Fephisto wrote:
A) the law of marginal utility is only talking about the nth v. n-1st goods. Action can determine a preference between two objects (nth v. n-1st). Thus a weak form of a subjective value theory (SVT) is all that’s really needed.
B) What I was originally thinking was the following. If marginal utility says that successive units of a good is applied to ‘less urgent’ ends, i.e. less-preferred ends, then I would have to be able to rank all of those possible ends. E.g., if 3 eggs goes to end C, 2 eggs to end B, and 1 egg to end A; the law would imply A>B>C.
Fephisto:
I’m not sure you’ve solved the problem. Because the law of marginal utility as typically formulated does indeed entail the expression “less urgent” (or “less valuable” or “less utility,” etc.) as you indicate in B and you’ve removed reference to that notion in your solution A above. If you’ve solved the problem, you should be able to insert the phrase “less urgent” or “less valuable” or “less utility” in A above, applied to a situation where the actor’s supply of homogeneous units changes from n to n-1.
Would your friend be willing to post on the forum why he/she believes that the law of marginal utility requires a strong form of subjective value theory?
Here is what I believe to be the essential problem. I will be using Mises’s conception of the law of marginal utility, Human Action, 3rd rev.
Mises conceives that those things are valuable to us that we choose to do or choose to obtain or attain.
“The assignment of orders of rank through valuation is done only in acting and through acting.” (p.120)
What Mises means is that the value assigned to object X is assigned by my acting in regard to it; either my doing X, or attaining X. My statement to Bill that I value X, or that I plan to do X or plan to obtain X in the future doesn’t count as “valuing” X for Mises in the scientific sense.
“What counts is a man’s total behavior, and not his talk about planned but not realized acts.” (p.13)
“…this overlooks the fact that the scale of value [the plan] is nothing but a constructed tool of thought. The [actual] scale of value manifests itself only in real acting.” (p.102)(bracketed added for clarification)
In regard to the law of marginal utility, this sets up a problem. If value is assigned to something by my doing or utilizing that thing, then, strictly and rigorously speaking, I can only compare the values of things I have done or utilized. When we say that X weighs less than Y, what we mean is that we have weighed X and we have weighed Y. In the same vein, when in the law of marginal utility we that X is less than Y in some sense, this must mean that we have subjected both X and Y to the same process and then compared the results. If X is valued less than Y, then we can only say this if we have “valued” both X and Y and compared the results, and as Mises conceives things, we can only value X and and value Y by choosing or doing both X and Y.
This explains why Mises struggles with the law of marginal utility in Human Action.
For example, Mises writes:
If the supply decreased by the loss of one unit, acting man must decide anew how to use the various units of the remaining stock. It is obvious that the smaller stock cannot render all the services the greater stock could. That employment of the various units which under this new disposition is no longer provided for, was in the eyes of acting man the least urgent employment among all those for which he had previously assigned the various units of the greater stock. (p.122)
Note that Mises does not begin with the statement that the actor has employed one unit, but instead begins by writing that the actor’s supply “has decreased” by one unit. This denotes a situation in which an actor has a supply that decreases by one unit by our assumption, but not by an act on the part of the actor.
In the second part of the passage, Mises then writes: “That employment of the various units which under this new disposition is no longer provided for, was in the eyes of acting man the least urgent employment among all those for which he had previously assigned the various units of the greater stock.”
Mises now discusses this same unit in terms of the actor’s employing it toward some purpose, i.e., in terms of an act on the part of the actor.
What’s going on here? We can see the problem if we rewrite Mises’s opening sentence:
“If acting man employs one unit of his supply, then acting man must decide anew how to use the various units of the remaining stock.”
The problem is that if the law of marginal utility is written in this way, it becomes obvious that we are referring to two actions, and that the value comparison entailed in the law of marginal utility (implied in the expressions “more/less,” “greater/lesser,” “higher/lower,” etc.) is based on the comparison of two actions.
I believe that in his explanation of the law of marginal utility, Mises may be trying to avoid explaining it in terms of two actions because he knows that it is inconsistent with his own theory to compare two separate instances of valuing with respect to their intensity, urgency, etc. The comparison of two different instances of valuing would be a thymological and not a praxeological matter.
If he simply writes “if acting man employs one unit of his supply,” which is the simple and uncomplicated expression, this leads to two actions and an explicit comparison of two acts of valuation, something Mises wants to avoid.
Here is another example:
“The satisfaction which he derived from the use of one unit for this employment was the smallest among the satisfactions which the units of the greater stock had rendered to him.” (p.123)
Mises writes that the use of one unit provided a satisfaction to the actor and that the units of the greater stock also provided satisfactions to the actor. Then we should be able to write plainly:
“The satisfaction which he derived from the use of one unit was the smallest among the satisfactions which he derived from using the units of the greater stock.”
The difference may be subtle, but the implications are significant. In Mises’s phrasing, the actor only performs one action; the act of employing a single unit. The same actor derives satisfactions from the units of the greater stock, not by any action of his own, but by virtue of the stock “rendering” satisfactions to the actor. This allows a description in terms of only one act of the actor, and avoids the issue of comparing two acts of valuation directly or explicitly in terms of two acts of the actor.
Consider this explanation of the law of marginal utility by Mises:
There are only two alternatives. Either there are or there are not intermediate stages between the felt uneasiness which impels a man to act and the state in which there can no longer be any action (be it because the state of perfect satisfaction is reached or because man is incapable of any further improvement in his conditions). In the second case there could be only one action; as soon as this action is consummated, a state would be reached in which no further action is possible. This is manifestly incompatible with our assumption that there is action; this case no longer implies the general conditions presupposed in the category of action. Only the first case remains. But then there are various degrees in the asymptotic approach to the state in which there can no longer be any action. Thus the law of marginal utility is already implied in the category of action. It is nothing else than the reverse of the statement that what satisfies more is preferred to what gives smaller satisfaction. (p.124)
Here, Mises attempts a short proof of the law of marginal utility. He writes that the reason there must be intermediate stages or various degrees leading up to the state in which there can no longer be any action is because we assume there is action, which rules out the case in which the actor performs one action and then ceases to act. Here, in using the terms “intermediate stages” or “various degrees” it appears Mises is trying to arrive at a theoretical justification for the notions “more versus less” or “smaller versus larger” in the context of his own theory.
Essentially he reasons that there must be intermediate stages or various degrees because in holding that there is action, we rule out the case in which there is only one action. He doesn’t bring up for discussion the assumption that there are two or more actions.
For some reason he never mentions what seems obvious: the assumption that for every instance of the actor’s felt uneasiness there is a corresponding action. In his discussion of the law of marginal utility, Mises seems to avoid any explanation that explicitly refers to two or more actions. I believe this is for the reason already given.
Mises is well aware of the idea that in formal praxeology, the assumption of an action implies a corresponding “need” or “uneasiness” and vice versa.
“However, we can never identify the want otherwise than in the action. The action is always in accord with the want because we can infer the want only from the action.” (Epistemological Problems of Economics, 1976, p. 80)
"It was forgotten that we are able to infer the need only from the action. Hence, the idea of an action not in conformity with needs is absurd. (p. 149)
Mises realizes that in formal praxeology, to suppose a need (a felt uneasiness) is to suppose an action and vice versa.
In his attempt to prove the law of marginal utility, he refers to the notion of intermediate stages, but it is not clear what these intermediate stages consist of. The problem is that if we try to clarify the nature of these intermediate stages by explicitly writing “intermediate stages of valuing” or “intermediate stages of dissatisfaction” or “intermediate stages of utility” this will introduce the notion of several actions unambiguously, and lead to the question of comparing the values of several actions.
Finally, there is another praxeological issue with the law of marginal utility. In Misesian praxeology, the categories of action are to be understood as cateories that apply to each and every action. As Mises writes:
“There is no action in which the praxeological categories do not appear fully and perfectly. There is no mode of action thinkable in which means and ends or costs and proceeds cannot be clearly distinguished and precisely separated” (p. 40)
“The teachings of praxeology and economics are valid for every human action…” (p. 21)
“And for every concrete action all that is rigorously valid which is categorically established with regard to action in general.” (p.198)
Mises also writes:
“Thus the law of marginal utility is already implied in the category of action.” (p. 124)
This seems to mean that the law of marginal utility is to be conceived as applying to each and every concrete action in the sense indicated in the passages above. The problem is that the law of marginal utility as explicitly formulated applies only to those actions in which an actor possesses a supply of homogeneous units and either attains an additional unit or employs one of his possessed units. There are many actions that do not fit this description.
Writing in The Economic Point of View, Kirzner distinguished between the economics of Mises and that of Robbins. Kirzner wrote that whereas Robbins conceives that economics has to do with a recognizable pattern of allocation of resources on the part of the actor, Mises’s praxeology is wider and more fundamental because Mises’s action, as opposed to Robbins’ economizing, does not depend on a recognizable pattern of allocation, but is based on the more fundamental notion of conduct directed toward a purpose. (p. 161-162)
Along the same lines, action that entails relinquishing one unit from a homogeneous supply, or that entails adding one unit to it, is less universal than action aiming at a goal generally. This implies that the law of marginal utility as typically and historically formulated is not a praxeological law since it doesn’t apply to each and every action. What the law of marginal utility describes is not clearly and precisely distinguishable in each and every action.
If the above reasoning holds, this means that the law of marginal utility as historically formulated is thymological in nature. This is consistent with what has been argued above because the comparison of two instances of valuing taken from two separate actions is a thymological and not a praxeological matter.