Marginal Utility: The Missing Link in the Diamond-Water Paradox

Marginal utility: Missing link in the diamond - water paradox The American traditional dictionary states that the paradox is "a seemingly contradictory statement, but still true." I think that this definition also applies to "Diamond Water Paradox". Water has immeasurable value for human survival, but little or no financial value or trade value. This seems to be contradictory, but in reality it is an absolute truth. On the other hand, diamonds are not worth a human being, but one of the most popular and expensive items in the world.

Menger uses his marginal utility to explain the old water / diamond's paradox. The value of diamond is greater than the value of water. Because it is not a comprehensive utility to decide consumer choice and value, it is a marginal utility. From this, they also believe that the value comes from the future, not past production. As Jevons clearly points out, the factors of production are pricing rather than pricing factors. "Production costs determine the supply, supply determines the ultimate utility level, and ultimate usefulness determines the value." Jevons and Menger Like their predecessors, they are mistakenly simple I tried to find traffic, causal relationships and value relationships. The wisdom of Leon Walras and Alfred Marshall interdependence the cost of production (supply) and utility (demand) and mutually decide each other's value.

Marginalism is an economic theory that attempts to explain the difference between the value of goods and services by referring to its secondary or marginal effects. For example, diamonds are higher than the price of water because diamonds are extra satisfied with water. Consequently, water has greater overall usefulness, but diamonds have greater marginal usefulness. The core concept of marginalism is a marginal utility, but under the guidance of Alfred Marshall, marginalists adopted the limitation of physical productivity in interpreting costs. The neoclassical tradition that was born from UK marginalism abandoned the concept of utility and used marginal replacement rate as a more important role in analysis. Marginalism is an integral part of mainstream economic theory

When Cramer and Bernoulli proposed the concept of marginal utility reduction, it was always a solution to the paradox of gambling, not paradox of value. However, revolutionary marginalists formally focus on issues that are not dangerous or uncertain. The indiscriminate curve analysis of Slutsky, Hicks, Allen is the same. The expected utility hypothesis of Bernoulli and colleagues was revived by various 20th century thinkers including Frank Ramsey (1926), John von Neumann and Oskar Morgenstern (1944), and Leonard Savage (1954). Although this assumption still seems controversial, it not only brings practicality but also brings the concept of quantification, returning to the mainstream of economic thought, and will give officialistic debate. (Perhaps, in the expected utility analysis, "law" which reduces marginal utility corresponds to so-called "risk aversion".)