his disposal for their enjoyment. Certain com modities are absolutely excluded by reason of their cost. From those which remain he chooses first that one which yields the largest surplus of utility over the cost involved in securing it, and then other commodities in the order of the surplus utility which they yield. This is the true economic order of consumption. It differs from the natural order, by which is meant the order in which commodities would be chosen, if they were entirely free. Those commodities which have a large surplus of utility over cost would be chosen, in the economic order, before others with a higher total utility but lower cost.
If we consider the various single commodi ties chosen as made up of a succession of in crements, each corresponding to the same unit of expenditure, we shall find that those incre ments are not possessed of uniform utility. The first increment of any commodity will have a maximum utility. The succeeding increments will steadily diminish in utility until, when the desire for the commodity in question is entirely satisfied, an increment is reached of which the utility is zero. Long before this point is reached, however, a second commodity will have been chosen, the first increment of which has a utility perhaps nearly as great as the highest increment of the first commodity. The suc ceeding increments of this second commodity diminish in utility as did those of the first. This experience is repeated with a third and fourth commodity, in each case the utility of the highest increment ranging between the highest and the lowest increment of the next preceding commodity, tending generally to approach the higher. In some instances it may even be quite as great, since the pleasure afforded by the first increment of two commodities may balance, and it might thus become a matter of indiffer ence which should be chosen first.
This law of diminishing utility may be ex pressed arithmetically by the erection of a scale of diminishing utilities. The various commodi ties are represented by the letters A, B, C, D, etc., in the order in which they are chosen by the consumer. If the first increment A yields a utility of ten units, its succeeding increments may be represented as diminishing uniformly in utility until of the eleventh or final incre ment the utility is zero. The first increment of B yields, it may be, but eights units ; the first increment of C, six units ; and the first incre ment of D, three units. If we assume for convenience that there are only these four com modities from which to choose, the various increments, each designated by the number expressing its utility, may be arranged as fol lows in the order in which they are chosen m A, 9 A, 8 A, 8 B, 7 A, 7 B, 6 A, 6 B, 6 C, 5 A, 5 B, 5 C, 4 A, 4 B, 4 C, 3 A, 3 B, 3 C, 3 D, 2 A, 2 B, 2 C, 2 D, I A, I B, I C, i D.
This is the so-called scale of diminishing utili The numbers arranged under the letters which designate the commodities represent the succeeding increments of those commodi ties. Three increments of A (to, 9, and 8) will be desired before any of the others. Five increments of A and three of B will be con sumed before any of C or D, and so on. If each increment represents what can be secured by one hour's labor, and A stands for food, B for clothing, C for shelter, and D for ornament, the scale would express the following facts : that two hours' labor would be devoted to the production (or securing possession) of food before any other commodity could be consid ered. That the third hour would produce an equal utility whether devoted to clothing or food, so that half of it would probably be given to each. That it would be only after six hours' labor, of which four had been given to food and two to clothing, that sufficient pleasure could be derived from shelter to furnish an inducement to devote a portion of the time to the task of securing shelter. The correspond ing numbers in the different columns represent different utilities, equal in amount and equally difficult of acquisition. If each separate desire could be completely satisfied, it would be found that ten increments of A, eight of B, six of C, and three of D had been consumed.
The idea of utility, developed at length in the preceding paragraphs, has been introduced into recent economic discussions as a basis for the theory of value. In a later chapter on the subject of value the relations between value and utility will be examined, but there are first to be made other and more funda mental applications of the conception of utility within the field of The study of consumption, like that of production, is wholly independent of considerations drawn from the theory of value. But consumption is vitally de pendent on utilities. When the available utili ties are increased, consumption is improved ; 1 One of the first things the student of economics learns is that the end of economic action is the creation of " utili ties." . . . But unfortunately for the student, he is, as a rule, no sooner introduced to this lofty conception than he is hurried past it by the necessity of measuring the results of economic action. Without much warning, the wide word " utility" is put aside in favor of the word " value." . . . All the while the last word in political economy is not value, but utility. — William Smart, in Annals of the American Academy, Vol. III., p. 257.