British economist (1842?1924)
Alfred Marshall
FBA
(26 July 1842 ? 13 July 1924) was an English economist, and was one of the most influential economists of his time. His book
Principles of Economics
(1890) was the dominant economic textbook in England for many years. It brought the ideas of
supply and demand
,
marginal utility
, and
costs of production
into a coherent whole.
[2]
He is known as one of the founders of
neoclassical economics
.
[3]
Life and career
[
edit
]
Marshall was born at
Bermondsey
in London, second son of William Marshall (1812?1901), clerk and cashier at the Bank of England, and Rebecca (1817?1878), daughter of butcher Thomas Oliver, from whom, on her mother's death, she inherited property.
[4]
William Marshall was a devout strict Evangelical,
[5]
"author of an Evangelical epic in a sort of Anglo-Saxon language of his own invention which found some favour in its appropriate circles" and of a tract titled
Men's Rights and Women's Duties
. There are scholars who note that this strict upbringing wielded strong influence on Marshall's work such as how he favored the doctrines of philosophical idealism.
[5]
Marshall had two brothers and two sisters; a cousin was the economist
Ralph Hawtrey
. The Marshalls were a
West Country
clerical
family; Marshall's great-great-grandfather was "the Reverend William Marshall, half-legendary Herculean parson of Devonshire", famous for "twisting horseshoes with his hands" to scare "local blacksmiths into fearing that they blew their bellows for the devil".
[6]
[7]
Marshall grew up in
Clapham
and was educated at the
Merchant Taylors' School
[8]
and
St John's College, Cambridge
, where he demonstrated an aptitude in mathematics, achieving the rank of
Second Wrangler
in the 1865
Cambridge Mathematical Tripos
.
[9]
[10]
Marshall experienced a mental crisis that led him to abandon physics and switch to philosophy. He began with metaphysics, specifically "the philosophical foundation of knowledge, especially in relation to theology".
[11]
Metaphysics led Marshall to ethics, specifically a
Sidgwickian
version of utilitarianism; ethics, in turn, led him to economics, because economics played an essential role in providing the preconditions for the improvement of the working class.
He saw that the duty of economics was to improve material conditions,
[2]
but such improvement would occur, 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.
Marshall was elected in 1865 to a fellowship at St John's College at Cambridge, and became lecturer in the moral sciences in 1868. He was
Mary Paley
's professor of political economy at Cambridge; they became a couple and were married in 1877, forcing Marshall to leave his position as a
Fellow
of
St John's College, Cambridge
. 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 became professor of political economy at Cambridge, where he remained until his retirement in 1908. Over the years 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 special attention to increasing returns, the
theory of the firm
, and welfare economics; after his retirement leaderships passed to
Arthur Cecil Pigou
and
John Maynard Keynes
.
Contributions to economics
[
edit
]
Marshall desired to improve the mathematical rigour of economics and transform it into a more scientific profession. In the 1870s he wrote a small number of tracts on international trade and the problems of protectionism. In 1879, many of these works were compiled into a work entitled
The Theory of Foreign Trade: The Pure Theory of Domestic Values
. In the same year (1879) he published
The Economics of Industry
with his wife
Mary Paley
.
Although Marshall took economics to a more mathematically rigorous level, he did not want mathematics to overshadow economics and thus make economics irrelevant to the layman. Accordingly, Marshall tailored the text of his books to laymen and put the mathematical content in the footnotes and appendices for the professionals. In a letter to
A. L. Bowley
, he laid out the following system:
(1) Use mathematics as shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life (5) Burn the mathematics. (6) If you can't succeed in 4, burn 3. This I do often."
[12]
He perfected his
Economics of Industry
while at Bristol, and published it more widely in England as an economic curriculum; its simple form stood upon sophisticated theoretical foundations. Marshall achieved a measure of fame from this work, and upon the death of
William Jevons
in 1882, Marshall became the leading British economist of the scientific school of his time.
Marshall returned to Cambridge, via a brief period at
Balliol College, Oxford
, during 1883?84, to take the seat as
Professor of Political Economy
in 1884 on the death of
Henry Fawcett
. At Cambridge he endeavoured to create a new
tripos
for economics, a goal which he would achieve only in 1903. Until that time, economics was taught under the Historical and Moral Sciences Triposes which failed to provide Marshall the kind of energetic and specialised students he desired.
Along with Pigou and Hawtrey, Marshall developed the quantity theory of money or the income version of the money theory.
[13]
In 1917, Marshall introduced the Cambridge version of the quantity theory of money and this was refined further by Pigou, Hawtrey, and Robertson. It became known as the Cambridge equation.
[14]
Principles of Economics
(1890)
[
edit
]
Marshall began his economic work, the
Principles of Economics
, in 1881, and spent much of the next decade at work on the treatise. His plan for the work gradually extended to a two-volume compilation on the whole of economic thought. The first volume was published in 1890 to worldwide acclaim, establishing him as one of the leading economists of his time. The second volume, which was to address foreign trade, money, trade fluctuations, taxation, and
collectivism
, was never published.
Principles of Economics
established his worldwide reputation. It appeared in eight editions, starting at 750 pages and growing to 870 pages. It decisively shaped the teaching of economics in English-speaking countries. Its main technical contribution was a masterful analysis of the issues of
elasticity
,
consumer surplus
, increasing and
diminishing returns
, short and long terms, and
marginal utility
. Many of the ideas were original with Marshall; others were improved versions of the ideas by
W. S. Jevons
and others.
In a broader sense Marshall hoped to reconcile the classical and modern theories of value.
John Stuart Mill
had examined the relationship between the value of commodities and their production costs, on the theory that value depends on the effort expended in manufacture. Jevons and the
marginal utility
theorists had elaborated a theory of value based on the idea of maximising utility, holding that value depends on demand. Marshall's work used both these approaches, but he focused more on costs. He noted that, in the short run, supply cannot be changed and market value depends mainly on demand. In an intermediate time period, production can be expanded by existing facilities, such as buildings and machinery, but, since these do not require renewal within this intermediate period, their costs (called fixed, overhead, or supplementary costs) have little influence on the sale price of the product. Marshall pointed out that it is the prime or variable costs, which constantly recur, that influence the sale price most in this period. In a still longer period, machines and buildings wear out and have to be replaced, so that the sale price of the product must be high enough to cover such
replacement costs
. This classification of costs into fixed and variable and the emphasis given to the element of time probably represent one of Marshall's chief contributions to economic theory. He was committed to
partial equilibrium
models over
general equilibrium
on the grounds that the inherently dynamical nature of economics made the former more practically useful.
Much of the success of Marshall's teaching and
Principles
book derived from his effective use of diagrams, which were soon emulated by other teachers worldwide.
[15]
Alfred Marshall was the first to develop the standard supply and demand graph demonstrating a number of fundamentals regarding supply and demand including the supply and demand curves, market equilibrium, the relationship between quantity and price in regards to supply and demand, the law of marginal utility, the law of diminishing returns, and the ideas of consumer and producer surpluses. This model is now used by economists in various forms using different variables to demonstrate several other economic principles. Marshall's model allowed a visual representation of complex economic fundamentals where before all the ideas and theories were only capable of being explained through words. These models are now critical throughout the study of economics because they allow a clear and concise representation of the fundamentals or theories being explained.
Theoretical contributions
[
edit
]
Marshall is considered to be one of the most influential economists of his time, largely shaping
mainstream economic thought
for the next fifty years, and being one of the founders of the school of
neoclassical economics
.
[
citation needed
]
[16]
Although his economics was advertised as extensions and refinements of the work of
Adam Smith
,
Thomas Robert Malthus
and
John Stuart Mill
, he extended economics away from its
classical
focus on the market economy and instead popularised it as a study of human behaviour. He downplayed the contributions of certain other economists to his work, such as
Leon Walras
,
Vilfredo Pareto
and
Jules Dupuit
, and only grudgingly acknowledged the influence of
Stanley Jevons
himself.
Marshall was one of those who used utility analysis, but not as a theory of value. He used it as a part of the theory to explain demand curves and the principle of substitution. Marshall's
scissors analysis
? which combined demand and supply, that is, utility and cost 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. While the term "value" continued to be used, for most people it was a synonym for "price". Prices no longer were thought to gravitate toward some ultimate and absolute basis of price; prices were existential, between the relationship of demand and supply.
Marshall's influence on codifying economic thought is difficult to deny. He popularised the use of
supply and demand
functions as tools of price determination (previously discovered independently by
Cournot
); modern economists owe the linkage between price shifts and curve shifts to Marshall. Marshall was an important part of the "
marginalist revolution
"; the idea that consumers attempt to adjust consumption until
marginal utility
equals the price was another of his contributions. The
price elasticity of demand
was presented by Marshall as an extension of these ideas. Economic welfare, divided into
producer surplus
and
consumer surplus
, was contributed by Marshall, and indeed, the two are sometimes described eponymously as '
Marshallian surplus
.' He used this idea of surplus to rigorously analyse the effect of taxes and price shifts on market welfare. Marshall also identified
quasi-rents
.
Marshall's brief references to the social and cultural relations in the "
industrial districts
" of England were used as a starting point for late twentieth-century work in
economic geography
and
institutional economics
on
clustering
and
learning organisations
.
Gary Becker
(1930?2014), the 1992 Nobel prize winner in economics, has mentioned that Milton Friedman and Alfred Marshall were the two greatest influences on his work.
Another contribution that Marshall made was differentiating concepts of internal and external
economies of scale
. That is that when costs of input factors of production go down, it is a positive externality for all the firms in the market place, outside the control of any of the firms.
[17]
The Marshallian industrial district
[
edit
]
A concept based on a pattern of organisation that was common in late nineteenth century Britain in which firms concentrating on the manufacture of certain products were geographically clustered. Comments made by Marshall in Book 4, Chapter 10 of
Principles of Economics
[18]
have been used by economists and economic geographers to discuss this phenomenon.
The two dominant characteristics of a Marshallian industrial district
[19]
are high degrees of vertical and horizontal specialisation and a very heavy reliance on market mechanism for exchange. Firms tend to be small and to focus on a single function in the production chain. Firms located in industrial districts are highly competitive in the
neoclassical
sense, and in many cases there is little product differentiation. The major advantages of Marshallian industrial districts arise from simple propinquity of firms, which allows easier recruitment of skilled labour and rapid exchanges of commercial and technical information through informal channels. They illustrate competitive capitalism at its most efficient, with
transaction costs
reduced to a practical minimum, but they are feasible only when
economies of scale
are limited.
Later career
[
edit
]
Marshall served as
president
of the first day of the 1889
Co-operative Congress
.
[20]
Over the next two decades he worked to complete the second volume of his
Principles,
but his unyielding attention to detail and ambition for completeness prevented him from mastering the work's breadth. The work was never finished and many other, lesser works he had begun work on ? a memorandum on trade policy for the
Chancellor of the Exchequer
in the 1890s, for instance ? were left incomplete for the same reasons.
His health problems had gradually grown worse since the 1880s, and in 1908 he retired from the university. He hoped to continue work on his
Principles
but his health continued to deteriorate and the project had continued to grow with each further investigation. The outbreak of the
First World War
in 1914 prompted him to revise his examinations of the international economy and in 1919 he published
Industry and Trade
at the age of 77. This work was a more empirical treatise than the largely theoretical
Principles
, and for that reason it failed to attract as much acclaim from theoretical economists. In 1923, he published
Money, Credit, and Commerce,
a broad amalgam of previous economic ideas, published and unpublished, stretching back a half-century.
Final years, death and legacy
[
edit
]
From 1890 to 1924 he was the respected father of the economic profession and to most economists for the half-century after his death, the venerable grandfather. He had shied away from controversy during his life in a way that previous leaders of the profession had not, although his even-handedness drew great respect and even reverence from fellow economists, and his home at
Balliol Croft
in Cambridge had no shortage of distinguished guests. His students at Cambridge became leading figures in economics, including
John Maynard Keynes
and
Arthur Cecil Pigou
. His most important legacy was creating a respected, academic, scientifically founded profession for economists in the future that set the tone of the field for the remainder of the 20th century.
Marshall died aged 81 at his home in Cambridge and is buried in the
Ascension Parish Burial Ground
.
[21]
The library of the Department of Economics at Cambridge University (
The Marshall Library of Economics
), the Economics society at Cambridge (The
Marshall Society
)
[22]
as well as the
University of Bristol
Economics department are named after him. His archive is available for consultation by appointment at the Marshall Library of Economics.
[23]
His home, Balliol Croft, was renamed
Marshall House
in 1991 in his honour when it was bought by
Lucy Cavendish College, Cambridge
.
[24]
Alfred Marshall's wife was
Mary Paley
, an economist who was one of the first women students at Cambridge and a lecturer at Newnham College.
[25]
She continued to live in Balliol Croft until her death in 1944; her ashes were scattered in the garden. The couple had no children.
[26]
Works
[
edit
]
- 1879 ?
The Economics of Industry
(with Mary Paley Marshall)
- 1879 ?
The Pure Theory of Foreign Trade: The Pure Theory of Domestic Values
- 1890 ?
Principles of Economics
- 1919 ?
Industry and Trade
- 1923 ?
Money, Credit and Commerce
See also
[
edit
]
References
[
edit
]
- ^
a
b
Jordan, Alexander (Spring 2019).
"The Influence of Thomas Carlyle among Economists in Britain, c. 1880?1920"
.
Historical Reflections
.
45
(1): 50?69.
doi
:
10.3167/hrrh.2019.450104
.
S2CID
210576145
.
- ^
a
b
Abergel, Frederic; Aoyama, Hideaki; Chakrabarti, Bikas K.; Chakraborti, Anirban; Ghosh, Asim (2013).
Econophysics of Agent-Based Models
. Cham, Switzerland: Springer Science & Business Media. p. 244.
ISBN
978-3-319-00022-0
.
- ^
"Alfred Marshall"
.
economics.illinoisstate.edu
. Archived from
the original
on 7 November 2016
. Retrieved
1 June
2017
.
- ^
The Wrong Marshall: Notes on the Marshall family in response to biographies of the economist, Alfred Marshall, Megan Stevens and Alun Stevens, in History of Political Economy, Volume 52, Issue 2, April 2020, pp. 239?273
- ^
a
b
Reisman, David (2013).
Alfred Marshall: Progress and Politics (Routledge Revivals)
. New York: Taylor & Francis. p. 119.
ISBN
978-1-136-70344-7
.
- ^
"Search Results for Alfred Marshall"
.
- ^
Essays in Biography, J. M. Keynes, Harcourt Brace & Co., 1933, pp. 150?151
- ^
Keynes, J. (2010).
Essays in Biography
. New York, NY: Palgrave Macmillan. p. 162.
ISBN
978-1-349-59074-2
.
- ^
"Marshall, Alfred (MRSL861A)"
.
A Cambridge Alumni Database
. University of Cambridge.
- ^
McWilliams Tullberg (May 2008).
"Alfred Marshall (1896?2019)"
.
Oxford Dictionary of National Biography
(online ed.). Oxford University Press.
doi
:
10.1093/ref:odnb/34893
. Retrieved
25 April
2008
.
(Subscription or
UK public library membership
required.)
- ^
Keynes, 1924
- ^
Dimand, Robert W. (2007). "Keynes, IS-LM, and the Marshallian Tradition".
History of Political Economy
.
39
(1). Duke University Press: 81?95.
doi
:
10.1215/00182702-2006-024
.
- ^
Ahiakpor, James C. W. (2021).
Macroeconomic Analysis in the Classical Tradition: The Impediments Of Keynes's Influence
. Oxon: Routledge.
ISBN
978-1-000-36041-7
.
- ^
Marchionatti, Roberto (2020).
Economic Theory in the Twentieth Century, An Intellectual History ? Volume I: 1890?1918. Economics in the Golden Age of Capitalism
. Cham, Switzerland: Springer Nature. p. 65.
ISBN
978-3-030-40296-9
.
- ^
Cook (2005)
- ^
"Britannica"
. 25 March 2024.
- ^
"External Economies of Scale"
. Investopedia.
- ^
Fiorenza Belussi, "Industrial Districts/Local Production Systems as hypernetworks: a neo-Marshallian interpretive frame", in Marco Enrico Luigi Guidi,
The changing firm, contributions from the history of economic thought
- ^
Alfred Marshall y la teoria economica del empresario, Jesus M. Zaratiegui
Archived
12 September 2010 at the
Wayback Machine
.
- ^
"Congress Presidents 1869?2002"
(PDF)
. February 2002. Archived from
the original
(PDF)
on 28 May 2008
. Retrieved
10 May
2008
.
- ^
A Guide to Churchill College, Cambridge: text by Dr.
Mark Goldie
, pp. 62, 63 (2009)
- ^
marshallsociety.com
- ^
A finding aid to his materials is available at
"Marshall Library Archives ? Overview"
. 20 November 2011.
- ^
"Lucy Cavendish College Site and Buildings"
(PDF)
. Archived from
the original
(PDF)
on 27 September 2011.
- ^
Pande, Rohini; Roy, Helena (19 October 2021).
"
"If you compete with us, we shan't marry you" The (Mary Paley and) Alfred Marshall Lecture"
.
Journal of the European Economic Association
.
19
(6): 2992?3024.
doi
:
10.1093/jeea/jvab049
.
ISSN
1542-4766
.
- ^
Land, Hilary (2016).
"Overshadowed by the Male Breadwinner: Care in 20th Century Britain"
. In Fink, J, Lundqvist A (eds.).
Changing Relations of Welfare: Family, Gender and Migration in Britain and Scandinavia
. Routledge. p. 24.
ISBN
978-1-317-16852-2
.
Further reading
[
edit
]
- Backhouse, Roger E. "Sidgwick, Marshall, and the Cambridge School of Economics."
History of Political Economy
2006 38(1): 15?44.
ISSN
0018-2702
Fulltext:
Ebsco
- Cook, Simon J. "
Late Victorian Visual Reasoning and Alfred Marshall's Economic Science
."
British Journal for the History of Science
2005 38(2): 179?195.
ISSN
0007-0874
- Cook, Simon J. "
Race and Nation in Marshall's Histories
."
European Journal of the History of Economic Thought
2013 20(6): 940?956.
- Cook, Simon J.
The Intellectual Foundations of Alfred Marshall's Economic Science: A Rounded Globe of Knowledge
(2009)
- Groenewegen, Peter.
A Soaring Eagle: Alfred Marshall: 1842?1924
(1995) 880pp, the major scholarly biography
- Groenewegen, Peter.
Alfred Marshall: Economist 1842?1924
(2007, short version)
- Keynes, John Maynard. "Alfred Marshall, 1842?1924,"
The Economic Journal
34#135 September 1924 pp. 311?372, included in his
Essays in Biography
(1933, 1951) at 125?217,
in JSTOR
- Laughlin, J. Laurence (1887). "
Marshall's Theory of Value and Distribution
".
The Quarterly Journal of Economics
.
1
(2): 227?232.
- Parsons, Talcott. "The Structure of Social Action." (1937), Chapter IV.
- Narmadeshwar Jha,
The Age of Marshall: Aspects of British Economic Thought ? 1890?1915.
London: F. Cass, 1973.
- Raffaelli, Tiziano et al.
The Elgar Companion to Alfred Marshall
2006. 752
ISBN
1-84376-072-X
.
- Tullberg, Rita McWilliams. "Marshall, Alfred (1842?1924)"
Oxford Dictionary of National Biography
2004;
- Tullberg, Rita McWilliams, ed.
Alfred Marshall in Retrospect
(1990) ·
External links
[
edit
]
|
---|
International
| |
---|
National
| |
---|
Academics
| |
---|
Artists
| |
---|
People
| |
---|
Other
| |
---|