A Critique of Gossen's Fundamental Theorem of the Theory of Pleasure Hermann Heinrich Gossen is generally known as the predecessor of Walras, Menger and Jevons in preparing modern economic analysis. What is generally not known is his Fundamental Theorem as a marginal approach to the labour theory of value. This paper presents his Fundamental Theorem in terms of modern terminology and extends Gossen's hedonistic approach of pleasure and pain to the analysis of marginal labour values based on technical production functions. It is shown that the marginal approach to the labour theory of value underlies modern economic analysis. Gossen's introduction of the concept of marginal pain or labour in his Fundamental Theorem of the Theory of Pleasure is really the revolutionary part of the Marginalist Revolution and it appears to be rather natural that bourgeois and Marxist vulgar economists have ignored it.
Tuning in for the Revolution
In order to prepare us for the Revolution I am going to start up now here are some pictures and I ask you to identify what they are.
What is this?
OK. And this?
And this?
No, this is not a hetero economist! It is Michel Bouquet playing Molière's Malade Imaginaire
And this?
Yes, Yes, This is a pretty Russian Girl. There is no Revolution without the Russians!
Now, what is this?
Yes, that is economics. And THIS IS THE REVOLUTION!
Gossen's Basic View What humans do in their lives is moving. Movments take time and yield pleasure, but with diminishing intensity over time. If a movement continues above the point where it ceases to create pleasure, it creates pain. Humans try to maximize pleasure in life.
Matter and Historical Materialism “The pre-Marxist materialists, i. e. the French materialists of the 18. century defended the proposition of the unalienable connection of matter and movement, movement being the most important property of matter, its form of existence. All appearances were regarded as being subject to natural and unchangeable laws. The materialist philosophers of the past hold the point of view of the absolute perceptibility of matter, of the ability of man to comprehend its properties and laws whatever complicated and unusual they might be. All these principles of the materialist view of the world were taken over by the dialectical materialism and modern natural science ... The atoms were regarded as the original and indestructible component elements of the world which only merge or divide, change their position in space and by this create the whole qualitative multitude of the appearances of the world. In this way the idea of the unchanging nature of the atoms was identified with the idea of matter as the substantial fundamental of the world as well as the philosophical principal of the preservation of matter with the principal of the indestructibility of atoms. ... From this was inferred, if one could succeed to break down the object to be analysed (body) into its atoms, to determine their position and velocity and to specify their movement in an equation, it would be possible to comprehend any possible phenomenon, even the properties of our consciousness and of the social processes." (Grundlagen der Marxistisch-Leninistischen Philosophie, pp. 69-70, my translation).
Gossen's Model
Gossen's Model
Utility and Labour as Functions of a Good
Gossen's Fundamental Theorem
U* = ∑(Ui – Bi) ;
dU/dQi = dB/dQi
From Gossen's Fundamental Theorem to Supply and Demand Functions To reach the optimal quantity to be produced a certain amount of time is needed. The simple assumption is that output per labour time is constant. As there is an unlimited amount of goods to be produced labour time is necessarily the constraint. The Lagrangian for the maximization problem becomes £ = ∑(Ui – Bi) + λ[L0 - Li]
Gossen's Fundamental Theorem with Time Constraint The Lagrangian for the maximization problem becomes £ = ∑(Ui – Bi) + λ[L0 – Li] U*i = Ui – Bi dU*i/dQi = dLi/dQi dU*i/dQi / dU*1/dQ1 = dLi/dQi / dL1/dQ1
Gossen's Supply Function Q/L = constant Constant returns to scale but not necessarily: Q/L = δQ/δL Usually: δQ/δL < Q/L And therefore δL/δQ > L/Q in Gossen: δL/δQ = constant
The Construction of the Gossen Type Demand Function £ = U1 + U2 + λ[L - v1Q1 – v2Q2] ; vi = δL/δQi First Order Conditions: dUi/dQi = λvi L = v1Q1 + v2Q2 Q1 = f(v1, v2, L) This Gossen type function is not invertible.
Gossen Type Supply and Demand Functions
Conclusions The Theory of Pleasure as developed by Hermann Heinrich Gossen is an early example of microeconomic analysis. It is a kind of activity analysis based on physiological functions. Taking Gossen's Fundamental Theorem we have sketched how to derive results of modern microeconomic analysis starting from Gossen's assumptions. In particular we have shown that his physiological labour theory of value leads straight forward to the modern interpretation of the labour theory of value based on objectively determined marginal labour values. Moreover the labour theory of value holds also in the presents of surplus labour which yields rent or profits. This result we may call “The Old Solution”. Coming to the end we should put some emphasize on a particular theorem of Gossen which is obviously true as long as there are people appreciating to having a good time together and it balances out a bit Gossen's ultra-liberal, free-market fetishism, Gossen's Free-Round-Theorem, a theorem ignored so far by all of his critics29. The theorem goes as follows: [4.1] “If a pleasure becomes available to man without his effort, his total life pleasure increases by the entire magnitude of this pleasure.” (Gossen, 1983, p. 59)
In this sense, have a toast on the 200. anniversary of Gossen's birthday: Cheers!
