This section is from the "Economics In Two Volumes: Volume I. Economic Principles" book, by Frank A. Fetter. Also available from Amazon: Economic
Some of these occur in the use of enjoyable goods, and still more occur in production by means of complementary agents, the consideration of which must be postponed till later in our study.
§ 6. Changes of desires and of valuations. Choice is constantly being affected by changes within men (subjective) as well as by changes in the objective conditions. Desire is constantly shifting; different kinds of goods are at every moment being revalued according to the new conditions. The use of one unit of a good causes the valuation of the remaining portions to drop down the scale for the next moment. When we rise in the morning, we desire breakfast; the breakfast eaten, another breakfast does not appeal to us. Our tasks done, we take a boat ride or go golfing; then, appetite returning, we are tempted to our dinner. And thus from hour to hour desires are gratified, are altered, and are shifted, until, wearied with the day's labors and pastimes, we go to rest. No impression on the nerves or on the senses is lasting. The "consciousness" is not a state; it is a ceaseless process. Man's senses were evolved for the purpose of bringing him into relation with the outer world, of enabling him to survive in his struggle with the forces of nature. When a choice occurs, the corresponding desire falls for that particular moment, it may be even to zero. To keep desires satisfied is impossible. Desires recur for the same reason that they first arose. If they did not there would be no motive for action. We can not do next week's reading or next week's eating now. The best results in reading or eating come from taking the right amount day by day. In a well-ordered life, in an advanced, economic society, the means for gratifying desires as they arise are provided in advance. The changing series of desires is met by a changing series of goods. Life has been defined as a constant adjustment of inner relations to outer conditions. Economic life is therefore like physical life, a constant adjustment; and this adjustment of goods but reflects the shifting and adjustment of feelings.
§ 7. Effect of repeated stimuli. It is in the very nature of man and his nervous organization that any stimulus to the nerves, however pleasant for a time, becomes painful when long continued or increased unduly. The trumpet too distant at first for the ear to distinguish its notes, may swell to pleasing tones as it approaches, until at length its volume and its din may become absolutely painful. A man coming in from the winter storm and holding out his hands before the fire enjoys the warmth intensely; a few minutes later the same heat becomes unpleasant. In winter we wish for a moderation of the temperature; on the sultry days of summer we think of a cool breeze as the most to be desired of all things. Whether the temperature rises or falls, there is a point beyond which the change no longer adds to our comfort but begins to detract from it. A man, however hungry at first, may be made miserable if forced to eat beyond his capacity. The first sup of cool water is delicious to a thirsty man; a second and third glass, but not more, may still be grateful. Forcing one to take an excessive amount of water is one of the cruelest of tortures (sometimes called the "water cure"). Of every economic object it may be said, "One may have too much of a good thing." The statement of this relativity of desires and successive gratification, is called the principle of diminishing gratification.1
§ 8. Different quantities and corresponding desires. It has already been made clear that the scarcity or abundance of a good has its effect upon our desire for that good. We can make use of more or less of it, but not of an infinite amount. If a very small quantity is available, we may use that quantity and still feel a fairly intense desire for more. If the quantity available is large, our consumption may be increased, but a desire (less intense) for more may still remain. A limit will be found somewhere, however, to the use that we can make of the good, and if this limit is reached - if the quantity available is so great that absolutely all our desires for it are satisfied - the value of the good will fall to zero for the reason that desire has completely ceased. Clearly the intensity of desire changes - and changes inversely - with the quantity of the goods available. If now we may be allowed the latitude of speaking of these various intensities of desire as different desires, we may say that there is a series of desires capable of being gratified by various quantities of the good in question. A small amount will gratify the greatest or most intense desire, an additional amount of the good will meet the desire which comes next in intensity, and so on until finally we reach the point where, with the whole series of desires already met, an additional amount finds desire completely lacking and value therefore at the zero point.
1 See note on the Weber-Fechner law, at end of chapter.
§ 9. Stock of homogeneous units; principle of indifference. If now we consider a quantity (stock) of the good which is capable of gratifying a part, but not all, of our desires, it is plain that a value will attach to the good. If it is a stock made up of homogeneous or identical units, there is no reason for preferring any particular unit to any other.
True, in advance of using the goods, we say that some of the desires are more intense than the others. But when we begin to use a stock of homogeneous units this difference must disappear. For we will begin by applying the goods first to the more intense desires, and as we have just seen, this reduces their intensity. We then apply goods to the desire formerly ranking next in intensity. And so successively, we apply the goods to the more intense desires remaining, and as they fall in intensity we take in, one after another, the desires which at first were less intense, continuing until the whole stock of goods has been applied. In this way we bring to equality the values of all the units that are actually used (if the goods are divided into very small units). We have come to the limit, or the margin, of the series of desires that this stock of goods is capable of gratifying, and outside of this limit may remain various ungratified desires.
* To show this graphically, let the units of goods be plotted on the base line. If but one were present its desirability measured on the perpendicular (valuation scale) or parallel with it, is indicated at the height d; if there were a second unit its desirability would be indicated by e; and so on until with six units the value of the sixth would be c. But if the units are perfectly interchangeable, the value of every unit would now be the same as that of the last, and is measured by the height of the straight line be above the base line, and not by the height of the curve ac.
FIG. 4. The Principle OF INDIFFERENCE.*