Hermann Heinrich Gossen

Hermann Heinrich Gossen was a German economist whose 1854 book formulated principles of diminishing marginal utility and utility-maximizing consumption. His ideas were largely overlooked during his lifetime and later influenced marginal utility theory.

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Utility: In economics, utility is a representation of the satisfaction or preference associated with outcomes. Gossen treated satisfaction from consumption as something that could be analyzed and maximized.
The Laws of Human Relations: The Laws of Human Relations is Gossen’s 1854 work on human behavior, utility, and economic choice. It contains the two principles later known as Gossen’s laws.
Marginal revolution: The marginal revolution was the late-nineteenth-century shift toward explaining economic value through marginal utility and marginal analysis. Gossen’s work anticipated ideas that became prominent during this intellectual transformation.
Classical economics: Classical economics is a tradition centered on production, distribution, and long-run growth, associated with economists such as Adam Smith and David Ricardo. Gossen shifted attention toward individual satisfaction and consumption choices rather than production alone.
Marginal utility: Marginal utility is the change in utility produced by consuming one additional unit of a good. His account of declining satisfaction from successive units anticipated this central concept.
Prussian economic thought: Prussian economic thought encompasses economic ideas and scholarship produced in Prussia and its intellectual institutions. Gossen developed his work within the German-speaking intellectual world of the Prussian era.
Marginal utility theory of value: Marginal utility theory explains prices and value partly through the utility of the next unit available to consumers. Gossen’s analysis helped establish the intellectual lineage of this account of value.
Labor theory of value: The labor theory of value explains the value of commodities by the labor required to produce them. Gossen’s focus on subjective satisfaction offered a different route to explaining economic value.
Diminishing marginal utility: Diminishing marginal utility is the tendency for each additional unit consumed to add less utility than the previous one. This principle is the core of Gossen’s first law.
Carl Menger: Carl Menger was an Austrian economist who founded the Austrian School and helped establish marginal utility analysis. Menger independently developed marginal utility theory after Gossen’s book had been overlooked.