Cuckoo for Marginalism

When I was a kid, I would ask my mother if she likes this cereal, that song, or this soft drink.

She would often reply in her droll way: “I wouldn’t want a steady diet of it.”

I came to conclude that this really meant that she didn’t like it.

I was wrong. She was thinking in terms of margins. She would perhaps like one experience but not three or four, much less a constant stream. It’s not whether we are for or against something. It’s how much we like a thing in its incremental consumable unit.

Hence, when you decline the second piece of pie, you aren’t saying you don’t like the pie. You are saying that you liked one piece but not two.

So it is when the girl breaks up with the guy, saying “I think you are fun, funny, cute, charming, and wonderful in so many ways; I’m just not ready for a big relationship right now,” this is not code for “take a hike, I don’t like you.” This means that she likes you but on the margin wants something else even more in the future, such as independence, more alone time, or whatever it could be. It’s not you; it’s her.

If we could learn to take the margin more seriously, we would all learn to think more clearly and carefully about a number of life issues. What was previously mysterious now seems rather obvious. What had previously baffled you now seems perfectly clear. The marginalist way of thinking becomes, in the most colloquial use of the phrase, “common sense,” in the marvelous phrase of Phillip Wicksteed.

I’m thinking about all of this following a masterful presentation by Phil Magness at the American Institute for Economic Research. He was explaining the history of economic ideas for some visiting students. He noted the special role that Carl Menger’s 1871 book Principles of Economics played in the rediscovery of marginalism as a core principle of the theory of choice, following centuries of confusion.

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