4 ms·
say i pay you $1000 in wages this month how do you decide how to allocate it between rent, food, savings, entertainment, etc. most rational people would use s
by roymurdock 8y ago
say i pay you $1000 in wages this month
how do you decide how to allocate it between rent, food, savings, entertainment, etc.
most rational people would use some type of internal or subconscious utility calculation to decide what how to budget their income
i dont know what marginalism is or why its useful when you can simply approximate a value by looking at the price of the good/service and use that to compare with other goods and services
- nybble41 8y agoThere's nothing wrong with the idea of an internal utility calculation. The problem comes in when people try to compare or sum utility across multiple individuals. I might have a personal utility function which says an apple has higher utility to me than an orange, while your personal utility function says just the opposite. It makes no sense to try to mix these together in an attempt to estimate just how much apples or oranges are worth to the two of us collectively. Money is a reasonable approximation of "aggregate utility" most of the time, but that holds only so long as interactions between individuals remain voluntary and there is enough trade in similar items to establish a "customary price". It doesn't work well for goods which are not customarily traded for money, or as a basis for orchestrating involuntary interference in the market.