Irish Liberty Forum

More Marginal Utility

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I was going over my post on Happiness Economics and Marginal Utility and I had a few more ideas. Perhaps I was wrong in saying that “We simply cannot perform [a comparison of value scales of different people]”.

Take for example an auction of a house between several bidders. Each bidder verbally expresses a price that he is willing to pay for the house. More and more people are pushed out of the bidding. This is the final result of the bidding:

(A) Auction winnner: €300,000

(B) Second place: €290,000 …

We know that person A values the house at €300,000 or more, while person B is unwilling to pay that amount. We can assume the auction price went up in incriments of €10,000. Now we can compare the value scales of person A and B with respect to the house. We would be perfectly correct in stating “Person A values the house more than person B”.

But notice that we did not use marginal utility here, and it’s pretty obvious that any redistributionist arguments cannot possibly rest on marginal utility theories alone.


Written by 20000miles

March 29, 2009 at 2:03 am

Posted in economics

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