Marginal Utility: An Economic Analysis of Thanksgiving
by Gary North
“…Thanksgiving Day is an old tradition in the United States. Although it was not the first such thanksgiving feast, the holiday had its origins in Plymouth Colony, in the fall of 1621, when the Pilgrims who had survived the first year invited Chief Massasoit to a feast, and he showed up with 90 braves and five deer. The feast lasted three days…”
O give thanks unto the LORD; for he is good: for his mercy endureth for ever. O give thanks unto the God of gods: for his mercy endureth for ever. O give thanks to the Lord of lords: for his mercy endureth for ever (Psalm 136:1-3)
Marginal Utility: A Brief History of Thanksgiving
This phrase appears in many of the psalms, but when you find the same phrase three times in a row, you can safely conclude that the writer was trying to make a point, and he thought the point was important. I know of no passage in the Bible where any other phrase appears three times in succession.
Thanksgiving Day is an old tradition in the United States. Although it was not the first such thanksgiving feast, the holiday had its origins in Plymouth Colony, in the fall of 1621, when the Pilgrims who had survived the first year invited Chief Massasoit to a feast, and he showed up with 90 braves and five deer. The feast lasted three days.
There had been a thanksgiving day of prayer and a feast in Maine in 1607. The tiny colony was abandoned a year later. There had also been a thanksgiving service in Jamestown in 1610, but it did not involve a feast.
Marginal Utility: The Official Thanksgiving
The first official Thanksgiving Day was celebrated on June 29, 1676 in Charlestown, Massachusetts, across the Charles River from Boston. But Gov. Jonathan Belcher had issued similar proclamations in Massachusetts in 1730 and in New Jersey in 1749. George Washington proclaimed a day of thanksgiving on October 23, 1789, to be celebrated on Thursday, November 27. In 1863, Abraham Lincoln officially restored it as a wartime measure. The holiday then became an American tradition. It became law in 1941.
Lincoln was a strange contradiction religiously. He was a religious skeptic, yet he invoked the rhetoric of the King James Bible – accurately – on many occasions. His political rhetoric, which had been deeply influenced by his reading of the King James, was often masterful. For example, when he spoke of the cemetery of the Gettysburg battlefield as “this hallowed ground,” using the King James word for holy, as in “hallowed be thy name,” he was seeking to infuse the battle of Gettysburg with sacred meaning – a use of religious terminology that was as morally abhorrent as it was rhetorically successful. It is the sacraments that are sacred, not monuments to man’s bloody destructiveness. In that same year, 1863, he used biblical themes in his October 3 Thanksgiving Day proclamation.
It is the duty of nations as well as of men to own their dependence upon the overruling power of God; to confess their sins and transgressions in humble sorrow, yet with assured hope that genuine repentance will lead to mercy and pardon; and to recognize the sublime truth, announced in the Holy Scriptures and proven by all history, that those nations are blessed whose God is the Lord.
He went on, in the tradition of a Puritan Jeremiad sermon, to attribute the calamity of the Civil War to the nation’s sins, conveniently ignoring the biggest contributing sin of all in the coming of that war: his own steadfast determination to collect the national tariff in Southern ports.
In his proclamation, he made an important and accurate theological point.
We have been the recipients of the choisest bounties of heaven; we have been preserved these many years in peace and prosperity; we have grown in numbers, wealth and power as no other nation has ever grown.
But we have forgotten God. We have forgotten the gracious hand which preserved us in peace and multiplied and enriched and strengthened us, and we have vainly imagined, in the deceitfulness of our hearts, that all these blessings were produced by some superior wisdom and virtue of our own. Intoxicated with unbroken success, we have become too self-sufficient to feel the necessity of redeeming and preserving grace, too proud to pray to the God that made us.
This observation leads to the same question that Moses raised long before Lincoln’s proclamation: Why is it that men become less thankful as their blessings increase?
Less than a decade after Lincoln’s proclamation, three economists came up with the theoretical insight that provides an answer.
Marginal Utility Theory
In the early 1870s, Karl Menger, William Stanley Jevons, and Leon Walras simultaneously and independently discovered the principle of marginal utility. Their discovery transformed economic analysis.
They observed that value, like beauty, is subjectively determined. Value is imputed – a familiar Calvinist theological concept – to scarce resources by the acting individual. Other things remaining equal, including tastes, the individual imputes less value to each additional unit of any good that he receives as income. This is the principle of marginal utility.
This can be put another way. We can say that each additional unit of any resource that a person receives as income satisfies a value that is lower on that individual’s subjective scale of value. He satisfied the next-higher value with the previous unit of income.
This provides a preliminary solution to the original question. I call this solution the declining marginal utility of thankfulness. People look at the value of what they have just received as income, and they are less impressed than they were with the previous unit of income. They focus on the immediate – “What have you done for me lately?” – rather than the aggregate level of their existing capital. They conclude, “What’s past is past; what matters most is whatever comes next.”
Modern economic theory discounts the past to zero. The past is gone; it is not a matter of human action. Whatever you spent to achieve your present condition in life is no longer a matter of human action. The economist calls this lost world “sunk costs.”
There is a major problem in thinking this way. It is the problem of saying “thank you.” The child is taught to say “thank you.” He is not told to do this because, by saying “thank you,” he is more likely to get another gift in the future. He is taught to say “thank you” as a matter of politeness.
I am sure that there is some University of Chicago-trained economist out there who is ready to explain etiquette as a matter of self-interest: “getting more in the future for a minimal expenditure of scarce economic resources.” And, I must admit, people who never say “thank you” do tend to receive fewer gifts. Or, as Moses put it, “And thou say in thine heart, My power and the might of mine hand hath gotten me this wealth. But thou shalt remember the LORD thy God: for it is he that giveth thee power to get wealth, that he may establish his covenant which he sware unto thy fathers, as it is this day” (Deuteronomy 8:17-18). But Moses added an “or else” clause: “And it shall be, if thou do at all forget the LORD thy God, and walk after other gods, and serve them, and worship them, I testify against you this day that ye shall surely perish” (verse 19). Gary Becker would no doubt put it differently, but the point regarding reduced future income is the same: lower. Maybe way, way lower.
The problem is, we look to the present, not to the past. We look at the marginal unit – the unit of economic decision-making – and not at the aggregate that we have accumulated. We assume that whatever we already possess is well-deserved – merited, we might say – and then we focus our attention on that next, hoped-for “util” of income.
As economic actors, we should recognize that the reason why we are allocating our latest unit of income to a satisfaction that is lower on our value scale is because we already possess so much. We are awash in wealth. We are the beneficiaries of a social order based on private ownership and free exchange, a social order that has made middle-class people rich beyond the wildest dreams of kings a century and a half ago. Or, as P. J. O’Rourke has observed, “When you think of the good old days, think one word: dentistry.”
About half of the Pilgrims who arrived in Plymouth in 1620 were dead a year later. The Indians really did save the colony by showing the first winter’s survivors what to plant and how to plant it in the spring of 1621. The Pilgrims really did rejoice at that festival. They were lucky – graced, they would have said – to be alive.
So are we. Ludwig von Mises wrote somewhere (I wish I could remember where) that Charles Darwin was wrong. The principle of the survival of the fittest does not apply to the free market social order. The free market’s division of labor has enabled millions of people to survive – today, billions – who would otherwise have perished.
So, give thanks to God tomorrow, even if your only god is the free market. You did not obtain all that you possess all by yourself. The might of your hands did not secure it for you. A little humility is in order on this one day of the year. Yes, even if you earned a Ph.D. at the University of Chicago.
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At the age of 25, Gary North was the youngest elected member of the Economists’ National Committee on Monetary Policy. He has served as a senior staff member of the Foundation for Economic Education and as a research assistant to U.S. Congressman Ron Paul. He is also the author of Mises on Moneyand the editor of Reality Check, a free e-letter, in which this article originally appeared (to sign up, send an email to firstname.lastname@example.org