Marshall’s Contribution to Economics

Marshall’s Contribution to Economics

           Alfred Marshall was an outstanding English economist during his time. His book, known as the “Principles of Economics,” was the most widely used textbook in England in teaching Economics. It combined concepts of demand and supply, marginal utility, and production costs into one. He is credited with being among the founders of neoclassical economics.

Life and Career

Marshall was born in London (Alfred Marshall, Wikipedia). His father worked as a bank teller and was a devoted Evangelical Christian. Marshall grew up in Clapham and did away with a college education in 1865. He began with metaphysics, precisely “the philosophical foundation of knowledge, especially to theology.” Metaphysics led Marshall to ethics, which led him to economics because economics played an essential role in providing the preconditions for the improvement of the working class.

Marshall believed only in connection with social and political forces. His interest in Georgism, liberalism, socialism, trade unions, women’s education, poverty, and progress reflect the influence of his early social philosophy on his later activities and writings Reisman, D. (2013). He married Mary Paley, one of his students year 1877. He became the first principal at University College, Bristol, which was the institution that later became the University of Bristol, again lecturing on political economy and economics.

In 1885 he interacted with many British thinkers, including Henry Sidgwick, W.K. Clifford, Benjamin Jowett, William Stanley Jevons, Francis Ysidro Edgeworth, John Neville Keynes, and John Maynard Keynes. Marshall founded the Cambridge School, which paid particular attention to increasing returns, the theory of the firm, and welfare economics (Alfred Marshall, Wikipedia). He is the founder of the ‘Marshallian economics’ school of thought. It emphasizes interaction between demand and provision of goods and services, as opposed to ‘Walrasian economics’ school of thinking, which highlights the equilibrium price and quantity of things. (Alfred Marshall, Wikipedia).

Neoclassical Economics

Lawson T. (2013) defines neoclassical economics as a strategy for economics in which production, consumption, and valuation of goods and services are observed as driven by the supply and demand model. According to this line of thought, individuals and organizations seek to attain the highest level of satisfaction from their economic decisions and employ accessible information and production factors that determine the worth of a thing or service.

Thorstein Veblen was the one who came up with the term in his article “Preconceptions of Economic Science” in 1900. Marshall linked the traditional notion that a commodity’s value is determined by its production costs with the new findings of marginalism, claiming that matter is determined by individual utility. According to the neoclassical viewpoint, the primary economic challenge is the organization and allocation of finite resources. As a result, efficiency – defined as the best use of available resources to maximize individual utility and, as a result, a country’s welfare – becomes the most critical evaluation criterion.

According to Arnsperger and Varoufakis (2006), the paradigmatic core of neoclassical economics consists of three assumptions that can be in all neoclassical models and sub-schools. They include; methodological individualism, methodological instrumentalism, and methodological equilibration. There is no universal agreement on what neoclassical economics means, resulting in a wide range of neoclassical approaches to diverse issue areas and domains.

Contributions to Economics

Marshall desired to improve the mathematical rigor of economics and transform it into a more scientific profession. He began work on his economic book, Principles of Economics, in 1881 and worked on it for the next decade. According to Whitaker, J. K. (1996), His worldwide fame was established by his book Principles of Economics. It had a significant impact on economics education in English-speaking countries. Its most significant technical contribution was a thorough examination of elasticity, consumer surplus, increasing and declining returns, short and long horizons, and marginal value.

Marshall was the first to create the standard supply. The demand graph demonstrated a few essentials to consider about supply and demand, such as the Prices and quantities curve, market structure, the relationship between quantity and value in producers and consumers, the rule of marginal benefit, the law of decreasing returns, and the ideas of consumer and producer surpluses are all topics covered in this course.

 Theoretical Contributions

Marshall was one of the pioneers of the utility analysis, although not as a value theory. He used it to explain demand curves and the substitution principle as part of his theory. Marshall’s scissors analysis, which combined producers and consumers, i.e. efficiency and costs of production, as if in the two blades of a pair of scissors, effectively removed the theory of value from the center of analysis and replaced it with the theory of price, effectively removing the theory of value from the center of analysis and replacing it with the theory of price.

Marshall made the use of supply and demand to serve as price-determination mechanism popular, and current economics credit him with establishing the link between price movements and curve shifts. Marshall was a key figure in the “marginality revolution,” and one of his contributions was the idea that customers should alter their consumption until marginal utility equals price.

Marshall added economic welfare, which he separated into production surplus and consumer surplus, and the two are frequently referred to as ‘Marshallian surplus.’ He applied this surplus concept to a thorough examination of the impact of taxes and price changes on market welfare. Marshall’s brief mentions of social and cultural linkages in England’s “industrial districts” served as a springboard for late-twentieth-century work on clustering and learning organizations in economic geography and institutional economics.

In conclusion, Milton Friedman and Alfred Marshall, according to Gary Becker, the 1992 Nobel Laureate in Economics, were the two most influential figures in his career. Marshall also distinguished between internal and external economies of scale, which was a significant contribution. That is, when the costs of input factors of production fall, it creates a positive externality for all enterprises in the market place that is beyond their control.

References

Whitaker, J. K. (1996). The correspondence of Alfred Marshall, economist.

Reisman, D. (2013). The Economics of Alfred Marshall (Routledge Revivals). Routledge.

Marshall, A. (2009). Principles of economics: unabridged eighth edition. Cosimo, Inc..

Foster, J. (1993). Economics and the self-organisation approach: Alfred Marshall revisited?. The Economic Journal, 103(419), 975-991.

Groenewegen, P. (2019). Alfred Marshall. In The Elgar Companion to John Maynard Keynes. Edward Elgar Publishing.

Marshall, A., & Whitaker, J. K. (1975). The early economic writings (Vol. 2). London, Macmillan.

Guillebaud, C. W. (1942). The evolution of Marshall’s principles of economics. The Economic Journal, 52(208), 330-349.

Hennings, K., & Samuels, W. J. (Eds.). (2012). Neoclassical economic theory, 1870 to 1930 (Vol. 20). Springer Science & Business Media.

Lawson, T. (2013). What is this ‘school’called neoclassical economics?. Cambridge Journal of Economics, 37(5), 947-983.