Alfred Marshall was born in 1842 in London and died in 1924 in Cambridge. He was a professor at Cambridge University in the years 1885-1908. His students included, among others, Arthur Cecil Pigou and John Maynard Keynes. His work entitled "Principles of Economics" published in 1890, had a big influence on his generation. Even now the introduction to economics is very often based on the presentation of Marshall's theory of prices.
Marshall popularised marginal logic in the United Kingdom area. He also proposed the synthesis between abstract and empirical approach, as well as between the tradition of English classics and new value analysis.
Marshall introduced the distinction between the market period, short period and long period. The market period is the amount of time for which the stock of a commodity is fixed. The short period is the time in which the supply can be increased by adding labour and other inputs but not by adding capital. Third, the long period is the amount of time taken for capital to be increased.
Marshall's influence on economic thought is difficult to deny. He popularized also the use of supply and demand functions as tools of price determination and analysed such concepts as consumer surplus and price elasticity of demand.
- The economics of industry (1874)
- Principles of economics (1890)
- Industry and trade (1919)
- Money, credit and commerce (1923)
Examples of Alfred Marshall
- Alfred Marshall is credited with developing the concept of marginal utility. This concept states that the utility or satisfaction derived from a good or service is determined by how much of it a consumer has. For example, the first slice of a cake may provide more satisfaction than the second slice, even though the second slice is the same size as the first.
- Marshall is also credited with developing the concept of diminishing marginal productivity. This concept states that as more of a good is produced, the marginal productivity of each additional unit will decrease. For example, if a factory increases its production of cars from one to two, the marginal productivity may increase significantly. But if the factory increases its production from twenty to twenty one, the marginal productivity may be much smaller.
- Marshall is also credited with developing the concept of elasticity of demand. This concept states that the demand for a good or service will be affected by changes in its price. For example, if the price of a good increases its demand may decrease, and if the price of a good decreases its demand may increase.
Advantages of Alfred Marshall
Alfred Marshall was a renowned English economist who had a great impact on the development of economic thought in the late 19th and early 20th centuries. His main advantages include:
- He was one of the first economists to formalize the study of economics, introducing the concept of supply and demand curves.
- He was the first to introduce the concept of elasticity of demand, which is still used today in order to measure the responsiveness of demand to changes in price.
- He was a strong advocate for the use of mathematics in economics and was one of the first to use mathematical equations to explain economic models.
- He developed the concept of 'marginal utility', which is the additional satisfaction a consumer receives from the purchase of one more unit of a good or service.
- He argued that the price of a good or service is determined by the intersection of its supply and demand curves.
- He was a strong proponent of free trade and an opponent of protective tariffs.
Limitations of Alfred Marshall
Alfred Marshall's contributions to economics are undoubtedly significant, but there are also some limitations to his work. These include:
- His focus on equilibrium theory, which can be seen as too static and not taking into account the dynamic nature of markets.
- His lack of consideration for the role of government in the economy, which can be seen as a limitation to his analysis.
- His reliance on supply and demand curves, which can be seen as oversimplifying the complexity of the real world.
- His neglect of the role of uncertainty and risk in economic decision-making, which can be seen as a limitation to his theory.
- His lack of attention to the role of technology in economic growth, which can be seen as a limitation to his analysis.
Alfred Marshall is recognized for his extensive contribution to economics and his work on the Principles of Economics. He is associated with many approaches and theories, including:
- Demand and Supply Theory: Marshall's approach to demand and supply theory was based on the concept of elasticity. He argued that the demand for a good was a function of its price and that prices were determined by the interaction of supply and demand.
- Marginalism: Marshall's marginalism theory was based on the idea that decisions are made at the margin. This theory explains how consumers and producers make decisions and is the foundation of modern microeconomics.
- Perfect Competition: Marshall's idea of perfect competition was based on the notion that in a perfect market, all participants would have perfect information and be able to make rational decisions.
In summary, Alfred Marshall is associated with numerous approaches and theories, including demand and supply theory, marginalism, and perfect competition. These theories have shaped the way economics is studied and understood today.
- Pressman S. (1999), Fifty major economists, Routledge, p. 64.
- Weintraub E.R., Forget E. L. (2007), Economist's lives: biography and autobiography in the history of economics, Duke University Press, Durham & London, p. 51.
- Whitaker J.K. (1990), Centenary essays on Alfred Marshall, Royal Economic Society, Cambridge Uniwersity Press.
- Alfred Marshall @ Wikipedia.
Author: Sławomir Pytel