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The role of diminishing marginal utility in the ordinal and cardinal utility theories

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  • Chung‐Cheng Lin
  • Shi‐Shu Peng

Abstract

We illustrate the role of the law of diminishing marginal utility in the two main modern utility theories, the ordinal and cardinal utility theories, using a generalised total utility function. In short, the ordinal utility theory, in which utility is immeasurable, must abandon the law of diminishing marginal utility; the cardinal utility theory, although able to retain this law, suffers from keeping the unrealistic view of utility measurability, which Samuelson criticises as “infinitely improbable.” A new utility theory with the advantages of the two mentioned theories (i.e. the notions of both diminishing marginal utility and utility immeasurability) but without the disadvantages (i.e. the law of diminishing marginal utility is excluded and utility is measurable) therefore still seems to be a Holy Grail deserving search and development by economists.

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  • Chung‐Cheng Lin & Shi‐Shu Peng, 2019. "The role of diminishing marginal utility in the ordinal and cardinal utility theories," Australian Economic Papers, Wiley Blackwell, vol. 58(3), pages 233-246, September.
    • Handle: RePEc:bla:ausecp:v:58:y:2019:i:3:p:233-246
    DOI: 10.1111/1467-8454.12151
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    Cited by:

    1. Mohajan, Devajit & Mohajan, Haradhan, 2022. "Utility Maximization Analysis of an Organization: A Mathematical Economic Procedure," MPRA Paper 115791, University Library of Munich, Germany, revised 15 Oct 2022.
    2. Mohajan, Devajit & Mohajan, Haradhan, 2022. "Sensitivity Analysis among Commodities and Coupons during Utility Maximization," MPRA Paper 115554, University Library of Munich, Germany, revised 04 Oct 2022.
    3. Todorova, Tamara, 2020. "Diminishing marginal utility and the teaching of economics: A note," EconStor Preprints 222942, ZBW - Leibniz Information Centre for Economics.
    4. Joonho Moon & Won Seok Lee & Jimin Shim, 2022. "Effect of Travel Expenditure on Life Satisfaction for Middle-Aged and Older Adults in Korea: Moderating Effect of COVID-19 Pandemic," IJERPH, MDPI, vol. 19(20), pages 1-8, October.
    5. Hyein Shim & Won Seok Lee & Joonho Moon, 2023. "The Relationships between Food, Recreation Expense, Subjective Health, and Life Satisfaction: Case of Korean People with Disability," Sustainability, MDPI, vol. 15(11), pages 1-11, June.
    6. Mohajan, Haradhan, 2021. "Utility Maximization of Bangladeshi Consumers within Their Budget: A Mathematical Procedure," MPRA Paper 109993, University Library of Munich, Germany, revised 20 Jul 2021.

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