WILLIAM STANLEY JEVONS * Strongly believed in the future of math and statistics as indispensable aids in economic study I.

Theory of Value * MU was developed by Jules Dupuit based his utility theory on empirical facts while Jevons based his reasoning PARTIALLY on physiological theory: looked into the dynamics of stimulus and response A. Utility Theory: 1. the measurement of pleasure and pain has subjective features a unit of pleasure or of pain is difficult to visualize, BUT is it how much we feel pleasure and/or pain that prompts us to participate in the economics arena 2. utility is very subjective interpersonal comparisons are impossible B. Marginal Utility 1. the value of pleasure and pain varies according to four circumstances: a. intensity b. duration is taken into account UNLESS intensity is assumed constant c. certainty or uncertainty anticipated feeling affect behavior d. nearness or remoteness 2. PAIN is regarded as the negative of pleasure a. maximizing pleasure is the object of economics to make this more objective, the principle of pleasure must be related to something more concrete i.e., commodities 3. COMMODITY an object, substance, action or service which can afford pleasure or ward off pain anything that a person desires and labors for must be assumed to possess for him utility 4. Utility Function U = f(X) is an act of individual valuation a. utility is not inherent in commodities but only has meaning in valuation 5. Jevons improvements on Benthams pleasure-pain principle: a. his clear distinction between total utility and marginal utility b. his discussion on the nature of marginal utility c. his equimarginal principle C. The Equimarginal Principle is the same as what you have learned in Eco 1 and in Eco 4 Y = PxX + PyY MUx = MUy du/dx = du/dy

II. The Theory of Exchange explains why and how goods are traded between individuals in a market A. Related to this is Jevons Law of Indifference states that in any free and open market, at any one time, there can only be one price for homogeneous commodities B. Trading body term used by Jevons that refers to either buyers and sellers If a person has any useful objects, but an object belonging to another person would have greater utility, he will be glad to give the one in return for the other. But it is a necessary condition that the other person will likewise gain, or at least not lose by the exchange. Whether the exchange will take place or not can only be ascertained by estimating the utility of the objects n either side, which is done by integrating the appropriate functions or utility up to the quantity of each object as limits. A balance of utility on both sides will lead to an exchange. ** Therefore, freedom of exchange must be to the advantage of all and laissezfaire grants this degree of freedom III. Theory of Labor Supply A. seeks to explain behavior in terms of costs incurred (pain) and utility gained (pleasure) 1. labor any painful exertion of mind and body undergone partly or wholly with a view of future good 2. the decision to work is based on three quantities: a. net pain from work a balance of the painfulness and the pleasure of working b. amount of production c. amount of utility gained 3. a worker will stop producing/working when the net pain of working is equal to the degree of utility of the real wage IV. Sunspots and Commercial Activity explained commercial crises based on the change of the spots on the sun If the planets govern the sun, and the sun governs the vintages and harvests, and thus the prices of food and raw materials and the state of the money market, it follows that the configurations of the planets may prove to be the remote causes of the greatest commercial disasters.