Re: Absolute vs. relative income level
i think there is a at least partial contradiction between the hypothesis of diminishing marginal return of income and the hypothesis that people care about consuming more than their neighbors or about earning more than their neighbors (Frank: Luxury Fever). If the latter is true than the first hypothesis is weak. What do you think about this? Steffen If the latter is true, it too can be subject to diminishing marginal returns. So where is the contradiction? Fred Foldvasry = [EMAIL PROTECTED]
Re: Absolute vs. relative income level
Dear armchairs, i think there is a at least partial contradiction between the hypothesis of diminishing marginal return of income and the hypothesis that people care about consuming more than their neighbors or about earning more than their neighbors (Frank: Luxury Fever). If the latter is true than the first hypothesis is weak. What do you think about this? Steffen I don't see a contradiction. Once people have enough money for food, housing, keeping up with the Jones's, (or perhaps besting the Jones's), etc., then additional income beyond that level has less perceived value. ~Alypius
Re: Absolute vs. relative income level
i think there is a at least partial contradiction between the hypothesis of diminishing marginal return of income and the hypothesis that people care about consuming more than their neighbors or about earning more than their neighbors (Frank: Luxury Fever). If the latter is true than the first hypothesis is weak. What do you think about this? Steffen If the latter is true, it too can be subject to diminishing marginal returns. So where is the contradiction? Fred Foldvasry I think Steffen is onto something very important, and Fred ( Alpius) are acting dense. After food, clothing, etc., diminishing marginal return says the next dollar of income has a lower (or perhaps often only equal?) marginal return. A desire to earn more than the neighbors seems to say that at a level equal to the neighbor, the next dollar has a (much?) greater return than the prior few dollars--obviously contradicting the diminishing. (Prolly non-linearly; but so what if reality is difficult to model?) And I think this very important, under studied issue is behind the rat race, as well as America's high consumption high productivity. I often talk, here in Slovakia, about the Russian and American dreams: An American farmer lives next door to another farmer with a prize cow. A Russian farmer's nearest neighbor has a prize cow. The American farmer dreams that he has a better cow than his neighbor. The Russian farmer dreams that his neighbor's cow, dies. American Admiration Envy violates the assumption of diminishing marginal returns. (I often often think of these envy differences, but hadn't related them to marginal returns.) I'm not so sure about Russian Destructive Envy -- but I AM sure that this is the envy which is sinful, and terrible. Tom Grey P.S. If, as in both Slovak and Russian privatization, only the very corrupt were greatly benefiting, the admirable desire for punishing justice is indistinguishable from destructive envy.
Re: Absolute vs. relative income level
--- Tigger [EMAIL PROTECTED] wrote: Fred ( Alpius) are acting dense. Density is efficient. With greater density, we get more mass per volume, thus a more efficient use of space. A desire to earn more than the neighbors seems to say that at a level equal to the neighbor, the next dollar has a (much?) greater return than the prior few dollars--obviously contradicting the diminishing. This does not contradict diminishing marginal utility. DMU proposes that for a given good, after some amount, extra amounts yield ever diminishing extra utility. For a different good, marginal utility starts all over again. I get diminishing marginal utility from consuming more and more apple, but if I switch to organge, my marginal utility can go up. The good of beating one's neighbor is a different good than that goods obtained for incomes up to that of the neighbor. If a particular threshold of income is needed in order to get utility from a good (i.e. having more than the neighbor), marginal utility theory is not contradicted but simply does not apply. The maximization of utility from a mix of goods implies that the goods are obtainable. Once one achieves the threshold and can then obtain the good, marginal utility kicks in. One gets more of the new good until its marginal utility per cost is equal to that of anything else. The implication is that after the threshold, one would strive to get more income until extra neighbor-beating has the same utility as extra other goods or extra leisure. Fred Foldvary = [EMAIL PROTECTED]
