Hermann Heinrich Gossen Biography Model

Hermann Heinrich Gossen

The first writer who developed a full-fledged theory of consumption grounded in the marginal principle was Hermann Heinrich Gossen (1810-1858), also a native of Ger­many.

He served as a tax assessor for the Prussian government but had retired from this position by the time he wrote his one great work in 1854, a book entitled Development of the Laws of Human Relationships and of Rules to Be Derived There­from for Human Action. Despite its author's high expectations, the book passed al­most unnoticed. In bitter disappointment, Gossen recalled all of the unsold copies from the publisher (who had published it on commission only) and destroyed them. Afflicted with tuberculosis soon afterward, Gossen died in 1858, convinced that his ideas, original and valuable as they were, would never bring honor to his name. So ended in personal tragedy a life that had much to give theoretical economics but that received even less recognition than the life of the pioneer Cournot.

Technically speaking, Gossen's work is of a piece with that of Dupuit, Jevons, Walras, and, to a somewhat lesser extent, Menger. Yet more than anyone else—with the possible exception of Jevons—Gossen's economics seems to be rooted in an at­tempt to mathematize Bentham's hedonic calculus. Gossen viewed economics as the theory of pleasure and pain, or, more specifically, how people as individuals and as groups may realize the maximum of pleasure with the minimum of painful effort. He insisted that mathematical treatment was the only sound way to handle economic relations and applied this method throughout his work to determine maxima and minima.

Gossen's book was organized in two parts of about equal length. The first, de­voted to pure theory, has attracted the most (belated) attention for its early formula­tion of the two laws that have come to bear Gossen's name. Gossen's first law for­mulated the principle of diminishing marginal utility and gave it graphical expression. His second law described the condition for utility maximization: to maximize util­ity a given quantity of a good must be divided among different uses in such a man­ner that the marginal utilities are equal in all uses. Also in this first part of his work are Gossen's laws of exchange (accompanied by complicated geometrical repre­sentation) and his theory of rent. The second part of his book is devoted to applied theory, including the "rules of conduct pertaining to desires and pleasures" and the refutation of certain "social errors" concerning education, property, money, and credit. Philosophically, Gossen was a utilitarian and a classical liberal; that is, he was opposed to government intervention, especially in those instances when individual initiative and free competition suffice as guiding principles of the economic order.

The neglect of Gossen's work was a setback for the progress of economic theory. He was rediscovered by Jevons in 1879, but only after independent discoveries of the same magnitude had been made in economics by Jevons, Menger, and Walras. Important contributions to the subjective theory of value and the marginal principle preceded Gossen's, of course (Dupuit's contribution appeared a decade earlier, for example), but no work carried either idea as far as Gossen did until after 1870. His bitter disappointment at the neglect of his work was understandable, but it must be noted that Gossen was naive in an almost childlike way. He openly proclaimed that his work did for economics what Copernicus had done for astronomy—a somewhat pretentious claim that Leon Walras nevertheless took for under­statement. But then we must remember Walras's own disappointment when he did not receive the Nobel Peace Prize after putting his own name in nomination. As for Gossen, perhaps the most encouraging thing that can be said of his personal tragedy is that the future was on his side.