Satisfying demand: W. S. Jevons and the law of diminishing marginal utility

Type :

Term papers

Pages :

5 pages

Format :

.doc

Published date :

07/29/2009

Category :

Economics & finance

Sub category :

Economics

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Summary :

Introduction
The transition toward neo-classical economics
The Theory of Political Economy
Jevons revolutionized political economic thought
The law of diminishing marginal utility and the utility-maximizing rule
Description and analysis of Jeveons' model
Conclusion
Works cited

Abstract

W. S. jevons' The Theory of Political Economy marks the shift from classical to the development of neo-classical economic theory in the nineteenth century. Classical political economy originated in the eighteenth century as an expansion of moral philosophy, uniting observation of facts with deductive analysis of cause and effect relationships to explain the workings of the economic system [Black, 1970]. The writings of British philosophers John Stuart Mill and Jeremy Bentham combined to produce a theory of utilitarianism that viewed human activity motivated by pleasure, and the maximization of an individual's pleasure while minimizing their pain as the aim of moral philosophy; that is, as the condition of happiness. The realization that people sought pleasure as the good was combined with the work of Adam Smith in The Wealth of Nations to form classical economic theory. Smith found that national wealth depended upon the degree of division of labor, or social stratification, in a given economy which would allow the maximum production of goods by specialized tradesmen. Analyzing economic progress as based on self-interest, or the desire of individuals to increase their own happiness, allowed Smith to posit that natural competition based around market prices determined by supply and demand would create an "invisible hand" to direct social prosperity. By minimizing government intervention in business, which Smith saw as promoting favoritism, the principle of laissez-faire would see competition prevent monopolies and ensure the greatest production of goods and wealth through a capitalist economy.