Friedrich August von Hayek, “Gossen, Hermann Heinrich”

Hayek’s biographical encyclopedia entry, originally published in 1932 and republished in 1937, presents Hermann Heinrich Gossen as an initially neglected precursor of marginal-utility economics. Its structure moves from intellectual biography and the reception of Gossen’s sole book to a compact exposition of his economic principles, followed by references for further study. The central claim concerns both historical priority and conceptual achievement: Gossen anticipated principles subsequently recognized as foundational to the explanation of value and price.

The biography contrasts Gossen’s mathematical inclination with the legal studies and government service imposed by his father. His interest in economics developed at university, apparently under Bentham’s influence; after his father’s death in 1847, economic study became his principal occupation. Hayek juxtaposes Gossen’s hope of attaining the fame of Copernicus with the near-total neglect of his 1854 book, Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln. Shortly before his death, the disappointed author ordered the edition destroyed. Recognition came later through R. Adamson’s discovery and Jevons’s acknowledgment, in 1879, of Gossen’s anticipation of his general principles and method.

Hayek identifies the substantive basis for that retrospective recognition:

Gossen’s most important contribution is a clear formulation of what later came to be called the principle of marginal utility and its application to problems of value and price.

The qualification “what later came to be called” distinguishes Gossen’s achievement from the terminology subsequently attached to it. Hayek organizes the explanation around three laws. The first describes diminishing satisfaction: successive units of the same commodity yield less satisfaction until satiety is reached. The second turns this account of consumption into a rule for allocating resources among competing wants:

Second, if it is impossible to gratify all wants to the point of satiety, it is necessary in order to obtain maximum satisfaction to discontinue the satisfaction of different wants at the points at which their intensity has become equal.

Here scarcity makes choice necessary, while equalization supplies the criterion for maximum satisfaction. The third law connects subjective value to the first two: goods possess subjective value only when their available quantity falls short of the quantity wanted, and the value of additional units declines toward zero. Hayek then extends the allocation principle from consumption to productive effort:

Also men should distribute their efforts so as to make the value of the quantity of each good produced by a unit of effort equal to the pain of the last unit of effort expended.

This final condition brings the burden of work into the calculation alongside the value of its product. Hayek closes by noting Gossen’s use of algebraic formulae and two-dimensional diagrams. The entry’s significance lies in its concise reconstruction of how diminishing satisfaction, constrained choice, subjective scarcity, and effort fit together within Gossen’s contribution to economic theory.