[PEN-L:4813] Re: econ. and cognitive psychology

["DARREN BUSH" <BUSH@xxxxxxxxxxxxxxxxx>]

Professor White wrote:
> Oh come now! This argument is akin to saying that because eating one ice
> cream cone is good, eating ten thousand at a sitting is better -- or at
> least until you reach your bliss point and start craving tobacco. My simple
> (Economics 101) rebuttal is based on diminishing marginal utility. I derive
> utility from your happiness of course, but when your happiness begins to
> reach blissful proportions you become annoying to the point where my
> marginal utility is less than zero. The graphical explanation relies on a
> sigmoid or parabolic curve.

Ah, the principle of diminishing marginal utility.  (I recently
experienced this with signatures).  The principle may be true in many
instances.  But suppose that the commodities are drugs and alcohol
and that I'm (by psychological terms) an alcoholic or drug addict.
Do I experience diminishing marginal utility?  Here, I'm told that
the principle of non-satiation tends to hold true (until one reaches
a toxic level of drugs).  Now we have to ask whether affection for
another person (i.e., receiving utility from their "happiness") is a
drug (i.e., utility does not diminish at the margin).

These type of commodities and the interpersonal effects of
consumption are treated as the exception rather than the norm in NC
economics.   We cannot say based strictly on NC economic theory that
drug addiction is bad.  If we were to do so, then we'd be making
a normative critique of an individual's consumption patterns.  This
leads one to conclude that we could evaluate different social systems.

Either way, whether I accept that utility diminishes at the margin
or we achieve cosmic orgasm through utility functions that take into
account the happiness of other people, I am still left with very
little information about human behavior outside the market or the
world of finance.

Darren Bush