Alfred Marshall (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
In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...
,
marginal utility, and
costs of production into a coherent whole. He is known as one of the founders of
neoclassical economics
Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good ...
.
Life and career
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. William Marshall was a devout strict Evangelical, "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''. Marshall had two brothers and two sisters; a cousin was the economist
Ralph Hawtrey. The Marshalls were a
West Country
The West Country (occasionally Westcountry) is a loosely defined area of South West England, usually taken to include all, some, or parts of the counties of Cornwall, Devon, Dorset, Somerset, Bristol, and, less commonly, Wiltshire, Glouc ...
clerical
Clerical may refer to:
* Pertaining to the clergy
* Pertaining to a clerical worker
* Clerical script, a style of Chinese calligraphy
* Clerical People's Party
See also
* Cleric (disambiguation)
Cleric is a member of the clergy.
Cleric may al ...
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". Marshall grew up in
Clapham and was educated at the
Merchant Taylors' School and
St John's College, Cambridge, where he demonstrated an aptitude in mathematics, achieving the rank of
Second Wrangler
At the University of Cambridge in England, a "Wrangler" is a student who gains first-class honours in the final year of the university's degree in mathematics. The highest-scoring student is the Senior Wrangler, the second highest is the Se ...
in the 1865
Cambridge Mathematical Tripos.
[
] 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". 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, 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 and the two were married in 1877, forcing Marshall to leave his position as a
Fellow
A fellow is a concept whose exact meaning depends on context.
In learned or professional societies, it refers to a privileged member who is specially elected in recognition of their work and achievements.
Within the context of higher education ...
of
St John's College, Cambridge, to comply with celibacy rules at the university. He became the first principal at
University College, Bristol, which was the institution that later became the
University of Bristol
, mottoeng = earningpromotes one's innate power (from Horace, ''Ode 4.4'')
, established = 1595 – Merchant Venturers School1876 – University College, Bristol1909 – received royal charter
, type ...
, 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
William Stanley Jevons (; 1 September 183513 August 1882) was an English economist and logician.
Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method in ec ...
,
Francis Ysidro Edgeworth
Francis Ysidro Edgeworth (8 February 1845 – 13 February 1926) was an Anglo-Irish philosopher and political economist who made significant contributions to the methods of statistics during the 1880s. From 1891 onward, he was appointed th ...
,
John Neville Keynes and
John Maynard Keynes
John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
. Marshall founded the
Cambridge School which paid special attention to increasing returns, the
theory of the firm
The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. Firms are key drivers in ec ...
, and welfare economics; after his retirement leaderships passed to
Arthur Cecil Pigou and
John Maynard Keynes
John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
.
Contributions to economics
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
Mary Marshall (née Paley; 24 October 1850 – 19 March 1944) was an economist who in 1874 had been one of the first women to take the Tripos examination at Cambridge University – although, as a woman, she had been excluded from receiving ...
.
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
Sir Arthur Lyon Bowley, FBA (6 November 1869 – 21 January 1957) was an English statistician and economist who worked on economic statistics and pioneered the use of sampling techniques in social surveys.
Early life
Bowley's father, James Wil ...
, he laid out the following system:
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
Henry Fawcett (26 August 1833 – 6 November 1884) was a British academic, statesman and economist.
Background and education
Henry Fawcett was born in Salisbury, and educated at King's College School and the University of Cambridge: enteri ...
. At Cambridge he endeavoured to create a new
tripos
At the University of Cambridge, a Tripos (, plural 'Triposes') is any of the examinations that qualify an undergraduate for a bachelor's degree or the courses taken by a student to prepare for these. For example, an undergraduate studying mat ...
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.
''Principles of Economics'' (1890)
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
In economics, diminishing returns are the decrease in marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, holding all other factors of production equal ( ceteris pari ...
, 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
William Stanley Jevons (; 1 September 183513 August 1882) was an English economist and logician.
Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method in eco ...
and others.
In a broader sense Marshall hoped to reconcile the classical and modern theories of value.
John Stuart Mill
John Stuart Mill (20 May 1806 – 7 May 1873) was an English philosopher, political economist, Member of Parliament (MP) and civil servant. One of the most influential thinkers in the history of classical liberalism, he contributed widely to ...
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
In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an o ...
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.
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
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
Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good ...
. Although his economics was advertised as extensions and refinements of the work of
Adam Smith,
Thomas Robert Malthus
Thomas Robert Malthus (; 13/14 February 1766 – 29 December 1834) was an English cleric, scholar and influential economist in the fields of political economy and demography.
In his 1798 book '' An Essay on the Principle of Population'', M ...
and
John Stuart Mill
John Stuart Mill (20 May 1806 – 7 May 1873) was an English philosopher, political economist, Member of Parliament (MP) and civil servant. One of the most influential thinkers in the history of classical liberalism, he contributed widely to ...
, 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
Léon Walras
Marie-Esprit-Léon Walras (; 16 December 1834 – 5 January 1910) was a French mathematical economist and Georgist. He formulated the marginal theory of value (independently of William Stanley Jevons and Carl Menger) and pioneered the developme ...
,
Vilfredo Pareto and
Jules Dupuit
Arsène Jules Étienne Juvenel Dupuit (18 May 1804 – 5 September 1866) was an Italian-born French civil engineer and economist.
He was born in Fossano, Italy then under the rule of Napoleon Bonaparte. At the age of ten he emigrated to Fran ...
, 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
In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...
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
Economic geography is the subfield of human geography which studies economic activity and factors affecting them. It can also be considered a subfield or method in economics.
There are four branches of economic geography.
There is,
primary sect ...
and
institutional economics on
clustering and
learning organisations
In business management, a learning organization is a company that facilitates the learning of its members and continuously transforms itself.Pedler, M., Burgogyne, J. and Boydell, T. 1997. ''The Learning Company: A strategy for sustainable develop ...
.
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
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ...
. 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.
The Marshallian industrial district
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'' have been used by economists and economic geographers to discuss this phenomenon.
The two dominant characteristics of a Marshallian industrial district 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
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ...
are limited.
Later career
Marshall served as
President
President most commonly refers to:
*President (corporate title)
* President (education), a leader of a college or university
* President (government title)
President may also refer to:
Automobiles
* Nissan President, a 1966–2010 Japanese ...
of the first day of the 1889
Co-operative Congress
The Co-operative Congress is the national conference of the UK Co-operative Movement. The first of the modern congresses took place in 1869 following a series of meetings called the "Owenite Congress" in the 1830s. Members of Co-operatives UK ( ...
.
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
World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was List of wars and anthropogenic disasters by death toll, one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, ...
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
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
John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
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
The Ascension Parish Burial Ground, formerly known as the burial ground for the parish of St Giles and St Peter's, is a cemetery off Huntingdon Road in Cambridge, England. Many notable University of Cambridge academics are buried there, includ ...
. The library of the Department of Economics at Cambridge University (
The Marshall Library of Economics
The Marshall Library of Economics is a library of the University of Cambridge, England.
History
The library is the outgrowth of a Moral Sciences Library begun in 1885 by Professor Alfred Marshall and Professor Henry Sidgwick, consisting largel ...
), the Economics society at Cambridge (The Marshall Society) as well as the
University of Bristol
, mottoeng = earningpromotes one's innate power (from Horace, ''Ode 4.4'')
, established = 1595 – Merchant Venturers School1876 – University College, Bristol1909 – received royal charter
, type ...
Economics department are named after him. His archive is available for consultation by appointment at the Marshall Library of Economics.
His home, Balliol Croft, was renamed
Marshall House in 1991 in his honour when it was bought by
Lucy Cavendish College, Cambridge
Lucy Cavendish College is a constituent college of the University of Cambridge.
The college is named in honour of Lucy Cavendish (1841–1925), who campaigned for the reform of women's education.
History
The college was founded in 1965 by fe ...
.
Alfred Marshall's wife was
Mary Paley
Mary Marshall (née Paley; 24 October 1850 – 19 March 1944) was an economist who in 1874 had been one of the first women to take the Tripos examination at Cambridge University – although, as a woman, she had been excluded from receiving ...
, an economist who was one of the first women students at Cambridge and a lecturer at Newnham College. She continued to live in Balliol Croft until her death in 1944; her ashes were scattered in the garden. The couple had no children.
Works
* 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
*
Welfare definition of economics
*
Marshall Jevons, a pseudonym partly derived from Marshall's name
*
Liberalism in the United Kingdom
In the United Kingdom, the word liberalism can have any of several meanings. Scholars use the term to refer to '' classical liberalism''; the term can also mean '' economic liberalism'', '' social liberalism'' or '' political liberalism''; it ...
References
Further reading
* Backhouse, Roger E. "Sidgwick, Marshall, and the Cambridge School of Economics." ''History of Political Economy'' 2006 38(1): 15–44. 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.
* 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* 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 .
* Tullberg, Rita McWilliams. "Marshall, Alfred (1842–1924)" ''Oxford Dictionary of National Biography'' 2004;
* Tullberg, Rita McWilliams, ed. ''Alfred Marshall in Retrospect'' (1990) ·
External links
*
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People educated at Merchant Taylors' School, Northwood
Presidents of Co-operative Congress
Second Wranglers
Fellows of St John's College, Cambridge
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