Gossen studied in Bonn, then worked in the Prussian administration until retiring in 1847, after which he sold insurance until his death.

Prior to Gossen, a number of theorists, including Gabriel Cramer, Daniel Bernoulli, William Forster Lloyd, Nassau William Senior, and Jules Dupuit had employed or asserted the significance of some notion of marginal utility. But Cramer, Bernoulli, and Dupuit had focussed upon specific problems, Lloyd had not presented any application, and if Senior actually employed to the development of more general theory then he did so in language that caused the application to be missed by most readers.

Gossen's book Die Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fließenden Regeln für menschliches Handeln (The Development of the Laws of Human Intercourse and the Consequent Rules of Human Action), published in Braunschweig in 1854, very explicitly developed general theoretical implications from a theory of marginal utility, to the extent that William Stanley Jevons (one of the preceptors of the Marginal Revolution) was later to remark that

[I]t is quite apparent that Gossen has completely anticipated me as regards the general principles and method of the theory of Economics. So far as I can gather, his treatment of the fundamental theory is even more general and thorough than what I was able to scheme out.

However, Die Entwicklung was poorly received, as economic thought in Germany was then dominated by the Historical School and as Gossen wrote it in a dense, heavily mathematical style which was quite unpopular at the time. Although Gossen himself declared that his work was comparable in its significance to the innovations of Copernicus, few others agreed; most copies of the book were destroyed and, today, only a few original copies exist.

In the early 1870s, William Stanley Jevons, Carl Menger, and Leon Walras each reintroduced the theory of marginal utility. During discussions of which of those three had been the first to formulate the theory, a colleague of Jevons discovered a copy of Die Entwicklung. However, the discovery (in 1878) came several years after the three principals in the Marginal Revolution had published their own books, and significant differences with Gossen’s original contributions were overlooked. A century later (1983) Gossen’s book was translated into English. In his introduction to the book, Nicholas Georgescu Roegen, a prominent American economist (Distinguished Fellow of the American Economics Association), strongly supported Gossen’s vision, which stands in opposition to the neoclassical orthodoxy that utility (satisfaction) is properly identified with consumables in basic (utility) theory rather than consumption activity:

Given that the only certain fact is the intensity of pleasure felt at an instant of time, the only epistemologically sound approach is to take intensity as the primary concept.

Georgescu - Roegen also extended Gossen’s behavioral formulation by introducing leisure in addition to production and consumption activities.