01 07 11 - 11:34Economics theories work in parallel to natural selection, thought selection and even desire:
The concept of diminishing marginal utility -- i.e. that equal increments of a good / yield diminishing increments of utility -- was already widely known.
Dupuit did not rest his demand curve on empirical intuition but rather identified the demand curve as the marginal utility curve itself. Dupuit's basic idea was this: as quantity rises, the marginal utility of the good declines. Consequently, one should also say that as the quantity rises, the willingness of a person to pay for that good declines.
Unlike Dupuit, Gossen clearly distinguished the marginal utility curve from the demand curve. Gossen posited that demand is derived from the utility-maximizing choices of the consumer. Gossen's "Three Laws" can be stated as follows:
(1) the amount of utility derived from the consumption of a good declines with each additional unit of that commodity (i.e. diminishing marginal utility, or, to use Gossen's term, "diminishing worth of the last atom".)
(2) a person maximizes his utility when he distributes his income among various goods so that he obtains the same amount of satisfaction from the last unit of each good or, if money is being used, he obtains the same amount of satisfaction from the last unit of money spent upon each commodity (i.e. equality of the ratio of marginal utilities to the ratio of prices, i.e. MUi/pi = MUj/pj for any two goods i, j).
(3) a good has value only when the demand for it exceeds supply (i.e. subjective scarcity is source of value).
Of Gossen's three laws, the second is perhaps the most remarkable. The idea that, at the margin, the consumer substitutes between goods so that he obtains the same marginal utility (in terms of money) across goods yields the downward-sloping demand curve for each of the goods. To see this, merely note that when the price of a good rises, the marginal utility in terms of money (MUi/pi) declines and thus, by Gossen's first law (diminshing marginal utility), less of that good will be bought. - "Phases of the Marginalist Revolution"
The concept that is vital here:
People seek to derive a certain amount of power, enjoyment or utility from everything they buy.
When a type of thing becomes common, they switch to something else to get the same impact.
This explains why "nothing gold can stay": even a good thing, if common enough, becomes taken for granted.
When you think about civilization decline, this explains how individualism makes it occur: over time, a stable and rising civilization is no longer valuable to the individual.
Only to a wise leader.