Marginal Utility

Here’s a nice little puzzle: why do we value diamonds over water? Water is obviously more useful to us: we’re dependent on water to remain alive! Diamonds are nice to look at and really hard. A nice-to-have, but not even close in terms of utility.

Thankfully, Carl Menger has an explanation: marginal utility. We value diamonds more than water “at the margin.” If our basic thirst needs are met, additional units of water are often less useful to us than additional units of diamonds.

So, how does this apply to trust? Well, it seems to me that we calibrate our willingness to trust based on the perceived marginal utility of what we’re risking. I might trust you enough to loan you $10. But all my money? While no different in kind, it clearly crosses some threshold of safety or common sense.

Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes? Look at the birds of the air: They do not sow or reap or gather into barns—and yet your heavenly Father feeds them. Are you not much more valuable than they? Who of you by worrying can add a single hour to his life? And why do you worry about clothes? Consider how the lilies of the field grow: They do not labor or spin. Yet I tell you that not even Solomon in all his glory was adorned like one of these. If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the furnace, will He not much more clothe you, O you of little faith?

• Matthew 6:25-30

Here is Jesus talking about some real basics of “necessity,” and yet he’s telling us not to worry about them. So how much more should we not worry about any marginal gains beyond these necessities?

You have heard that it was said, ‘Eye for eye and tooth for tooth.’ But I tell you not to resist an evil person. If someone slaps you on your right cheek, turn to him the other also; if someone wants to sue you and take your tunic, let him have your cloak as well; and if someone forces you to go one mile, go with him two miles. Give to the one who asks you, and do not turn away from the one who wants to borrow from you.

• Matthew 5:38

The more I perceive all earthly utility as “marginal,” the more people I can trust, and therefore the more chances I create for the “heaven on earth” of good trust to exist. It’s not naivety, it’s a sign wealth.

Menger’s insight in marginal utility is that we don’t compare the value of “all water” with the value of “all diamonds,” rather only the specific diamonds or water we’re considering in any given transaction, but Jesus goes so far as to say that to “gain the whole world” is unprofitable when traded against a man’s soul:

For whoever wants to save his life will lose it, but whoever loses his life for My sake will find it. What will it profit a man if he gains the whole world, yet forfeits his soul?

• Matthew 16:25-26

I can only surmise that the Christian is at an advantage when it comes to extending trust to others, because the Christian can not, in the ultimate measure of things, be truly harmed.

O death, where is your victory? O death, where is your sting?