Herman Heinrich Gossen (1810-1858) received a law degree and 37 years of age, he retired and devoted himself entirely to economic science. He is the author of a single work, published in 1854, and in the same year withdrawn from sale due to complete lack of demand.
The Efforts of the French economist Walras and the English philosopher Jevons logic, the book which brought him neither fame nor wealth, accidentally found in the library, was reprinted in 1927. This work was declared the beginning of the emergence of a completely new and original approach to the basics of political economy, in particular, to the explanation of the utility of all goods consumed, and their impact on demand. The author recognized the founder of the new concept. This theory is totally rejected the basic concepts of classical political economy, where the main engine of progress, which gave impetus to the development of society, was the capitalist-producer and the "vulgar" bourgeois political economy is completely ignored production and at the forefront were put the consumption. Called vulgar it was Karl Marx because the approach of this school to the basic laws of Economics dictate class limits to their horizons. The change in concepts, approaches, interpretations of the main provisions of the economy was devastating. It deserved the definition of "revolution."
Gossen developed and economically substantiated the theory of marginal utility and its main provisions. One of the basic postulates were called followers of the way: the law of Gossen. The importance of the author in the world economy has increased so much that in 1997, the award was established in his name with the value of 10 000 euros. It is awarded as Nobel prize in Economics for discoveries or brilliant theories in this field, the ultimate goal of which - improving the lives of any society or humanity as a whole.
Briefly the laws of Gossen can be summarized as follows. The first: if the consumption of anything will be continuous in a certain period of time, the value of each portion will fall at have already been used. For example, the food - value of the last piece (if food will be in abundance) is equal to zero.
The Essence of the second law boils down to this - the best design demand (consumption) is obtained according to the limit degrees of appropriateness of all available benefits. Again, the example of food - main dish and side dish must be combined in such amounts and for such money so consumption them to give maximum benefit.
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First and second laws of Gossen contributed to the further development of economic thought, formed the basis of the pricing explained certain provisions of the market economy, they are used for mathematical calculations of the capitalist supply and demand. There is an opinion that the laws were obscure to explain the situation about why, in General, useless diamond is incomparably expensive compared to the necessary for human life is water.
The First law of Gossen reflects the following situation: if a goods lot, they depreciate. He argues that if the consumption of the public good increases total utility but marginal utility decreases. All your insights Gossen justified mathematically using algebraic calculations and diagrams. Therefore, the representatives of the mathematical school (political economy) as its direct predecessor.
First law of Gossen was comprehensive, that is, under its scope to encompass all human feelings and needs. Then this absolutism has been revised, as in certain cases the action of the law of diminishing utility brought absolutely opposite results. It was concluded that it applied only to a rather narrow range of essential consumer goods (available food) and enjoyment do not fall under this law.
The Representatives of different schools of "vulgar" bourgeois political economy argued that the law of Gossen helps competent supervisor to ensure the growth of the industry. This happens in the following way. If the marginal utility of any provided benefits above others, and the extension of its production is profitable and necessary, the market is saturated, the value of the final utility falls relative to other types of benefits, it becomes necessary to their production. Then due to lack of first benefits on the market (as its production was reduced) it is needed. All this stimulates the growth of industrial production.
And here comes into force the law of Gossen, which is also justified by mathematical calculations, the equations and the scheme, including a scheme of "indifference curve". It consists of two options. The first is considered self-sufficient unit of farming (subsistence farming), placed in lockdown. The purpose of the experiment is to establish reasonable production and consumptionbenefits.
The Following variant provides a specific subject having a specific amount of money, and set prices in a commodity economy. That is, the limiters of consumption of goods are the prices and budget. Goal by trial to find the optimum amount of benefits available under these conditions, is able to deliver the individual with maximum satisfaction.
The Followers of Gossen put these laws underlying the calculations of demand and pricing. If we consider this postulate, for example weekly rations of a specific person, when the total number of products purchased last portion will have equal marginal utility, whether a delicacy or bread. This law was called the second law of Gossen.
The Main criticism of the theory developed by Gossen and its basic postulates emphasizes subjective-idealistic approach to the distribution and consumption of goods, considering them the basis for the development of society. At the same time completely ignored production and its social identity. Against "vulgarity" of marginal utility theory, Karl Marx was an example of the choice of utility between an Apple and a violin. He thought the inability to even put this question in the limits of common sense.
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