On page one of Black Orchids, by Rex Stout, Archie Goodwin says,
"I do not deny that flowers are pretty, but a million flowers are not million times prettier than one flower. Oysters are good to eat, but who wants to eat a carload?"
Most economists I know would take the above quote as a great example of diminishing marginal utility: another flower or another oyster might add to my overall sense of satisfaction, but it won't add as much as the first few did. In fact, I'll probably use it as an example myself when teaching intro microeconomics this fall at The University of Regina.
But when I'm at the campus pub (The Owl), I'll be raising the following issue with colleagues:
I'll accept the basic notion of diminishing marginal utility, and I'll agree with Archie Goodwin up to a point. But at some point, adding more and more flowers becomes stupendous.
I certainly prefer looking at a massive field of flowers to looking at 100 or 101 flowers. I would agree that an additional flower in either case wouldn't add much to my overall sense of satisfaction. But somewhere along the line, having an (or some) additional flower(s) converts the bunch of flowers to a larger field, which greatly increases my overall satisfaction.
Does this mean that at some point, as additional flowers are added, I experience a massive increase in marginal utility? or, more likely, does adding more flowers convert the product from "flowers" to "fields of flowers"?
This last possibility is perhaps better seen when you consider collecting things, say quarters from each of the US states. If I have twenty of these, then finding the 21st would add some to my total satisfaction. But if I have 49 and find the 50th, then I would have the complete set, which would likely add greatly to my overall satisfaction.
To put it differently, I wouldn't pay anything at all to look at one flower, but I would likely, at times, be willing to pay something to look at a field of a million flowers, and in that sense, I might even take issue with Archie Goodwin.
So while we often teach diminishing marginal utility as a law, there are times when getting one more X converts the bunch of Xs into a set, thus increasing overall satisfaction considerably. But I'm not sure that necessarily violates the "law" of diminishing marginal utility.