Satiation
Satiation
The Oxford English Dictionary offers one definition of satiation to be the “point at which satisfaction of a need or familiarity with a stimulus reduces or ends an organism’s responsiveness or motivation” and thereby encompasses, in principle, the satiety of both needs and desires.
Neoclassical economics, however fuzzily its boundaries are conceived, sits ill at ease with the distinction between needs and desires. By conceiving of a generality in which the particularity of commodities is submerged in an abstract finite or infinite list, or simply postulated as a coordinate-free, infinite-dimensional space endowed with precisely specified mathematical structure, it obliterates the nineteenth-century distinction between use and exchange values. (The loci classici in the case of a finite list of commodities are Samuelson 1947; Debreu 1959; and McKenzie 2002. For an infinite-dimensional space of commodities, see the reference to Gérard Debreu’s 1952 paper on Valuation equilibrium and Pareto optimum in Debreu 1959 and relevant references in Khan 2008. The source for the use- and exchange-value is Marx 1967, who in turn takes it from chapter 4, book 1 of Smith 1776.) Once food, labor, money, and more popularly current reifications such as fidelity, trust, racial or ethnic characteristics, reputation, and the like are all seen under the same analytical rubric (in addition to Marx 1867, chap. 1, see Hill 1967 for the commodification of labor and Khan 1993 and 2002 for commodification more generally), “wants that spring from the stomach as opposed to those from fancy, appetites of the mind as opposed to hungers of the body” (Marx [1867] 1967, p. 43) are subjected to the same theoretical machinery and tamed by the same indiscriminate calculus, one blind to individual particularities of any commodity. It thus stands to reason that the subject sits ill at ease with the concept of satiation.
Thus perfect competition, as formalized in what is referred to as “general equilibrium theory,” the existence theorem, the two fundamental theorems of welfare economics, and through its adoption of the monotonicity assumption on preferences, the Debreu-Scarf theorem, all assume individual preferences to be non-satiated and the consumption set on which these preferences are defined to be unbounded from above (see Debreu 1959 and McKenzie 2002 for an explication of these results). To be sure, there is a literature in general equilibrium theory that addresses the assumption of satiation and thereby problems arising from compact consumption sets, but it surely constitutes a peripheral rather than a central stream (see McFadden 1969 and the literature that follows him in Winter 1969; Rader 1980; John and Ryder 1985; Weymark 1985; Mas-Colell 1992. I am supposing Debreu’s [1986] verbal proof of the first fundamental theorem to be also relevant here as well as the resurgence of the subject as exemplified in Martins-da-Rocha and Monteiro 2007 and their references.)
At the founding moment of the theory of optimal growth, Frank Ramsey did assume a “bliss point” (a point of satiation in the terms of this entry) for his representative agent (see Ramsey 1928 and its finite commodity generalization in Samuelson and Solow 1965). However, by viewing this assumption as a response to an analytical difficulty rather than as a descriptive point of substance to be incorporated into the theory, subsequent work took two alternative routes. In a literature exemplified by Tjalling Charles Koopmans (1965), David Gale (1967), and William A. Brock (1970), the objective function was rendered well-defined by considering deviations from a golden-rule stock, a stock that ensures the highest constant sustainable rate of consumption and thereby ensuring the convergence of the relevant integral of the utility stream. Alternatively, as in Koopmans (1967) and Nancy L. Stokey and Robert E. Lucas Jr. (1989), the undiscounted framework is done away with altogether as something irrelevant to a regimen in which methodological individualism is rather aggressively prescribed to counter the possibility of any sort of governmental paternalism.
There is an irony in that Robinson Crusoe remains a hallowed figure for neoclassical economics even though his needs are limited (obviously so) and his desires have no ready outlet. (In addition to playing a role in Edgeworth 1881, Koopmans’s 1957 exposition of general equilibrium theory and the John von Neumann and Oskar Morgenstern 1953 criticism of this theory are based on Robinson Crusoe.) However, moving away from the creations of Daniel Defoe, Paul A. Samuelson, and Frank P. Ramsey, one ought perhaps not forget that the skeptical David Hume was crystal clear about the dampening effect of satiation on commerce and on the progress commerce was to bring in its wake. In his influential essay “Of Refinements in the Arts,” he writes:
Riches are valuable at all times, and to all men; because they always purchase pleasures, such as men are accustomed to, and desire.… In a nation where there is no demand for such superfluities, men sink into indolence, lose all enjoyment of life, and are useless to the public, which cannot maintain or support its fleets and armies, from the industry of such slothful members.… Luxury, when excessive, is the source of many ills; but is in general preferable to sloth and idleness, which would commonly succeed in its place, and are more hurtful both to private persons and the public. (Hume [1742/1752] 1985, pp. 276, 272, 280)
The problem of scarcity of labor as a damper to the growth of colonial (plantation) economies brought about by satiation and self-sufficiency of native labor, and its possible cure in terms of a head tax levied in money, was well understood by colonial governments of all stripes in both the nineteenth and the twentieth centuries (see, for example, Mamdani 1976, chaps. 2 and 3), but even a half-adequate exploration of these theoretical and practical issues goes well beyond the ambit of this brief entry.
SEE ALSO Arrow-Debreu Model; Competition, Perfect; Economics, Neoclassical; Optimal Growth; Samuelson, Paul A.;Wants;Welfare Economics
BIBLIOGRAPHY
Brock, William A. 1970. On Existence of Weakly Maximal Programmes in a Multi-Sector Economy. Review of Economic Studies 37 (2): 275–280.
Debreu, Gérard. 1959. The Theory of Value. New York: Wiley.
Debreu, Gérard. 1986. Theoretic Models: Mathematical Form and Economic Content. Econometrica 54 (6): 1259–1270.
Debreu, Gérard, and Herbert E. Scarf. 1963. A Limit Theorem on the Core of an Economy. International Economic Review 4 (3): 235–246.
Edgeworth, F. Y. 1881. Mathematical Psychics. London: Kegan-Paul.
Gale, David. 1967. On Optimal Development in a Multi-Sector Economy. Review of Economic Studies 34 (1): 1–18.
Hill, Christopher. 1967. Pottage for Freeborn Englishmen: Attitudes to Wage Labour in the Sixteenth and Seventeenth Centuries. In Socialism, Capitalism, and Economic Growth: Essays Presented to Maurice Dobb, ed. C. H. Feinstein, 338–350. Cambridge, U.K.: Cambridge University Press.
Hume, David. [1742/1752] 1985. Essays: Moral, Political, and Literary, ed. Eugene F. Miller. Indianapolis, IN: Liberty Fund.
John, Reinhard, and Harl E. Ryder. 1985. On the Second Optimality Theorem of Welfare Economics. Journal of Economic Theory 36 (1): 176–185.
Khan, M. Ali. 1993. On Education as a Commodity. Pakistan Development Review 32: 541–579.
Khan, M. Ali. 2002. On Trust as a Commodity and the Grammar of Trust. Journal of Banking and Finance 26 (9): 1719–1766.
Khan, M. Ali. 2008. Perfect Competition. In The New Palgrave Dictionary of Economics, 2nd ed., ed. Steven N. Durlauf, Lawrence E. Blume, and E. Durlauf. London: Macmillan.
Koopmans, Tjalling Charles 1957. Three Essays on the State of Economic Science. New York: McGraw-Hill.
Koopmans, Tjalling Charles. 1965. On the Concept of Optimal Economic Growth. Pontificiae Academiae Scientiarum Scripta Varia 28 (1): 225–300.
Koopmans, Tjalling Charles. 1967. Objectives, Constraints, and Outcomes in Optimal Growth Models. Econometrica 35 (1): 1–15.
Mamdani, Mahmood. 1976. Politics and Class Formation in Uganda. New York: Monthly Review.
Martins-da-Rocha, Felipe V., and Paulo K. Monteiro. 2007. Unbounded Exchange Economies with Satiation: How Far Can We Go? Mimeo. Rio de Janeiro: FGV.
Marx, Karl. [1867] 1967. The Process of Capitalist Production. Vol. 1 of Capital: A Critique of Political Economy, ed. Frederick Engels, trans. S. Moore and E. Aveling. New York: International Publishers.
Mas-Colell, Andreu. 1992. Equilibrium Theory with Possibly Satiated Preferences. In Equilibrium and Dynamics: Essays in Honour of David Gale, ed. Mukul Majumdar, 201–213. New York: St. Martin’s.
McFadden, Daniel. 1969. A Simple Remark on the Second Best Pareto Optimality of Market Equilibria. Journal of Economic Theory 1 (1): 26–38.
McKenzie, Lionel W. 2002. Classical General Equilibrium Theory. Cambridge, MA: MIT Press.
Rader, Trout. 1980. The Second Theorem of Welfare Economics When Utilities Are Interdependent. Journal of Economic Theory 23 (3): 420–424.
Ramsey, Frank P. 1928. A Mathematical Theory of Savings. Economic Journal 38 (152): 543–559.
Samuelson, Paul A. 1947. Foundations of Economic Analysis. Cambridge, MA: Harvard University Press.
Samuelson, Paul A., and Robert M. Solow. 1956. A Complete Capital Model Involving Heterogeneous Capital Goods. Quarterly Journal of Economics 70 (4): 537–562.
Smith, Adam. [1776] 1981. An Enquiry into the Nature and Causes of the Wealth of Nations, ed. R. H. Campbell and A. S. Skinner. Indianapolis, IN: Liberty Fund.
Stokey, Nancy L., and Robert E. Lucas Jr. 1989. Recursive Methods in Economic Dynamics. Cambridge, MA: Harvard University Press.
Von Neumann, John, and Oskar Morgenstern. 1953. Theory of Games and Economic Behavior. 3rd ed. Princeton, NJ: Princeton University Press.
Winter, Sidney G., Jr. 1969. A Simple Remark on the Second Optimality Theorem of Welfare Economics. Journal of Economic Theory 1 (1): 99–103.
Weymark, John A. 1985. Remarks on the First Welfare Theorem with Nonordered Preferences. Journal of Economic Theory 36 (1): 156–159.
M. Ali Khan