13-9 Man allocates everything so that each unit goes into the use with the highest prospective marginal utility on his value scale—i.e., in accordance with the principle of maximizing his psychic income

“Man allocates his time between leisure and productive labor, between labor for money and labor on unexchangeable items, etc., in accordance with the principle of maximizing his psychic income. Each man, at every point in time, has in his ownership a certain stock of useful goods, a certain stock of resources, or assets. These resources may include not only money, but also consumers’ goods, nonpersonal producers’ goods (land and capital goods), personal energy, and time. He will allocate each one of these resources according to the same principles by which he has allocated money—so that each unit goes into the use with the highest prospective marginal utility on his value scale.”

“Let us for a time consider a world where every good is produced only by several specific factors. In this world, a world that is conceivable, though highly unlikely, every person, every piece of land, every capital good, would necessarily be irrevocably committed to the production of one particular product. There would still, in the sphere of production of exchangeable goods, be one allocation that every man would make: how much time to devote to labor and how much to leisure.”

“Money obeys the law of marginal utility, just as any other commodity does.”

Next:

• 13-9a All goods are somewhat substitutable for one another thanks to money
• 13-10 The law of the diminishing marginal utility of money applies only to the valuations of each individual person

Related:

• 13-6 Man reveals only a part of his value scale through actions
• 13-1a3a2.1 An exchange is positive-sum only subjectively
• 13-4d4 Value is subjective
• 13-6c The action axiom implies corresponding value scales
• 13-7 Value scales consist of specific units, and associated subjective utilities
• 13-8c Utility alone determines the price and the quantity exchanged
• 3-1a4b8 With few exceptions, buy on the cheapest market and sell on the dearest leads to satisfaction of the most highly valued ends of each individual, both as consumer and as a producer
• Man maximizes his psychic income, and not monetary income per se
  • 13-1a3a1a Everyone benefits a psychic profit at the time of exchange (ex ante), but not everyone will benefit from the exchange (ex post)
  • 13-1a3a1a1 Only monetary income (or loss) can be observed and measured ex post—never psychic income (or loss)