From the marginal revolution in economics, Hermann Heinrich Gossen (1854), William Stanley Jevons (The Theory of Political Economy, 1871), Carl Menger (1871), and Léon Walras (1874), set in textbook form by Alfred Marshall (Principles of Economics, 1890).
Weighs what one more unit of staff, spending, or output would cost against what it would return, and stops adding where cost overtakes return.
When to reach for it
When deciding how much to spend, hire, produce, or charge, and averages are hiding whether the next increment pays.
How it runs
- Name the unit of decision: a hire, a dollar, an hour.
- Estimate what the next unit costs and what it returns.
- Add while the benefit exceeds the cost.
- Stop or cut where the cost exceeds the benefit.
- Recalculate at each new level; the margins shift.
Where it sits in SOLVE eX
Go to the source
- Entwickelung der Gesetze des menschlichen Verkehrs, 1854
- The Theory of Political Economy, 1871
- Grundsätze der Volkswirtschaftslehre, in English as Principles of Economics, 1871
- Éléments d'économie politique pure, first part 1874, second part 1877, 1874
- Principles of Economics, 1890