Hermann Heinrich Gossen

Hermann Heinrich Gossen
Hermann Heinrich Gossen
Born	7 September 1810; Düren, North Rhine-Westphalia, First French Empire
Died	February 13, 1858 (aged 47); Cologne, North Rhine-Westphalia, Kingdom of Prussia
Nationality	German
Academic career
Field	Microeconomics
Alma mater	University of Bonn
Contributions	General theory of marginal utility; Gossen's laws

Hermann Heinrich Gossen (7 September 1810 – 13 February 1858) was a German economist who is often regarded as the first to elaborate, in detail, a general theory of marginal utility.

Prior to Gossen, a number of economic theorists, including Gabriel Cramer,^[1] Daniel Bernoulli,^[2] William Forster Lloyd,^[3] Nassau William Senior,^[4] and Jules Dupuit^[5] had employed or asserted the significance of some notion of marginal utility. But Cramer, Bernoulli, and Dupuit had focussed upon specific problems, Lloyd had not presented any applications of theory, and if Senior provided a detailed elaboration of the general theory he had developed,^[6] he had done so in language that caused his applications of theory to be missed by most readers.

Life and family background

Hermann Heinrich Gossen was born in Düren, Roer (department) (Roerdépartement, or Département de la Roer), First French Empire.^[7] Today that area is known as North Rhine-Westphalia, Germany. Hermann died in Cologne (Köln), North Rhine-Westphalia, Prussia. His parents were Georg Joseph Gossen (December 15, 1780 - October 7, 1847) (aka Georg Josef Gossen) and Maria Anna Mechtilde (Mechthildis) Scholl (February 22, 1768 - June 29, 1833). Georg and Maria were married on October 25, 1804 in Aachen.

Hermann's paternal grandfather, Arnold Winand Gossen, married Anna Cordula Schmitz on September 3, 1774 in Selgersdorf, Jülich, Prussia. Arnold Winand Gossen - a Kurfürstlicher steuereintreiber (Electoral tax collector) and Wahlrentenmanager (Electoral pension manager) - was one of the most respected officials operating in the city of Düren, the duchy of Jülich, and other parts of the Lower Rhine region of Prussia. However, beginning in the mid-1790s, Arnold gradually lost his position and income, due to the acquisition by France of Prussian territories where Arnold had ongoing business operations. These acquisitions of Prussian territory by France were a consequence of Prussia's involvement in the French Revolutionary Wars (1792-1802).^[8]

Hermann studied at the University of Bonn, then worked in the Prussian administration until retiring in 1847, after which he sold insurance until his death.^[9]

Entwickelung der Gesetze des menschlichen Verkehrs (1854)

Gossen's book Entwickelung der Gesetze des menschlichen Verkehrs, und der daraus fließenden Regeln für menschliches Handeln (Braunschweig: Druck und Verlag von Friedrich Vieweg und Sohn, 1854) (Development of the Laws of Human Intercourse and the Consequent Rules of Human Action) went through two printings in 1854. In this work, Gossen very explicitly develops general theoretical implications from a theory of marginal utility, to the extent that William Stanley Jevons (one of the preceptors of the Marginal Revolution) was later to remark that

[I]t is quite apparent that Gossen has completely anticipated me as regards the general principles and method of the theory of Economics. So far as I can gather, his treatment of the fundamental theory is even more general and thorough than what I was able to scheme out.^[10]

Entwickelung was poorly received, as economic thought in Germany at the time (1854) was dominated by the Historical School, and Gossen had written Entwickelung in a dense, heavily mathematical style, a manner of exposition which was quite unpopular with adherents of the Historical School. Although Gossen himself declared that his work was comparable in its significance to the innovations of Copernicus, few others agreed. Embittered by the work's poor reception, shortly before his death Gossen ordered the destruction of all copies of the book. All unsold copies were pulled from stores by the publisher, who did not destroy them however, but instead put them in storage. About 32 years later, these unsold copies of the book were purchased by Berlin publisher R. L. Prager, who recycled and re-issued them in 1889, under the imprint Verlag von R. L. Prager. Today, only a few copies of the 1854 and 1889 printings of the book still exist.^[11]

In the early 1870s, William Stanley Jevons, Carl Menger, and Léon Walras each reintroduced the theory of marginal utility. During discussions in 1878 as to which of those three had been the first to formulate the theory, Robert Adamson (1852-1902), who was a colleague of Jevons at Owens College (Manchester, England), finally discovered a copy of Entwickelung in the British Museum, after trying for several years to locate a copy of the book, which had become unobtainable (and had been ignored and forgotten as well) since being removed from sale in stores by its publisher in late 1857 or early 1858.^[12] However, this re-discovery of the book came several years after the three principals in the Marginal Revolution had published their own books, and significant differences with Gossen’s original contributions were overlooked. A century later (1983), Gossen’s book was translated into English.^[13] In his introduction to the book, Nicholas Georgescu-Roegen, a prominent American economist (Distinguished Fellow of the American Economics Association), strongly supported Gossen’s vision, which stands in opposition to the neoclassical orthodoxy that utility (satisfaction) is properly identified with consumables in basic (utility) theory rather than consumption activity:

Given that the only certain fact is the intensity of pleasure felt at an instant of time, the only epistemologically sound approach is to take intensity as the primary concept. ([1854] 1983, lxxxi [See "Further reading" below.])

Georgescu-Roegen also extended Gossen’s behavioral formulation by introducing leisure in addition to production and consumption activities.

Gossen was among the first economists to argue that a centrally planned economy was unworkable:^[14]^[15]

Original: " … nur durch Feststellung des Privateigenthums der Maßstab gefunden wird zur Bestimmung der Quantität, welche den Verhältnissen angemessen am Zweckmäßigsten von jeden Gegenstand zu produciren ist. Darum würde denn die von Communisten projectirte Centralbehörde zur Vertheilung der verschiedenen Arbeiten und ihrer Belohnung sehr bald die Erfahrung machen, daß sie sich eine Aufgabe gestellt habe, deren Lösung die Kräfte einzelner Menschen weit übersteigt."

Translation: " ... only through the establishment of private property is to be found the measure for determining the quantity of each commodity which it would be best to produce under given conditions. Therefore, the central authority [that's] proposed by the communists for the distribution of the various tasks and their reward, would very soon find that it had undertaken a task the solution of which far exceeds the abilities of individual men."

References

^ Cramer, Garbriel; letter of 21 May 1728 to Nicolaus Bernoulli (excerpted in PDF Archived 2008-09-09 at the Wayback Machine).
^ Bernoulli, Daniel (1738). "Specimen theoriae novae de mensura sortis" [Exposition of a new theory on the measurement of risk]. Commentarii Academiae Scientiarum Imperialis Petropolitanae [Memoirs of the Imperial Academy of Science at St. Petersburg] (in Latin and French). 5: 175–192.; English translation: Bernoulli, Daniel (January 1954). "Exposition of a new theory on the measurement of risk". Econometrica. 22 (1): 23–36. doi:10.2307/1909829. JSTOR 1909829. S2CID 9165746.
^ Lloyd, William Forster; Lectures on Population, Value, Poor Laws and Rent (1837).
^ Senior, Nassau William (1836). An Outline of the Science of Political Economy. London, England: W. Clowes and Sons.
^
Dupuit, Jules (1844). "De la mesure de l'utilité des travaux publics" [On the measure of the utility of public works]. Annales des ponts et chaussées (in French). 8 (2): 332–375.
- English translation: Dupuit, Jules; Barback, R.M., trans. (1952). "On the measure of utility of public works". International Economic Papers. 2: 83–100.{{cite journal}}: CS1 maint: multiple names: authors list (link)
^ White, Michael V; “Diamonds Are Forever(?): Nassau Senior and Utility Theory” in The Manchester School of Economic & Social Studies 60 (1992) #1 (March).
^ In the year Hermann was born (1810), and for a few years thereafter, the city of Düren was part of France. As early as 1794 the city of Düren was occupied by French Revolutionary troops, due to Prussia's involvement in the War of the First Coalition (1792-1797). By the terms of secret clauses of the Treaty of Campo Formio (October 17, 1797), the cities of Düren and Aachen (Aix-la-Chapelle) now came under the rulership of the First French Republic (Aachen previously had been a Free Imperial City in the Holy Roman Empire). The Treaty of Campo Formio terminated the War of the First Coalition. Finally, by the Treaty of Lunéville (February 9, 1801), Prussia officially and publicly (not secretly) ceded Düren, Aachen, and the entire west bank of the Rhine River to France. Under both the First French Republic (1792-1804) and the First French Empire (1804-1814), Aachen was the chief city in the French Département de la Roer (Roerdépartement). From 1798-1814 Düren was the main city in the canton Düren in the Aachen arrondissement of the Département de la Roer (Roerdépartement). As one of the provisions of the Congress of Vienna (June 9, 1815), the territory known as the Lower Rhine - which included the French départements Rhin-et-Moselle, Sarre, and Roer - was ceded back to Prussia by France via an agreement with Frederick William III of Prussia (King of Prussia from 1797-1840). On April 16, 1816, these former French départements, now part of the Kingdom of Prussia, were combined to form the Grand Duchy of the Lower Rhine (Grossherzogtum Niederrhein), aka the Lower Rhine Province (Provinz Niederrhein), which King Frederick William III ruled over under his title Grand Duke of the Lower Rhine. On June 22, 1822 a Kabinettsorder (Order of the Prussian Cabinet) united the Grand Duchy of the Lower Rhine (Lower Rhine Province) with the neighboring Province of Jülich-Cleves-Berg - the province immediately to the south of the Lower Rhine Province - to form the Rhine Province.
^ Arnold's loss of his position and income was due, generally speaking, to the French occupation in western Prussia that was a result of Prussia's involvement in the War of the First Coalition (1792-1797). More specifically, Arnold's losses were due to France's annexation of the west bank of the Rhine River, and to the ceding to France by Prussia of Düren, Aachen, and other Prussian cities and territories where he was very active in business. Arnold's fortunes started to decline rapidly when representatives of France and Prussia signed the first part of the Peace of Basel (1795) on April 6, 1795. A secret article in the Peace of Basel recognized French control of the west bank of the Rhine River - pending approval by members of the Imperial Diet (Holy Roman Empire). A few years later, the Treaty of Campo Formio (October 17, 1797) - the treaty that ended the War of the First Coalition - also contained secret clauses that affected Arnold's fortunes. These secret clauses extended the borders of France up to the Rhine, Nette, and Roer Rivers, again ceded control of the west bank of the Rhine River to France, and additionally ceded control of the cities Düren and Aachen to France, thus expanding the territory of France into areas of Prussia where Arnold had business operations. Finally, by the Treaty of Lunéville (February 9, 1801), Prussia officially and publicly (not secretly this time) ceded areas of the Lower Rhine region (including the cities Düren and Aachen), plus the entire west bank of the Rhine River, to France.
^ Rutherford, Donald (2002). "Gossen, Hermann Heinrich (1810-1858)". Routledge Dictionary of Economics (2nd ed.). London and New York: Routledge. p. 236 – via Internet Archive.
^ Jevons, William Stanley (1879). The Theory of Political Economy (2nd ed.). London, England: Macmillan and Co. p. xxxviii.
^ As the 1982 Nobel prize winner George Stigler reported in his memoirs, a nice copy of the first edition of the book was purchased by his son Stephen Stigler for $25 and presented to him as a present. Another copy of the same book was sold for $15,000 at an auction ten years later. See Stigler, George J. (1988). Memoirs of an Unregulated Economist. New York: Basic Books. p. 217. ISBN 9780226774404.
^ Jevons, William (1888). "Preface to the Second Edition (1879)". The Theory of Political Economy. p. XXXI.
^ Gossen, Hermann Heinrich (1983). The Laws of Human Relations, and The Rules of Human Action Derived Therefrom. Translated by Blitz, Rudolph C. Cambridge, Massachusetts and London, England: MIT Press – via Internet Archive.
^ Hermann Heinrich Gossen (1854). Entwickelung der Gesetze des menschlichen Verkehrs, und der daraus fließenden Regeln für menschliches Handeln [Development of the laws of human intercourse, and the rules following therefrom for human action]. Braunschweig, (Germany): Friedrich Vieweg und Sohn. p. 231., as cited in: Mises, Ludwig von (2016). Die Gemeinwirtschaft: Untersuchungen über den Sozialismus (Unveränderter Nachdruck der 2., umgearbeiteten Auflage, Jena 1932, mit einem Vorwort von Theo Müller und Harald Freiherr v. Seefried). De Gruyter Oldenbourg. pp. 114–115. doi:10.1515/9783110504705.; Mises, Ludwig von (1951). Socialism: An Economic and Sociological Analysis. Translated by Kahane J. New Haven: Yale University Press. p. 135 – via Internet Archive.
^ Hayek, F. A. (1935). "The Nature and History of the Problem". Collectivist Economic Planning. London: Routledge. p. 26 – via Internet Archive.