This insight further addresses wage issues that would otherwise mystify people. Why does a basketball star, who would seem to provide nothing necessary to human life, make so much more money than a reading teacher, who is teaching a crucial skill? Again, it is not the total utility of the task that matters for economics, but the utility of the incremental choice of the acting person.
Why, on holidays, are restaurants open but banks closed, when surely banking provides a more unique service to society and anyone can cook stuff at home anytime? The answer is that restaurants make higher profits on the margin on holidays, when people want to go out to eat, whereas the banks have discovered that their profit margins are best served by opening when people tend to do their banking, which is not on holidays.
Marginalism helps illuminate many other economic concepts, such as opportunity cost (the real cost of anything is the thing you give up to get it), subjective value (economic value resides in the human mind, not the physical good), diminishing marginal utility (the more of each additional unit you buy, the less you are willing to pay for it), and the relationship of cost and price (the cost of a good never dictates its market prices; indeed, the reverse is true).
It provides insight into nearly every aspect of human behavior, provided we have maximum choice to express our preferences.
On the other hand, political democracy poses a serious problem for the reality of marginalism. When people vote, they seem to be making an absolute choice for someone to be a ruler. This is where the idea of a “mandate” comes from.
In reality, people are most often choosing on the margin: avoiding a worst fate, holding their noses to guess at the least bad, doing what they feel they must do under the circumstances, or maybe expressing a temper tantrum over one which issue among a million – same as the rest of life. Politics chews up all these complications and spits them out as your new overlord, as if marginalism doesn’t matter.
Markets, in contrast, are forever accommodating choices on the margin – a daily plebiscite in which every voter/consumer wins, as Ludwig von Mises says.
Small and great evils in the world have come from absolutism, the belief that there is only one way forward, and that if that way is not what you choose, that makes you the evil enemy. Governments think this way. They don’t think on the margin. A world of billions of people acting and thinking based on marginal utility is too complicated a notion for them. So they decide to just ignore it all and divide the world between us and them.