"One of the most useful economic concepts is marginalism—the effect of incremental, or small, changes. Marginalism shows how economic reasoning allows us to accomplish more by accepting limits on what can be accomplished—by focusing on marginal (some will say mundane) adjustments to make things better, rather than on more heroic attempts to solve problems totally and completely. It also shows that what many people see as objectionable outcomes and actions are actually reasonable accommodations to scarcity and that attempts to “correct” them are harmful. I illustrate marginalism with two examples. In following months I shall discuss how failure to understand marginalism reduces the good we can do, and often ends up being deadly.
Diamonds and Water, Wrestlers and Nurses - We have all heard arguments like these: Something is wrong with the economy when professional wrestlers are paid a lot more than nurses. Food is far more important than golf, so we are making a big mistake by converting so much prime agricultural land to golf courses. If you are going to do a job, do it as well as you possibly can. Most people enjoy their work and don’t have to be bribed with bonuses and merit pay to get them to perform well. Some things, such as human life, are simply too valuable to put a price on.
Each of these sounds plausible. But all of them are flawed because they ignore the importance of marginal considerations, and if we acted on them we would end up reducing the good that can be accomplished.
For years economists and others were perplexed that the price of diamonds is far greater than the price of water, even though water is far more valuable than diamonds. This diamond-water paradox wasn’t resolved until the 1870s when the Austrian economist Carl Menger and the British economist William Jevons independently recognized the difference between marginal value and total value."
https://fee.org/articles/its-the-margin-that-counts/
Diamonds and Water, Wrestlers and Nurses - We have all heard arguments like these: Something is wrong with the economy when professional wrestlers are paid a lot more than nurses. Food is far more important than golf, so we are making a big mistake by converting so much prime agricultural land to golf courses. If you are going to do a job, do it as well as you possibly can. Most people enjoy their work and don’t have to be bribed with bonuses and merit pay to get them to perform well. Some things, such as human life, are simply too valuable to put a price on.
Each of these sounds plausible. But all of them are flawed because they ignore the importance of marginal considerations, and if we acted on them we would end up reducing the good that can be accomplished.
For years economists and others were perplexed that the price of diamonds is far greater than the price of water, even though water is far more valuable than diamonds. This diamond-water paradox wasn’t resolved until the 1870s when the Austrian economist Carl Menger and the British economist William Jevons independently recognized the difference between marginal value and total value."
https://fee.org/articles/its-the-margin-that-counts/