[jRoden]

"In many cases, Karelis says, diminishing marginal utility certainly does apply:"

Either way, I'd like to know why exactly he and the article are crap. I'm not completely sold on it myself, but you've really only managed to appeal to authority so far.

[yummyfajitas]

The main reason his theory is crap is it just doesn't agree with experiment. The article mentions several, all of which tend to encompass the income regime Karelis is presumably talking about. One example is the negative income tax experiment of the 70's, another is welfare to work.

If Karelis has evidence of his theory, he should present it. But as it stands, he is pushing thought experiments and analogies, and telling us to ignore the empirical evidence when it disagrees with his theory.