Numerical Determination of the Laws of Utility
Numerical Determination of the Laws of Utility is the title given by Jevons (Theory of Political Economy, 2nd edn, p. 158) to an operation which he, like Gossen, regards as possible – the ascertainment of the form of demand curves by statistics of prices and consumption. It may be objected to this phrase, that laws of utility cannot be deduced from laws of price, except on the assumption that price is the measure of utility – the Marginal Utility of money being constant (see “ Final Degree of Utility). But, even upon this assumption, there are great difficulties in the way of the statistical operation. First, the utility derived from a set of articles is in general not the simple sum, but some unknown function, of the utilities derived from each. Thus the amount consumed of any one article will vary with the prices of others – especially of those which are substitutes for the one under consideration, as tea is for coffee, or complementary to it, as bats are to balls. Accordingly, to observe the changes in the demand for an article corresponding to the changes in its price is apt to be nugatory unless it can be assumed that the prices of all other articles are constant. Again, utility is not only a complicated function of the amounts consumed, but a variable one, changing its form with every vicissitude of taste and fashion. Professor Marshall has pointed out these and other difficulties (Principles, bk. iii, ch. iii), and attempted to evade them (ibid., last section).