Conceptual Difficulties in Modern Economic Theory

Abstract

The use of the marginal concept in academic economic theory is found to underlie a good deal of current orthodox economic analysis. The marginal concept is used by thinkers with a collectivist bent as well as thinkers of an orthodox stamp. Marginal analysis is reasonably serviceable on some occasions but fraught with difficulties on others. When the marginal concept refers to a measurable factor, such as the marginal product of an additional unit of capital, it is unquestionably useful for analysis. When it refers to a subjective situation, such as a marginal increase or decrease in satisfaction or demand, the analysis which rests upon it is often somewhat shaky. This paper is an attempt to point out some difficulties in the use of marginal analysis when such analysis refers to internal psychological states of economic men. The points made here will center about the concept of marginal satisfaction in income, that is to say, the assumption that the increment of satisfaction resulting from an additional unit of income, diminishes with size of income.