W. S. Jevons The Theory Of Value

William Stanley Jevons The Theory Of Value

Jevons's major thrust in economic theory was the foundation of utility analysis. From this foundation he constructed a theory of exchange and a theory of labor supply and capital. Many of these ideas, which were expressed chiefly in his Theory of Politi­cal Economy, were not new. Indeed, Jevons very generously noted that many of the features of his economic theory had been developed before by others. Two of his most important precursors were Dionysius Lardner, who developed a theory of the firm in his Railway Economy of 1850, and Fleeming Jenkin, who established a graphical presentation of the laws of supply and demand in 1870. Nevertheless, many of Jevons's theoretical contributions were original and of the first rank. His discov­ery of marginal utility was made independently of all other writers, and thus reflects his original cast of mind.

Utility Theory

The actual discovery of utility theory, and specifically marginal-utility theory, was made by Jules Dupuit. There had been essentially adventitious statements of the same principle by Nassau Senior, William Lloyd, and Montifort Longfield. Dupuit, however, had developed the theory in an empirical mi­lieu and had based his argument on empirical facts. Jevons, although possibly look­ing to the practical concerns of Lardner for inspiration, at least based his reasoning partially on physiological theory. In this connection Jevons specifically noted the Weber-Fechner studies of stimulus and response.

In his establishment of utility theory, Jevons's background in science and scien­tific measurement was much on his mind. Economics to Jevons was fortunate in that some of its important quantities (prices and so forth) were capable of exact mea­surement. He had early and unbounded faith in the future of mathematics and sta­tistics as indispensable aids to discovery in economics. Yet he placed a subjective maximand—utility—in the starring role in economic analysis. Jevons admitted that the calculus of pleasure and pain (or utility theory) had subjective features, although he expressed hopes that the effects of utility might somehow be ascertained. In 1871 he wrote:

A unit of pleasure or of pain is difficult even to conceive; but it is the amount of these feelings which is continually prompting us to buying and selling, borrowing and lending, labouring and resting, producing and consuming; and it is from the quantitative effects of the feelings that we must estimate their comparative amounts. We can no more know nor measure gravity in its own nature than we can measure a feeling; but, just as we measure gravity by its effects in the motion of a pendulum, so we may estimate the equality or inequality of feelings by the deci­sions of the human mind (Theory of Political Economy, p. 11).

Immediately, then, Jevons acknowledged that one could, at best, obtain only ordi­nal estimates of the quantity around which the entire economic system revolves. In his Theory, Jevons noted that utility is basically introspective, and he recognized ex­plicitly that interpersonal comparisons from one individual or group to another are impossible (although he may have failed to heed his own warnings in the concept of a "trading body," as we shall see). Nevertheless, despite all these difficulties, Jevons set out the new core of economics in utility terms.