suppose a consumer buys a Van Gogh painting and then he has some money left and buys another painting, this time by some lesser known artist. Do the two paintings count as the same type of good or as different goods? Does marginal utility apply here?
it seems to me that the question whether something is the same type of good depends on the subjective valuation of the consumer, but if that is the case then a DVD or a microwave could also be the same type of good depending on the person’s subjecrive valuation.
Or am I misunderstanding the theory of subjective value and does it not apply to the type of good something is (for which physical or functional characteristics are used to identify them as such) but purely to the comparison the consumer makes between that specific good and any other good?
The physical characteristics of a good do not matter in regards to economic analysis. An individual may have to almost identical goods which he values completely different. Likewise, an individual could regard two completely different goods as the same good. Goods are merely the means an economic agent uses to reach his goals. As such all that matters is that he believes that they will allow him to reach his subjectively valued ends.
An example would be an individual who didn’t care at all about the quality of the picture on a TV, and just required it to watch one movie. For him there might be no difference between any TV on the market.
On the other hand an individual may have two identical apples, provided he believes one will taste better, or is luckier or whatever than the other he will value it more highly.
okay, but then the idea of marginal utility becomes somewhat vague, no? or am I misunderstanding it in the sense that it necessarily is a subjective and hence ‘empty’ concept so that DVD’s, vases, computers etc. could all have the same use (e.g. throwing at the tax collector) so that if first you buy a DVD to throw at the guy, then a vase, then a computer these would then all constitute the same subjectively valued good?
and then in sort of the regular economic market because people, empirically speaking, tend to have rather specific demands for given needs the goods falling under a given instance of diminishing marginal utility tend to be physically similar as well (e.g. a carrot and then one more and then still one more. whereas if the valuation would be solely based on being able to nibble on something it could also have been a bread stick or a cucumber or a remote control or a book)
so then for example in the case of scientific ideas, it could be the case that the discovery of some subatomic particle, and a theoretical breakthrough could both be instances of the same diminishing marginal utility if for example a sponsor first finances a production process that leads to the discovery of the subatomic particle and then thinks to himself ‘I’m gonna have me still some more of them physics insights’ and then sponsors some theoretical work. Then the subatomic particle and the theoretical breakthrough (in that order) are instances of the same diminishing marginal utility under the general subjective concept ‘cool stuff in physics’
I think you’re understanding it correctly, but I don’t see what you feel is vague about this concept. It is completely opposite of vague, it is a precise observation of how goods are valued. I know of no other economic theory that is so precise when describing goods, yet I know many that are vague, calling all consumer goods “mass-produced goods like sugar or bread” and all cars “semi-differentiated” goods, even though these classifications can not be applied universally.
yeah, I guess I understand the logic and also why it is the way it is, but it makes the standard supply and demand stuff somewhat simplistic, and one sort of has to assume that subjective valuations are similar enough when one draws those.
Okay, so in terms of the production of scientific ideas there is an intrinsic necessity for them to be novel somehow. here ‘novel’ is used in an epistemic sense. my first temptation was to say that this means that e.g. supply and demand curves etc. cannot be had because of this, but then I think I am mixing the epistemic category with the praxeological category (subjective valuation of goods). it doesn’t matter that from an epistemic perspective there is constant novelty because consumers of science may subjectively consider different epistemic results as the same type of good, so that subjective marginal utility applies.
but then unlike in the regular economic market it is a lot harder to, for the sake of the diagram, assume that the subjective valuations are similar enough so that one can draw supply and demand graphs, and this is because of the intrinsic novelty involved