[1115] “The enjoyment derived from the least enjoyable unit is what we understand by final utility.” (Böhm-Bawerk, The Austrian Economists, in the Annals of the American Academy of Political and Social Science, 1891.)
[1116] The new school deduces a very curious conclusion from this law of indifference. Although there is only one price for all corn buyers, say, the final utility of the corn for each individual is by no means the same. Let us assume that the price is 20s., but one of the buyers, rather than go without, would possibly have given 25s. for it, and others might have been willing to give 24s., 23s., 22s., etc. Every one of those who ex hypothesi only pay 20s. gains a surplus which Professor Marshall has called consumer’s rent (Principles, Book III, chap. 6). He has given it that name in order to facilitate comparison with producer’s rent, which had gained notoriety long before the Hedonistic school arose. Both are due to similar causes, namely, the existence of differential advantages which give rise to a substantial margin between the selling price and the cost of production.
Really, however, the similarity is simply a matter of words, because consumer’s rent is purely subjective, whereas producer’s rent is a marketable commodity. It would be better to say simply that in many cases of exchange it is not correct to argue that because the prices are equal the satisfaction given to different persons is necessarily equal.
[1117] It is scarcely necessary to point out that if workers are not really interchangeable on account of their different capacities the law can no longer be said to hold good, since it always presupposes free competition, whereas in this case we have a personal monopoly.
[1118] It is not quite the same when the capital is fixed, for the law of substitution is no longer applicable in that case, and the incomes are very different.
[1119] It must not be supposed that in applying the term “school” to these writers we wish to suggest that they have a common programme. All we mean is that they make use of the same method.
It is generally recognised to-day that the school dates from the appearance of Cournot’s Recherches sur les Principes mathématiques de la Théorie des Richesses (1838). Cournot, who was a school inspector, died in 1877, leaving behind him several philosophical works which are now considered to be of some importance. The story of his economic work affords an illustration of the kind of misfortune which awaits a person who is in advance of his age. For several years not a single copy of the book was sold. In 1863 the author tried to overcome the indifference of the public by recasting the work and omitting the algebraical formulæ. This time the book was called Principes de la Théorie des Richesses. In 1876 he published it again in a still more elementary form, and under the title of Revue sommaire des Doctrines économiques, but with the same result. It was only shortly before his death that attention was drawn to the merits of the work in a glowing tribute which was paid to him by Stanley Jevons.
Gossen’s book, Entwickelung der Gesetze des menschlichen Verkehrs, which appeared much later (1853), was equally unfortunate. The author remained an obscure civil servant all his life. His book, of which there is still a copy in the British Museum—the only one in existence possibly—was accidentally discovered by Professor Adamson, and Stanley Jevons was again the first to recognise its merits. A brief résumé of the work will be found in our chapter on Rent.
Stanley Jevons (died 1882) belongs both to the Mathematical and to the Final Utility school. His charming book, The Theory of Political Economy, dates from 1871.
Léon Walras, who is persistently spoken of as a Swiss economist just because he happened to spend the greater part of his life at the University of Lausanne, also known as the School of Lausanne, was in reality a Frenchman. His Éléments d’Économie politique pure, of which the first part appeared in 1874, contains a full exposition of Mathematical economics.