Alfred Marshall

Alfred Marshall (London July 26th 1842 - Cambridge July 13rd 1924), British economist , is one of the founding fathers of the neo-classic school, which are one of the currents of thought currently dominating in economy, and one of the most influential economists of its time.

Biography

It was born in Bermondsey (London). His/her father was cash clerk with the Banque of England. He follows initially scientific studies in Mathématiques and Physique before being interested in the Philosophie and the Théologie.

Rather radical at the beginning of its career, it converts with the Libéralisme following a voyage to the the United States, while integrating a certain morals in its remarks: “ the economist, as very other must be concerned with fine last of the man ”.

After having taught with Oxford and Bristol-board, it continued its career of professor with Cambridge where it occupied the pulpit of political economy of 1885 with 1908. It had as a pupil John Maynard Keynes who will become his principal critic and Arthur Pigou. He dies in Cambridge the July 13rd 1924.

Its Work

Its book Principes of political economy (1890) gathered the theories of the offers and requires it (that it began again of Cournot and packed), of marginal Utilité and the Production costs in a coherent logic. This one became the economic handbook dominating in the United Kingdom for one long period.

It also published Industry and Trade in 1919 and Money, Credit and Commerce in 1924.

The question of the value

The question of the economic Valeur is a question which occupied the theorists for a very long time, since as of the 5th century, Saint Augustin wondered about the concept of fair price.

Before Marshall, the two great theories of value were those:

of the classical economists British which privileged a macro-economic approach and had analyzed the phenomena of production, and had proposed the value-work , with:

Adam Smith for which the price of a good depends on the remuneration of labor provided by the workman who manufactures it,
and with David Ricardo which had refined this analysis by developing the concept of incorporated work, which included not only the work of the workman, but also necessary work to produce the machines and the tools which it uses;

and that more innovative of Leon Walras and the school marginalist which initiated a micro-economic approach and placed resolutely on the level of the consumers, while speaking about value-utility , because for them only the consumer satisfaction counted, the price of the good dependant on its degree of utility:

if a good (or a service) rare but is considered to be very useful by the consumers, those are ready to discharge an high price, but this degree of utility decrease as the satisfaction degree of the consumer increases;
In parallel, price that a consumer is ready to pay fall progressively where its need is satisfied, which means that more one good is produced in great quantities, or when a service is accessible to greatest number the, the individual attaches importance less and less to it, and it is less and less ready to pay the full price.

They are these two theories seemingly opposite and irreconcilable that it has succeeds in melting in a synthesis, because these two approaches are contradictory only seemingly, and they are in fact complementary:

the traditional ones propose an objective analysis of the value while being based on the production costs,
whereas the marginalists privilege a more subjective approach by stressing the tastes and the needs for the individuals.

For Alfred Marshall, the price of a good depends on the cost of the factors of production and the Valeur that the consumer is ready to grant to him, and an approach should not be privileged rather than another. To solve this dilemma, it introduced the concept of time into the analysis of the economic mechanisms:

On the short term, the utility carries it in the phenomenon of fixing of the price, by the research of balance between the offers and requires it, which is established at a price which expresses the value-utility . During the introduction of a product on the market, the company adapts its prices according to the request.
But, on the long run, the production costs become determining, because the company is obliged to hold account of it, and an equilibrium price which is between what the market is ready to pay to the maximum and the price to which the company must sell its product at least, will correspond to the natural price such as it was defined by the classical economists while being based on value-work.

Criticisms had stressed that the concept of utility was hardly operational in company, much less than that of the value-work , because the consumer satisfaction was difficult to measure. But, according to Alfred Marshall, it is not because the tools for analysis do not exist that it is necessary to make the dead end on the value-utility , because in reality a company does not launch out in the production of a good, if she does not think reasonably that it will not find taking, either because it is too expensive, or because it does not correspond to an expressed or latent need.

Balance partial of Alfred Marshall

It has took again the theories marginalists and neo-classics but opposes the approach of Leon Walras: it has a more empirical approach of reality and defends the idea of partial and nongeneral balance. For him, when a market is balanced, there is not inevitably balance in all the markets.

The law of the outputs nonproportional

Alfred Marshall also worked on two contradictory aspects of work of Adam Smith and David Ricardo:

Smith had shown that the productivity of a company increases thanks to the division of the labor, it was the Loi of the increasing outputs .
On its side, Ricardo by examining the particular case of agriculture, had highlighted the fact that the best grounds are cultivated in priority, but the population increasing, it is necessary to clear new grounds but whose productivity is less. Nature thus imposes limits on the human activity, it is the Loi of the decreasing outputs .

Marshall, sought to build an ideal model applicable to a general field of application, it could thus be satisfied laws together with exception or laws applying only to particular cases. For him a company is subjected simultaneously to these two laws: she seeks to improve her productivity by a better organization of work, but runs up against the limits of the physical world or her workmen. Its outputs is in first decreasing then growing in the second time, it is the law of the outputs nonproportional .

The interventionism of the State

Alfred Marshall also considered the question of knowing how a subsidy or a tax could influence the satisfaction degree of the consumers.

Against its pupil John Maynard Keynes who thought that the massive intervention of the State was important to start again the economic activity in times of crisis, Marshall, burning defender of the “ to let make, let pass ”, thought that the intervention of the State was beneficial only to encourage the profitable productions but was against-productive for the activities in lose speed which were not to be unnecessarily constant.

Believing in the virtues of free-competition, he thought that the companies were to undergo a kind of natural selection so that only those remain which were able to adapt to the market. To succeed, whereas they undergo the law of the outputs nonproportional , they must be able to release in priority, of the internal economies , to increase their production and to increase their market share, before profiting from external contributions. The disappearance of concurrent companies enables them to naturally develop their activity on the market.

It will be noted however that Marshall evoked possible failures of the market.

Some other ideas

It was reticent in front of the increasing importance of the trade-union capacity which, to defend the interests of the workmen, threatens of bureaucratiser the company and to block the free-company by imposing too rigid social legislation.

On the other hand it was very favorable to the generalization of the formation, in order to reduce the number of unskilled workers. He thought that only the formation could really improve their wellbeing by better wages and a valorization of their social position.

He is that which introduced the notion of the surplus into the economic scene.

Conclusion

In the Principles of the political economy it defined the task of the economic scene: “ We must study humanity such as it is. We should not build an unreal world, such as it could or be supposed be ”. For him, the ideal was to build a theory which gives an account of this reality accurately, if complex and so refractory with any reduction, that it is important that the economic scene is never a science solidified by dogmas and that all criticisms and doubt can be expressed, because this way, they will be salutary.

Quotation

According to Marshall: “ the political Economy or the Economic one is a study of humanity in the ordinary activity of the life. She studies what, in the individual or the social action, is connected to the research and the use of the average materials required by the good being ”.

See too

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