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One of the notorious "forerunners" of neoclassical economics is Hermann Heinrich Gossen (1810-58). Gossen was not only acknowledged as a predecessor by the pioneers of marginal utility theory (Leon Walras, W. Stanley Jevons) but also was graced posthumously by later economists (Friedrich von Wieser, Wilhelm Lexis, Joseph Schumpeter) with two "laws": Gossen's first law and Gossen's second law. These laws, concerning the decreasing marginal utility of a good and the allocation of income by balancing marginal utilities of different goods, were attributed to Gossen because of his pioneering work, Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln fur menschliches Handeln. The book appeared in 1854, shortly before his death. Gossen claimed it was the result of twenty years of reflection, dating back to his days of civil service training. In the history of economics, Gossen's contribution has primarily served the fortification of neoclassical economics. (See, e.g., Landreth and Colander 1994 or Ekelund and Hebert 1990.) In particular, Gossen's work on the subjective estimation of enjoyment (utility) and his explanation of exchange have been gratefully acknowledged. These laws have formed the backbone of neoclassical economics.
The translation of Gossen's rather archaic German into English by Rudolph C. Blitz (Gossen [1889] 1983) and our own recent contribution to a French translation (Gossen [1889] 1995) have made the original text available to a wider audience.l The greater accessibility of the work makes it clear that only a careful selection of the Entwickelung was extracted by Gossen's earlier commentators. On rereading Entwickelung it becomes obvious that the specific tenets are gradually extended to the individual in society, and then to proposals for monetary reform or nationalization of land, and from there to the evolution of society.2
On rereading Entwickelung it also becomes clear that Gossen's laws are not what they used to be: Gossen's first law is actually a postulate, and the second law is really a theorem. (See also Schumpeter 1954, 910.) The first law simply postulates that the intensity of the enjoyment of each additional "atom" of a good declines until zero, when satiety has been reached. This is given without further proof. Gossen's second law can be deduced from the postulated first law. This leads to the theorem that when income is allocated...