Gossen's laws
Gossen's laws, named for Hermann Heinrich Gossen (1810 – 1858), are three laws of economics:
- Gossen's First Law is the "law" of diminishing marginal utility: that marginal utilities are diminishing across the ranges relevant to decision-making.
- Gossen's Second Law, which presumes that utility is at least weakly quantified, is that in equilibrium an agent will allocate expenditures so that the ratio of marginal utility to price (marginal cost of acquisition) is equal across all goods and services.
- where
- is utility
- is quantity of the -th good or service
- is the price of the -th good or service
- Gossen's Third Law is that scarcity is a precondition for economic value.
The citation referenced is the translation by Nicholas Georgescu-Roegen in which the traslator names only two laws: 1) ”If an enjoyment is experienced uninterruptedly, the corresponding intensity of pleasure decreases continuously until satiety is ultimately reached, at which point the intensity becomes nil." and, 2) "A similar decrease of the intensity of pleasure takes place if a previous enjoyment of the same kind of pleasure is repeated. Not only does the initial intensity of pleasure become smaller but also the duration of the enjoyment becomes shorter, so that satiety is reached sooner. Moreover, the sooner the repetition, the smaller becomes the initial intensity as well as the duration of the enjoyment." (p.lxxx)
See also
References
- Gossen, Hermann Heinrich; Die Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fließenden Regeln für menschliches Handeln (1854). Translated into English as The Laws of Human Relations and the Rules of Human Action Derived Therefrom (1983) MIT Press, ISBN 0-262-07090-1.