chapter  17
2 Pages

MARGINAL UTILITY IN IDEALIZED PRODUCTION

This accounting is fundamental and controls the scheme of production. However it would be incomplete if it were confined to a consideration of the various products. I t must also be extended to embrace the masses of productive supplies. The productive stock is kept on hand in order to be transformed into products which are to yield a utility increment. However, every such transfer diminishes the quantity of the productive stock and thus results in a loss of utility. Both the utility increment yielded by the products and the loss of utility due to the disposition of the productive agent must be considered by economic foresight. If the expression may be permitted, the controlling economic account is kept by double entry: it sets down the increment of utility against products and the loss of utility against the productive means. Both computations are made according to the marginal utility. In our example, one unit of iron has a marginal utility of 10. No technical transformation of the iron could therefore be permitted unless the resulting product yielded the marginal utility, 10. It is not sufficient that the producer is aware that iron, being likely to aid in turning out useful products, is itself useful. He should also know the exact measure of the utility which is assured to him by his stock of iron, according to prevailing circumstances. Then, just as he infers the usefulness of iron from that of its products, he will deduce the amount at which the utility of iron is to be computed from the amount by which the usefulness of its products is measured. Both the iron and its products must therefore be computed according to the marginal law. In general, a series of productive means are expected to yield a series of products. The anticipated marginal utility of the latter is imputed beforehand to the former series. The marginal law states that all units of a stock are to be computed cumulatively according to the marginal utility. This cumulative computation must therefore apply to both products and productive means. The total available supply of iron is thus to be reckoned as 1000 X 10, or 10,000. The stock set aside according to schedule for each fractional mass of products is figured as 100 × 10, or 1000. The sum of these ten masses is therefore also reckoned at 10,000. The cumulative computation in the economy does not even have the semblance of a paradox in production. I t is obvious that this method of appraising the masses insures adherence