Study Guide to Man, Economy, and State with Power and Market

Chapter 4: Prices and Consumption 47
prices are paid for (virtually) infinitely durable goods, such as
land.
8. Welfare Comparisons and the Ultimate Satisfactions
of the Consumer
All of the praxeological truths of chapter 1 are still applicable
in a money economy. Ultimately, what the economist labels
a “consumer good” in the market place may in fact truly be a
higher-order good for the consumer, because so-called consumer
goods (such as cans of Pepsi) are really just means to more
ultimate ends (such as satisfying thirst).
9. Some Fallacies Relating to Utility
Mainstream economists often derive an equilibrium condition
in which the marginal utility of each good, divided by the
price of the good, is equal for all goods. The argument is that
the marginal penny must yield the same increment in utility,
regardless of the good on which it is spent, because if this
weren’t the case, then the consumer could achieve a greater
amount of total utility by rearranging his or her expenditures.
The fallacy here is that utility is not a cardinal concept, and
hence it makes no sense to perform arithmetical operations on
the “marginal utility” of a given good.
APPENDIX A:
The Diminishing Marginal Utility of Money
Money is a commodity and hence is subject to the law of
diminishing marginal utility: the greater the units of money one
has, the lower its marginal utility. In the case of money, we must
be careful to maintain the ceteris paribus assumptions. For example,
prices may change between the time that the 100th and