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July 26, 2016 at 10:14 pm #18744
Just started reading MAN,ECONOMY AND STATE.
Rothbard states that one can’t quantify happiness.
But what if a person finds happiness solely in making money. Would not a doubling of his salary make him twice as happy?July 28, 2016 at 3:43 pm #18745
There are two theoretical issues raised by your question.
1. No units of happiness, utility, or other states of mind exist. While one can understand the meaning of the claim that $2,000 is twice $1,00, one can’t make sense of the claim that one state of mind is twice another.
2. The law of diminishing marginal utility states that the subjective value of the first unit of a good is preferred to the subjective value of the second unit of a good, and so on. So, the happiness a person attaches to the first $1,000 is higher than the happiness of the second $1,000. Twice as much money, then, would not make a person twice as happy (assuming it makes sense to say “twice as happy”).August 1, 2016 at 9:04 pm #18746
Thank you for your response.
But this is what I feel: If I have 1 million dollars saved for retirement I feel secure. If I have 2 million dollars saved I would feel much more secure, approximately twice as secure. If I had 3 million I’d feel approximately 2.5 times more secure. So I see the point of diminishing marginal utility .
I wonder about units of states of mind, could funniness, a joke, be measured by the number of laughs? Could sadness be measured by the number of tears or sobs?August 2, 2016 at 12:19 pm #18747
There is an unbridgeable gap between the experience of a person’s mind and the circumstances external to the mind. Laughs, tears, heart rates, neural firings, and so on are not the mind’s experience. Since the mind’s experience cannot be quantified, no quantitative correlation can exist between the mind’s experience and circumstances external to the mind.
It is possible, however, to make judgments concerning the magnitude of effects (even though they are non-quantifiable theoretically). Such is the procedure of history, as opposed to theory.
Take a look at Mises’s book, Theory and History, for a discussion of the distinction:
https://mises.org/library/theory-and-history-interpretation-social-and-economic-evolutionAugust 2, 2016 at 9:34 pm #18748
Thank you, I am taking my time getting through Man,Economy and State, hopefully after that I will move on to other books by Rothbard and Mises.
Regarding diminishing utility, what would be the Austrian position on saving for a purchase? If I earned and saved $100 per week toward a $1000 vacation, I would consider each consecutive $100 equal in utility, actually I might even perceive each successive $100 as increasing in utility.August 3, 2016 at 4:59 pm #18749
In a given action, the person chooses the amount of a good that he believes is suitable to the attainment of his end. That amount we call the “unit of the good.” So, in your example, the unit of money is $1,000. If your vacation was the highest-valued use of $1,000 for you and you had another end that could also be satisfied with $1,000, then the second unit of $1,000 would be less highly ranked by you than the first unit of $1,000.August 5, 2016 at 6:23 am #18750
Thank you.August 9, 2016 at 10:06 pm #18751
Just got to p.74 of man,economy and state. Rothbard makes the same point you did above, he used the egg/cake analogy.
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