants are hier-
archized and that the first unit of an individual's re-
sources has a higher importance than the second be-
cause it satisfies a more urgent need. This simple idea
is, in essence, a nonquantitative form of the Principle
of Decreasing Marginal Utility for any commodity that
may satisfy several wants. Perhaps this is why the first
formulations of this principle, by Daniel Bernoulli and
Bentham, pertained to money, not to a commodity.

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Menger's nonmathematical approach soon died away
under the mathematical landslide caused in economics
by Jevons and Walras. Yet, every time a justification
of the Principle of Decreasing Marginal Utility is
offered in the current literature, it invokes only
Menger's hierarchy of wants.