Chapter 15 The fifth chapter is the choice of different uses of a thing.Immediate use vs delayed use

Section 1 A person's property is allocated to the satisfaction of different desires, so the same price measures equal utility on the margins of various purchases. Housewives in the primitive era knew that the harvest of wool was only enough for a few rolls of wool, so they considered all the desires of the family for clothing, and tried to allocate this wool to these different desires, in order to contribute to the welfare of the family as much as possible. , if, after the assignment, she has reason to regret that she did not use a little more wool for (say) socks and a little less for a vest, she will consider her a failure.This means that she has miscalculated where the stocking and vest should stop; she has used too much in the vest and not enough in the stocking; so that where she actually stops, The utility of wool for stockings is greater than that of wool for waistcoats.But, on the other hand, if she stops just in place, she makes just so many stockings and vests that her last coil of yarn for the stockings and the last coil of yarn for the vest get the same amount of benefit.This illustrates a general principle, which can be shown as follows:

If a man has a thing which can serve several uses, he will divide it among these uses in such a way that it has the same marginal utility in all uses.For, if such a thing has a greater marginal utility in one use than in another, he will take a part of the thing from the former use for the latter, and thus gain a profit. One of the great disadvantages of a primitive economy, in which there is little free exchange, is that a man may easily possess so much of something, say wool, that when he uses it for every possible Its marginal utility is low: at the same time, another thing he owns, say wood, may be so little that its marginal utility to him is high.Meanwhile, some of his neighbors may be in great need of wool, and they have more wood than they can put to good use.If each gives up that which is of lower utility to him and accepts that which is of higher utility, each will gain by the exchange.However, it is troublesome and difficult to carry out such adjustments by means of barter.

Where there are but a few simple commodities, each of which can be adapted by homework to several uses, the difficulty of barter is indeed not great; The marginal utility of the various uses, while the various uses of the wood by the husband and son are similarly adjusted. Before the second quarter. But when commodities become very numerous and highly specialized, the free use of money, or of purchasing power in general, becomes urgently needed; for money alone facilitates the use in an infinite variety of purchases.Good dominance in a money economy consists in adjusting the stop margin at each expenditure in such a way that the marginal utility of goods worth a shilling at each expenditure is the same.This result may be attained by every one, if he is constantly on the lookout whether he spends so much on any one thing, that he would benefit by taking a little out of one kind of expenditure for another.

For example, the clerk is hesitant to take the car into town, or to walk and have a richer lunch, that is, he is weighing the (marginal) utility of two different ways of spending money against each other.Again, when an experienced housewife urges a young couple on the importance of keeping accounts carefully, one of the main motives of this exhortation is to save them from spending a great deal of money unthinkingly on furniture and other things; for , although a certain quantity of these things is really necessary, but if too many are bought, these things will not produce a high (marginal) utility in proportion to the cost of purchasing them.At the end of the year the young couple will look at their budget for the year, and perhaps find that they must save in certain places, and they will compare the (marginal) utility of the various expenditures to the utility of saving a pound of expenditure here. losses, weighed against the loss of utility resulting from saving a pound of expenditure therefrom: they try to adjust their reductions so that the total loss of utility is minimized, and the total utility they retain is maximized.

The third section is the distribution between present needs and future needs.Future benefits are to be discounted. A commodity is allocated to various uses, and these uses are not necessarily present uses; some may be present, and some may be future.A prudent man will endeavor to distribute his property among all the different uses, present and future, so that it will have the same marginal utility in each use.But in estimating the present marginal utility of a distant source of pleasure, two considerations must be made: first, to account for its uncertainty (an objective property which all sensible people would equally estimate); Two, to consider the difference in value to them of distant pleasures as compared with present pleasures (a subjective property which different people will value in different ways according to their different personalities and their immediate circumstances).

If people thought that future interests would require as much as similar present interests, they would probably distribute their pleasures and other gratifications evenly throughout their lives.Therefore, if they can be sure of obtaining the same pleasure in the future, they are usually willing to give up the present pleasure for this pleasure.But in fact, human nature is so constituted that most people, in estimating the "present value" of a future interest, usually add and subtract from its future value in what we may call a "discount." , the longer the period of deferral of benefits, the greater this discount.One person will regard a distant interest as being of nearly the same value to him as a present interest; while another, with less power to imagine the future, and less patience and self-control, will be more indifferent to interests that are not immediate. Not very concerned.

Even the same person's mood can change, sometimes impatient and greedy for immediate enjoyment; sometimes his mood is focused on the future, and he is willing to postpone all the enjoyment that can conveniently wait.At times he was in the mood of indifference to other things, at other times he was like a child who picks a plum out of a cake and eats it right away, and at other times like a child who saves the plum for last.In either case, we must carefully consider the expected pleasure when calculating the discount rate for future benefits. The rate at which different persons discount the future affects not only their propensity to economize, in the ordinary sense of the term, but also to purchase things which provide a lasting source of pleasure, rather than those which provide a stronger but more transitory enjoyment. Prefer buying a new dress rather than indulging in a drinking binge, or choosing durable, simple furniture over beautiful furniture that will soon wear out, for example.

Especially connected with these things is the pleasurable display of possession.Many people derive greater satisfaction from the mere feeling of ownership than from ordinary pleasures in the narrower sense: the pleasure of owning land, for example, often causes men to pay high prices for land, which yields but a small return on their investment.There is the pleasure of possessing for the sake of possessing; there is the pleasure of possessing because possessing produces pride.Sometimes the latter is stronger than the former, sometimes weaker; and I am afraid that no one knows himself or anyone else so well as to draw the line between the two with absolute certainty.

The fourth section is about the difference between discounted future pleasure and discounted future pleasure. It has been said before that even if the same person enjoys the quantity of two kinds of benefits at different times, we cannot compare them.When a man puts off an event that would give him pleasure, he is not postponing pleasure; he is merely giving up a present pleasure for another, or the expectation that another will be obtained in the future: we cannot say that what he expects whether his future pleasure is greater than that which he has given up, unless we know all the circumstances of the matter.So even if we knew the rate at which he discounted future pleasurable events—from, say, his spending a pound to obtain immediate gratification—we would not know the rate at which he discounted future pleasurable events.

However, if we make two assumptions, we can obtain an artificial measure of his discount rate for future benefits.The first is that he expects to be about as rich in the future as he is at the present; decreased, but remained largely unchanged.Under these two assumptions, if he is sure that there will be an income (for himself or his heirs) of a gold coin (a gold coin worth twenty-one shillings-translator) after a year, he will-but Just willing - save a pound from his present expenditures, then we can say that he discounts the fully guaranteed (limited only by death condition) future benefits at a rate of 5% per annum.And under these two assumptions, the rate at which he discounts future (certain) interests is the rate at which he discounts money in the financial market.

Above we have considered pleasures individually; but many of the things that people buy are durable, that is, things that are not consumed after a single use; and a durable thing, like a piano, may become Less is a remote source of many pleasures; its value to the purchaser is the use or totality of the value to him of all these pleasures, but the uncertain and very remote question of these pleasures has to be considered.