AW: Absolute vs. relative income level

2003-07-24 Thread Hentrich, Steffen
 This does not contradict diminishing marginal utility.  DMU 
 proposes that
 for a given good, after some amount, extra amounts yield ever 
 diminishing
 extra utility.

My use of contradiction was misleading. Here I have no dissent to Fred. 

 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 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.

My point is that justification of redistribution simply with the common argument of 
diminishing marginal returns of income over the complete range of income is not so 
convincing.

Steffen




Absolute vs. relative income level

2003-07-23 Thread Hentrich, Steffen
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



Re: Absolute vs. relative income level

2003-07-23 Thread Fred Foldvary
 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


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Re: Absolute vs. relative income level

2003-07-23 Thread alypius skinner


 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

2003-07-23 Thread Tigger


  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

2003-07-23 Thread Fred Foldvary
--- 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

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