Alfred Marshall - Expensivity

Marshall’s Early Life and Education

Alfred Marshall (1842–1924) was born in Clapham, a district in the southern part of London, in the UK. Marshall came from a middle-class, evangelical Christian background. His father was a bank cashier.

Marshall’s parents originally intended him for the clergy and his early education reflected that expectation. However, Marshall later rebelled against the idea and instead wished to attend Cambridge University, which he was able to do on the strength of his recognized mathematical ability.

Marshall matriculated at St. John’s College, Cambridge, in 1862, and pursued the Mathematical Tripos (major). He received his bachelor’s degree with distinction (Second Wrangler) in 1865 and received a fellowship which allowed him to continue his graduate studies at Cambridge.

After studying physics and philosophy, Marshall discovered economics, which he decided to make his life’s work. In later life, he liked to tell the story about what first prompted him to study economics.

The young Marshall had been holding forth to a friend of his about some utopian scheme he had thought of for improving the world. The friend responded by saying: “You would not say that if you knew more about political economy.”

Throughout his life, Marshall continued to view the main purpose of economics as improving the living conditions of the poorest members of society, though he came to understand that it could only achieve that purpose by working together with social and political agents and institutions.

Marshall was a Fellow of St. John’s College from 1868 until 1877. During this period, he regularly lectured on the “moral sciences” (humanities) as a condition of his fellowship.

Marshall’s Career

In 1877, Marshall married one of his students, a young woman by the name of Mary Paley, who was a great granddaughter of the theologian and philosopher, William Paley. Together, the couple worked on an economics textbook, The Economics of Industry, which was published in 1879 (for details, see Marshall’s Principal Works,” below).

Inasmuch as only unmarried men could hold Cambridge fellowships at the time, Marshall was obliged to resign his fellowship after his marriage.

In 1877, Marshall was appointed principal of University College, Bristol (a predecessor to today’s University of Bristol), where for the first time he delivered lectures on the subject of political economy.

Beginning In 1883, Marshall taught for a year at Balliol College, Oxford University. Then, in 1885, he returned to Cambridge, this time as a professor of economics, where he remained until his retirement in 1908.

In addition to his theoretical work in economics, Marshall was historically important as an institution-builder for economics as an academic discipline. For example, he was a co-founder of the Royal Economic Society and its flagship journal, the Economic Journal, which still remains one of the foremost journals in the field.

Above all, Marshall’s name was linked to the “Cambridge school of economics,” whose membership constituted a rising generation of young economists, in relation to whom Marshall played the role of doyen.

The Cambridge School is also known to historians as the “neo-Classical school” and as the “Marshallians.” However, much of the school’s theoretical orientation (see below) had been developed by William Stanley Jevons. It was after Jevons’s death in 1882, shortly before Marshall’s return to Cambridge, that the torch of the Cambridge school passed to Marshall, in a manner of speaking.

Among the younger members of the Cambridge school assiduously cultivated by Marshall, we may name such future-luminaries as Francis Ysidro Edgeworth, John Neville Keynes and his son, John Maynard Keynes, and Arthur C. Pigou.

Marshall’s Ideas

The Cambridge school of economics, in general, and Alfred Marshall, in particular, are noted for the following ideas, among other things:

Economics should be more formal (mathematical), but not too formal.
Welfare economics is the heart of the discipline.
The subjective theory of value and the concept of marginal utility are central.
Emphasis should be on supply and demand, as qualified by several factors, including the price elasticity of demand and the distinction between producer surplus and consumer surplus.
The effect of taxes and price shifts on welfare must also be emphasized.

These ideas, together with other, more technical concepts, form the heart of Marshall’s magnum opus, The Principles of Economics, which was first published in 1890. The Principles was a textbook aimed at both the general public and academic economists; equations, tables, and graphs relegated to footnotes and appendices.

Republished in many subsequent editions—the eighth edition, the last one released during Marshall’s lifetime, appeared in 1920—the Principles is the last textbook to make a significant new contribution of its own to the academic discipline of economics.

Marshall’s place in history is often viewed as fundamentally involving the greater conceptual clarification (through the introduction of formal tools) and synthesis of ideas first discovered by William Stanley Jevons, the founder of the Cambridge school.

John Maynard Keynes once provided insight into the respective contributions of the two men to the marginalist revolution with the following witticism:

Jevons saw the kettle boil and called out with the delighted voice of a child; Marshall too had seen the kettle boil and sat down silently to build an engine.