Gossen's Laws

laws named after H. H. Gossen that mathematically formulate the main principles of the bourgeois vulgar theory of marginal utility and the general bases of the theories of subjective value.

Gossen’s theoretical constructions are based on the unscientific position that the main factor governing human behavior is a striving to obtain maximum usefulness and that the basic task of political economy therefore consists of discovering the laws leading to increases in total usefulness or enjoyment. Gossen accomplished this task by formulating two theses that were subsequently named Gossen’s laws by representatives of the subjective school.

Gossen’s first law establishes the diminishing utility of each additional unit of product in one continuing process of consumption and the utility of the initial product units in connection with repeated acts of consumption. Gossen’s second law was formulated in two variations. The first is based on an examination of the natural economy of an individual taken in isolation from society. In the presence of a given number of different products an individual can employ them in various combinations during a given limited period. One of these combinations must be the most advantageous and must offer the most gratification. This is achieved by equalizing the marginal utilities of all the products. The second variation takes into consideration the conditions of a commodity economy. The main factors limiting consumption are commodity costs and the amount of money available to an individual. The most rational consumption variation can be achieved by establishing equality between the marginal utilities that have been obtained from past monetary units expended to purchase specific commodities. The second law was subsequently often used by the mathematical school to explain the phenomena of capitalist demand and price formation.

The fundamental methodological flaws in Gossen’s theory include his subjective-psychological, idealistic approach to economic phenomena and his disregard for production, which plays the decisive role in a society’s economic life. His theory is the basis for the apologist conclusion that the character of consumption and the distribution of material wealth among people does not depend on socioeconomic forms of production. Gossen’s theory was not recognized by his contemporaries but was resurrected by representatives of the mathematical school at the end of the 19th century.