William Stanley
Jevons
By: Alan Cheng
Don Walsh
Ruiyi Ge
Mitch Jacobson
History of Economic Thought
ECON 4171
Thomas Longwell
Spring 2012 - UMN
Biography
Born September 1st, 1835 in Liverpool UK.
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1850 – At age 15, attended University
College School in London for 2 years
o Studied chemistry and botany
1853 - Accepted an assayership for the
new mint in Australia
1859 - Returned to University College
School, this time focusing on the moral
sciences, receiving a B.A. and M.A.
Biography Continued
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1866 - Became a tutor at Owens
College in Manchester.
o Became professor of logic
and mental and moral
philosophy.
o Cobden professor of political
economy at Owens College
1867 - Married Harriet Ann Taylor
1880 - Resigned from job - bad
health, depression, and pressure
of literary work.
1882 - Drowned while bathing
near Hastings, UK
Hobbies were traveling and music
Books he authored
1863 - A Serious Fall in the Value of Gold
1865 - The Coal Question
1869 - The Substitution of Similars, The
True Principle of Reasoning
1870 - Elementary Lessons on Logic
1871 - The Theory of Political Economy
1874 - Principles of Science
1875 - Money and the Mechanism of
Exchange
Theory of Political Economy
Introduction
“In economics. . . we must reason mathematically”
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Economics is a mathematical discipline not out of
convenience, but rather because economics
fundamentally deals in quantities
Describes the usefulness of theory in the absence
of precise data
Many quantities (utility, pleasure, pain) cannot be
expressed in units, nor need they be
Practically, the laws of economics differ only in
magnitude between man and nation
Economics could very well be an exact discipline,
were it not for the difficulty in gathering data
In the broadest sense, all human action is guided
by pleasure or pain
Chapter 2 - Theory of
Pleasure and Pain
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Value of pleasure and pain determined by
four circumstances:
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Intensity
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Duration
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Propinquity/Remoteness
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Certainty/Uncertainty
Quantity of pain or pleasure is measured
as sum of intensity over time.
Pain is the opposite of pleasure (one is
negative and one is positive respectively).
Algebraic sum of pain and pleasure with
the goal to maximize pleasure.
The intensity of anticipating a feeling is a
function of the future actual feeling and of
time which increases as the moment of
realization is approached.
The intensity of anticipation is affected by
the certainty/uncertainty of actual
occurrence.
Y-Axis: Intensity of pleasure/pain
X-Axis: Time
Chapter 3 - Theory of
Utility
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Utility defined: The abstract quality
whereby an object serves our purposes,
and becomes entitled to rank as a
commodity.
Anything that can produce pleasure or
prevent pain may possess utility.
Utility is not an inherent quality, but a
circumstance arising from relation of man's
requirements.
Utility decreases as the quantity of a
commodity increases.
Differential of total utility curve is "degree
of utility"
The "final degree of utility" is the degree of
utility of the last addition.
Dimensions of Utility: MUT/T
Actual, Prospective and Potential Utility
X Axis: Quantity of a Commodity
Y Axis: Utility Possessed
Chapter 4 - Theory of
Exchange
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Ambiguity of the term Value
o "Ratio of Exchange"
Numerically expresses the ratio or
exchange rate of commodity A vs
commodity B
"The Ratio of exchange of any two
commodities will be the reciprocal of the
ratio of the final degrees of utility of the
commodity available for consumption after
the exchange is completed,"
In bottom equation, right side is the commodity he
is buying and left side is what he compares it
to in his possession, like pennies. The
consumer consumes X quantity on right side
until it is equal to the left side
Chapter 5 - Theory of
Labor
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Definition of Labor - any painful exertion of
mind or body undergone partly or wholly
with a view of future good.
Three Quantities Involved:
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Amount of painful exertion
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Amount of produce
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Amount of utility gained
"As long as he gains, he labors, and when
ceases to gain, he ceases to labor"
The richer a man becomes, the less does
he devote himself to business -- will have
little problem hiring someone to lose some
profits in exchange for more pleasure or
less pain.
Y-axis - Pleasure/pain
X-axis - Time
Curve ABCD - Pleasure/pain
Curve PQ - Utility
Point M is where the pleasure gained is
equal to the pain caused by working
Chapter 6 - Theory of Rent
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First discovered by James Anderson.
Different pieces of land are different in fertility, and yields
different amount of produce to the same labor.
Application of capital = Application of labor.
The produce will not increase proportionally to the amount
of additional labor applied to the land.
The final rate of production ultimately sinks towards zero.
Chapter 7 - Theory of Capital
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Economics = Science of Capitalisation.
Fundamentally agrees with Ricardo.
Capital consists of wealth employed to facilitate production,
or to support human beings.
Investment of Capital = (Greatest Amount of Capital)
x 0.5(Investment Time).
Circulating Capital & Fixed Capital.
Free Capital. Wages of labor.
Stock of food, clothing, etc. are a main part of capital.
Conclusion
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This model’s next step is regarding population as variable
“What is truth?”
The “noxious” influence of authority
Produce = profit + wages
Jevons Paradox
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Postulated by
Jevons in 1865
James Watt's coalfired steam engine
raised concerns
about coal reserves
Jevons argued the
opposite is true
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Experts promised
the increased
efficiency would
reduce coal
consumption
Marginalism
"External goods have a limit, like any other instrument, and
all things useful are of such a nature that where there is
too much of them they must either do harm, or at any
rate be of no use."
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Diminishing returns
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Marginal Revolution
Marginal Revolution
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Jevons, 1871, "Value depends entirely on utility"
Menger, 1871, Law of diminishing marginal utility
Walras, 1874, Mathematical treatment
Considered the 1st generation of the revolution
Further generations took the idea of marginalism and
applied it to concepts other than utility
Carl Menger
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Carl Menger (Austria) Feb 28, 1840 - Feb 26
1921
Founder of Austrian
School of Economics.
1871 Published
Principles of Economics.
Theory of value based
on marginal utility.
Prices determined at the
margin.
Leon Walras
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Leon Walras (Switzerland) Dec 16, 1834 Jan 5, 1910.
Son of French economist Auguste Walras.
Studied engineering. Tried careers as a
bank manager, journalist, romantic novelist
and a clerk at a railway company before
turning to economics.
Professor of Political Economy at the
University of Lausanne, Switzerland.
Influenced by his father.
Called for nationalization of land.
Found the value of goods by setting their
scarcity relative to human wants.
William Jevons,
Renaissance Man
• Related business cycles to sunspots
• Jevons’ method of inverse probability
• Logic and the logic piano
• Jevons’ Number:
8,616,460,799
Citations
http://www.econlib.org/library/Enc/bios/Jevons.html
http://mises.org/page/1459/Biography-of-Carl-Menger-The-Founder-of-theAustrian-School-18401921
http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/jevons/mathem.txt
http://www.bun.kyoto-u.ac.jp/~suchii/holmes_7.html
http://mathworld.wolfram.com/JevonsNumber.html
http://plato.stanford.edu/entries/william-jevons/
http://www-history.mcs.st-andrews.ac.uk/Biographies/Jevons.html