The Limitations of Marginal Utility

Abstract

Thorstein Veblen (1857–1929) was born in Wisconsin and received his Ph.D. from Yale. He taught at the University of Chicago and at several other schools. Given his irascibility and his radical criticisms of American society, he was unable to find a permanent position. Veblen did, however, gain considerable renown – he was even offered the presidency of the American Economic Association (which he turned down). Veblen was, as in the essay reprinted here, a persistent critic of neoclassical economics. In the last two decades, interest in Veblen's economics and the work of other “institutionalist” economists has increased significantly. The limitations of the marginal-utility economics are sharp and characteristic. It is from first to last a doctrine of value, and in point of form and method it is a theory of valuation. The whole system, therefore, lies within the theoretical field of distribution, and it has but a secondary bearing on any other economic phenomena than those of distribution – the term being taken in its accepted sense of pecuniary distribution, or distribution in point of ownership. Now and again an attempt is made to extend the use of the principle of marginal utility beyond this range, so as to apply it to questions of production, but hitherto without sensible effect, and necessarily so.

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