The Law of Diminishing Marginal Utility

Dan Klein has published a retraction of his earlier claim that progressives are more susceptible to economic ignorance than conservatives and libertarians. Along the way, he makes a mistake that is one of my pet peeves.

More than 30 percent of my libertarian compatriots (and more than 40 percent of conservatives), for instance, disagreed with the statement “A dollar means more to a poor person than it does to a rich person”—c’mon, people!—versus just 4 percent among progressives.

“A dollar means more to a poor person than it does to a rich person” is Klein’s misstatement of the law of diminishing marginal utility. A proper statement might be “a dollar would be worth more to a man if he were poor than if he were rich, other things equal.” The law of diminishing marginal utility does not give you the ability to make interpersonal comparisons of utility.

One Comment

  • Stephen Dewey

    Good point, I remember this distinction being drawn during one of my Economics sections, but I was confused at the time. You explain it more concisely here.

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