The ordinary laws of supply and demand, when properly stated, are the practical manifestation of the theory.
(TPE, p. 108)
|1 The investigation of the nature of utility and the utility function.|
|2 The formal representation of utility maximization.|
|3 The measurement of utility or social welfare.|
The exchange equations, which attempted to explain (equilibrium) exchange in terms of a balance of ‘feeling’, 3 are the main subject of what follows. Jevons placed the Benthamite notion of ‘happiness’ squarely at the centre of his analysis of exchange; in place of the Classical notion (at least as he perceived it) of labour as the ‘cause’ of value, Jevons insisted on utility as the cause of value. While he did not reject a cost of production theory of (long run) value (see below, Chapter 6), he did his best to divert attention away from the long run, and towards the explanation of market transactions instead. 4
For Jevons, the key economic phenomenon requiring explanation was the act of exchange. Given prices, exchange between any two or more economic actors (‘trading bodies’) occurred as long as a preponderance of