Marginal Analysis

ENL is deeply concerned with maximizing the benefits of economic activity, and it is therefore strongly committed to optimization and the marginal analysis this necessitates.

Marginal quantities are central to economic thought because they allow us to establish an activity's optimum level — that is, the level that maximizes the resulting benefits.

Although ENL is frequently critical of standard economics, the field deserves praise for its formalization of marginal analysis. This is a method that emphasizes the incremental, or marginal, changes in quantities rather than the totals we tend to emphasize in daily life.

For instance, if a quantity increases from seven to nine, the marginal view will highlight the difference between them — plus two — rather than the original and final figures.

To make the method and its application more concrete, imagine that you are Robinson Crusoe stranded on an island. In order to stay alive you must appropriate enough energy from the island's food sources to fuel your internal fires.

It takes energy to gather food, so you must balance your energy gains against your losses. What is the best strategy for obtaining your sustenance?

It turns out that you will maximize your chances of staying alive if you continue hunting, fishing, and picking berries until the next unit of food requires more energy to obtain than the energy you would gain from its consumption. If you gather less food than this, you are not gaining as much net energy as you could from your surroundings. If you gather more, your overexertion will result in lost net energy. In either case you could perish in a difficult environment.

The principle of marginal optimization stretches beyond the human realm and is a core principle for all living things. Consider the following observation by anthropologist Rick Potts:

Animals do not search for food at random. In many birds and mammals, individuals take a characteristic path between separate feeding places. Animals learn a lot about their environments and develop efficient patterns of movement and use of resources… In bees, primates, frogs, reptiles, and numerous birds, animals seem to identify the 'best' plants to feed on, defined by nutritional value and the time it takes to locate the food.1

As with Crusoe, organisms that gather either too little or too much food according to the dictates of marginal energy will likely die. Natural selection must therefore operate powerfully to encode the method in their DNA. This is the reason that "marginal analysis" is manifested daily in the instinctual behaviors of virtually all of the planet's life forms.

Marginal analysis is sometimes criticized by progressive thinkers. One objection is that the method is part of standard thought and is therefore suspect. The other is that the truly important issues in economics today relate to ecological thresholds, which are not subject to the marginal approach.

The first objection is simply guilt by association. While it is true that standard economics strongly supports capitalism's ecocidal logic, its broadly applicable techniques can and should be appropriated by a guiding framework such as ENL.

Marginal analysis can obviously be used for conservative purposes, and this is frequently the case. However, the problem is not with the method itself, but rather with the way it is employed: the quantities that are marginally analyzed and the skewed interpretation of the results. The same comment applies to mathematics and other tools used by standard thinkers.

Regarding the second objection, it is undeniable that many significant economic issues today involve thresholds, and that marginal analysis should not be uses in those cases. But many other issues are amenable to marginal analysis, and in fact cannot be analyzed in any other way.

This is why ENL is structurally split: its treatment of human gains depends on optimization and thus uses marginal analysis, whereas its treatment of environmental limits deals with threshold effects and thus avoids this method.

The following summary of marginal analysis, by standard economic thinker and historian Joseph Schumpeter, reflects this view:

Marginalism came quickly to be considered the badge of a distinct school. And not only that: it even acquired a political connotation, growing, in the eyes of some, into a reactionary monster that stood ready to defend capitalism and to sabotage social reform. In logic, there is no sense whatever in this. The marginal principle per se is a tool of analysis, the use of which imposes itself as soon as analysis comes of age.2

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