William Stanley Jevons - Theory of Utility

Theory of Utility

Jevons arrived quite early in his career at the doctrines that constituted his most characteristic and original contributions to economics and logic. The theory of utility, which became the keynote of his general theory of political economy, was practically formulated in a letter written in 1860; and the germ of his logical principles of the substitution of similars may be found in the view which he propounded in another letter written in 1861, that "philosophy would be found to consist solely in pointing out the likeness of things." The theory of utility above referred to, namely, that the degree of utility of a commodity is some continuous mathematical function of the quantity of the commodity available, together with the implied doctrine that economics is essentially a mathematical science, took more definite form in a paper on "A General Mathematical Theory of Political Economy", written for the British Association in 1862. This paper does not appear to have attracted much attention either in 1862 or on its publication four years later in the Journal of the Statistical Society; and it was not till 1871, when the Theory of Political Economy appeared, that Jevons set forth his doctrines in a fully developed form.

It was not till after the publication of this work that Jevons became acquainted with the applications of mathematics to political economy made by earlier writers, notably Antoine Augustin Cournot and HH Gossen. The theory of utility was at about 1870 being independently developed on somewhat similar lines by Carl Menger in Austria and Léon Walras in Switzerland. As regards the discovery of the connection between value in exchange and final (or marginal) utility, the priority belongs to Gossen, but this in no way detracts from the great importance of the service which Jevons rendered to British economics by his fresh discovery of the principle, and by the way in which he ultimately forced it into notice. In his reaction from the prevailing view he sometimes expressed himself without due qualification: the declaration, for instance, made at the commencement of the Theory of Political Economy, that value depends entirely upon utility, lent itself to misinterpretation. But a certain exaggeration of emphasis may be pardoned in a writer seeking to attract the attention of an indifferent public. The Neoclassical Revolution, which would reshape economics, had been started.

Jevons did not explicitly distinguish between the concepts of ordinal and cardinal utility. Cardinal utility allows the relative magnitude of utilities to be discussed, while ordinal utility only implies that goods can be compared and ranked according to which good provided the most utility. Although Jevons predated the debate about ordinality or cardinality of utility, his mathematics required the use of cardinal utility functions. For example, in The Theory of Political Economy, Chapter II, the subsection on "Theory of Dimensions of Economic Quantities", Jevons makes the statement that "In the first place, pleasure and pain must be regarded as measured upon the same scale, and as having, therefore, the same dimensions, being quantities of the same kind, which can be added and subtraced...." Speaking of measurement, addition, and subtraction requires cardinality, as does Jevons' heavy use of integral calculus. Note that cardinality does NOT imply direct measurability, in which Jevons did not believe.