> "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"."
Um...why should we think that? If my neighbor has X dollars, why would my going from X to X+1 be a greater step for me than going from X-1 to X? The last step in a journey may be more "satisfying" than the first since it coincides with the trek being completed, but does that, in general, strike down the idea of diminishing returns? The utility doesn't seem to be coming from the X+1th dollar per se, rather it seems to be coming from consuming a good we can call "beating the joneses". The utility rise comes from the consumption of the good, i.e. the psychic benefit of beating my neighbor in the income race, and not from any intrinsic value to that particular jump in income. __________________________________ Do you Yahoo!? Yahoo! SiteBuilder - Free, easy-to-use web site design software http://sitebuilder.yahoo.com