IN the classical economics of Marshall, it was assumed that a consumer spends his income so as to obtain the maximum possible 'utility', and it was deduced that the prices of commodities must be proportional to their marginal utilities. The weak point of this is that no one knows exactly what this utility is, and still less how it can be measured. Modern mathematical economists, in particular E. Slutsky, J. R. Hicks, R. G. D. Allen, have, by developing Edgeworth's 'indifference curve' and Pareto's 'scale of preference', succeeded in constructing a theory of value on a new and much sounder basis. All that is assumed is that the consumer knows, of the various sets of goods purchasable for a given sum, which he likes best, which second best, and so on. It is amazing how this apparently inadequate postulate is adapted to mathematical treatment, including the use of the differential calculus to determine the maximum satisfaction obtainable with a limited amount to spend.
Économie théorique et statistique économique
(1) Théorie mathématique de la valeur en régime de libre concurrence. Par J. R. Hicks. Pp. 56. 18 francs. (2) Les fondements mathématiques de la stabilisation du mouvement des affaires. Par Prof. J. Tinbergen. Pp. 114. 30 francs. (Actualités scientifiques et industrielles, 580 et 632.) (Paris: Hermann et Cie, 1937–38.)