The English economistWilliam Stanley JevonsHe was born on September 1, 1835 in Liverpool. He studied chemistry and botany at University College London. Due to the bankruptcy of his father’s business in 1847, he left school to take up the post of assayer at the Sydney Mint, Australia. He stayed there for five years, resuming his studies at University College upon his return to England. He was later appointed to the post of president of political economy at his alma mater and retired from there in 1880. Two years later, with a series of unfinished books in the works,Jevonsdrowned while swimming. He was forty-six years old.
This statement marked a significant departure from the classical theory of value, which stated that value was derived from the labor used to produce a product or from the cost of production in general. Thus began the neoclassical school, which remains the dominant one in economics today.
Jevonswent on to define the “exchange equation“, which shows that for a consumer to maximize his utility, the relationship between the marginal utility of each item consumed and its price must be equal. If not, then he or she can, with a given income, reallocate consumption and get more utility.
Of course, as with most new developments in economic theory, you can always find previous writers who said some of the same things. The paper ofJevonsin the marginal revolution it is no exception. Much of what he said had previously been said by Hermann Gossen in Germany, Jules Dupuit and Antoine Cournot in France, and Samuel Longfield in Great Britain. Yet historians of economic thought are sure thatJevonsI had never read them.
Jevonshe thought much less about the productive side of the economy. It is ironic, therefore, that he became famous in Britain for his bookThe Coal Question, in which he wrote that the industrial vitality of Great Britain depended on coal and, therefore, would diminish as that resource was depleted. As coal reserves are depleted, he wrote, the price of coal would rise. This would allow producers to extract coal from poorer or deeper seams. He also argued that the United States would become an industrial superpower. Although his forecast was correct for both Britain and the United States, and he was correct about the incentive to mine more expensive veins, he was almost certainly wrong that the main factor was the cost of coal.Jevonsfailed to appreciate the fact that as the price of an energy source rises, entrepreneurs have a strong incentive to invent, develop, and produce alternative sources. In particular, it did not anticipate oil or natural gas. In addition, it did not take into account the incentive, as the price of coal rose, to use it more efficiently or to develop technology that would lower discovery and mining costs.