Hermann Heinrich Gossen
Encyclopedia
Hermann Heinrich Gossen (7 September 1810 in Düren
– 13 February 1858 in Cologne
) was a Prussia
n economist
who is often regarded as the first to elaborate a general theory of marginal utility
.
, then worked in the Prussian administration until retiring in 1847, after which he sold insurance
until his death.
Prior to Gossen, a number of theorists, including Gabriel Cramer
, Daniel Bernoulli
, William Forster Lloyd
, Nassau William Senior
, and Jules Dupuit
had employed or asserted the significance of some notion of marginal utility
. But Cramer, Bernoulli, and Dupuit had focussed upon specific problems, Lloyd had not presented any application, and if Senior actually employed to the development of more general theory then he did so in language that caused the application to be missed by most readers.
Gossen's book Die Entwickelung der Gesetze des menschlichen Verkehrs, und der daraus fließenden Regeln für menschliches Handeln (The Development of the Laws of Human Intercourse and the Consequent Rules of Human Action), published in Braunschweig
in 1854, very explicitly developed general theoretical implications from a theory of marginal utility, to the extent that William Stanley Jevons
(one of the preceptors of the Marginal Revolution) was later to remark that
However, Die Entwickelung was poorly received, as economic thought in Germany was then dominated by the Historical School
and as Gossen wrote it in a dense, heavily mathematical style which was quite unpopular at the time. Although Gossen himself declared that his work was comparable in its significance to the innovations of Copernicus
, few others agreed; most copies of the book were destroyed and, today, only a few original copies exist.
In the early 1870s, William Stanley Jevons, Carl Menger, and Leon Walras each reintroduced the theory of marginal utility. During discussions of which of those three had been the first to formulate the theory, a colleague of Jevons discovered a copy of Die Entwicklung. However, the discovery (in 1878) came several years after the three principals in the Marginal Revolution had published their own books, and significant differences with Gossen’s original contributions were overlooked.
A century later (1983) Gossen’s book was translated into English. In his introduction to the book, Nicholas Georgescu Roegen, a prominent American economist (Distinguished Fellow of the American Economics Association), strongly supported Gossen’s vision, which stands in opposition to the neoclassical orthodoxy that utility (satisfaction) is properly identified with consumables in basic (utility) theory rather than consumption activity:
Georgescu-Roegen also extended Gossen’s behavioral formulation by introducing leisure in addition to production and consumption activities.
Düren
Düren is a town in North Rhine-Westphalia, capital of Düren district. It is located between Aachen and Cologne on the river Rur.-Roman era:Celts inhabited Düren's area before the Romans. They called their small settlement Durum . After the Celts other Germanic tribes settled this area...
– 13 February 1858 in Cologne
Cologne
Cologne is Germany's fourth-largest city , and is the largest city both in the Germany Federal State of North Rhine-Westphalia and within the Rhine-Ruhr Metropolitan Area, one of the major European metropolitan areas with more than ten million inhabitants.Cologne is located on both sides of the...
) was a Prussia
Prussia
Prussia was a German kingdom and historic state originating out of the Duchy of Prussia and the Margraviate of Brandenburg. For centuries, the House of Hohenzollern ruled Prussia, successfully expanding its size by way of an unusually well-organized and effective army. Prussia shaped the history...
n economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
who is often regarded as the first to elaborate a general theory of marginal utility
Marginal utility
In economics, the marginal utility of a good or service is the utility gained from an increase in the consumption of that good or service...
.
Life and work
Gossen studied in BonnUniversity of Bonn
The University of Bonn is a public research university located in Bonn, Germany. Founded in its present form in 1818, as the linear successor of earlier academic institutions, the University of Bonn is today one of the leading universities in Germany. The University of Bonn offers a large number...
, then worked in the Prussian administration until retiring in 1847, after which he sold insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
until his death.
Prior to Gossen, a number of theorists, including Gabriel Cramer
Gabriel Cramer
Gabriel Cramer was a Swiss mathematician, born in Geneva. He showed promise in mathematics from an early age. At 18 he received his doctorate and at 20 he was co-chair of mathematics.In 1728 he proposed a solution to the St...
, Daniel Bernoulli
Daniel Bernoulli
Daniel Bernoulli was a Dutch-Swiss mathematician and was one of the many prominent mathematicians in the Bernoulli family. He is particularly remembered for his applications of mathematics to mechanics, especially fluid mechanics, and for his pioneering work in probability and statistics...
, William Forster Lloyd
William Forster Lloyd
William Forster Lloyd FRS was a British writer on economics.He was educated at Westminster School and Christ Church, Oxford, graduating BA in 1815 and MA in 1818....
, Nassau William Senior
Nassau William Senior
Nassau William Senior , English economist, was born at Compton, Berkshire, the eldest son of the Rev. JR Senior, vicar of Durnford, Wiltshire.-Biography:...
, and Jules Dupuit
Jules Dupuit
Jules Dupuit was an Italian-born French civil engineer and economist.He was born in Fossano, Italy then under the rule of Napoleon Bonaparte. At the age of ten he emigrated to France with his family where he studied in Versailles — winning a Physics prize at graduation. He then studied in the...
had employed or asserted the significance of some notion of marginal utility
Marginal utility
In economics, the marginal utility of a good or service is the utility gained from an increase in the consumption of that good or service...
. But Cramer, Bernoulli, and Dupuit had focussed upon specific problems, Lloyd had not presented any application, and if Senior actually employed to the development of more general theory then he did so in language that caused the application to be missed by most readers.
Gossen's book Die Entwickelung der Gesetze des menschlichen Verkehrs, und der daraus fließenden Regeln für menschliches Handeln (The Development of the Laws of Human Intercourse and the Consequent Rules of Human Action), published in Braunschweig
Braunschweig
Braunschweig , is a city of 247,400 people, located in the federal-state of Lower Saxony, Germany. It is located north of the Harz mountains at the farthest navigable point of the Oker river, which connects to the North Sea via the rivers Aller and Weser....
in 1854, very explicitly developed general theoretical implications from a theory of marginal utility, to the extent that William Stanley Jevons
William Stanley Jevons
William Stanley Jevons was a British economist and logician.Irving Fisher described his book The Theory of Political Economy as beginning the mathematical method in economics. It made the case that economics as a science concerned with quantities is necessarily mathematical...
(one of the preceptors of the Marginal Revolution) was later to remark that
However, Die Entwickelung was poorly received, as economic thought in Germany was then dominated by the Historical School
Historical school of economics
The Historical school of economics was an approach to academic economics and to public administration that emerged in 19th century in Germany, and held sway there until well into the 20th century....
and as Gossen wrote it in a dense, heavily mathematical style which was quite unpopular at the time. Although Gossen himself declared that his work was comparable in its significance to the innovations of Copernicus
Nicolaus Copernicus
Nicolaus Copernicus was a Renaissance astronomer and the first person to formulate a comprehensive heliocentric cosmology which displaced the Earth from the center of the universe....
, few others agreed; most copies of the book were destroyed and, today, only a few original copies exist.
In the early 1870s, William Stanley Jevons, Carl Menger, and Leon Walras each reintroduced the theory of marginal utility. During discussions of which of those three had been the first to formulate the theory, a colleague of Jevons discovered a copy of Die Entwicklung. However, the discovery (in 1878) came several years after the three principals in the Marginal Revolution had published their own books, and significant differences with Gossen’s original contributions were overlooked.
A century later (1983) Gossen’s book was translated into English. In his introduction to the book, Nicholas Georgescu Roegen, a prominent American economist (Distinguished Fellow of the American Economics Association), strongly supported Gossen’s vision, which stands in opposition to the neoclassical orthodoxy that utility (satisfaction) is properly identified with consumables in basic (utility) theory rather than consumption activity:
Georgescu-Roegen also extended Gossen’s behavioral formulation by introducing leisure in addition to production and consumption activities.
See also
- Gossen's lawsGossen's lawsGossen's laws, named for Hermann Heinrich Gossen , are three ostensible laws of economics:* Gossen's First Law is the “law” of diminishing marginal utility: that marginal utilities are diminishing across the ranges relevant to decision-making.* Gossen's Second Law, which presumes that utility is at...
- Marginal utilityMarginal utilityIn economics, the marginal utility of a good or service is the utility gained from an increase in the consumption of that good or service...
- Gossen's second lawGossen's second lawGossen's Second “Law”, named for Hermann Heinrich Gossen , is the assertion that an economic agent will allocate his or her expenditures such that the ratio of the marginal utility of each good or service to its price is equal to that for every other good or service...
- ScarcityScarcityScarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be...
- MarginalismMarginalismMarginalism refers to the use of marginal concepts in economic theory. Marginalism is associated with arguments concerning changes in the quantity used of a good or service, as opposed to some notion of the over-all significance of that class of good or service, or of some total quantity...
Further reading
- Gossen, Hermann Heinrich; Die Entwickelung der Gesetze des menschlichen Verkehrs, und der daraus fließenden Regeln für menschliches Handeln (1854). Translated into English as The Laws of Human Relations and the Rules of Human Action Derived Therefrom (1983) MIT Press, ISBN 0-262-07090-1. Reproduced by Google books in German.
- Klaus Hagendorf: A Critique of Gossen's Fundamental Theorem of the Theory of Pleasure