Introduction
Alfred Marshall (1842-1924) was a very distinguished Economist whose original contribution to Economics was exceptional in many respects. He had a distinguished academic career. He was the principal of University College, Bristol from 1877-1882, Fellow, Balliol College, Oxford (1883-84) and Professor in Cambridge University from 1885 to 1908.
His influence was colossal in the Academic circles during the last decade of the 19th century and early decades of the 20th century. His great work was Principles of Economics (1890). He belonged to what is referred to as the School of Marginalists. “They provided modern macroeconomics with the basic analytic tools of demand and supply, consumer utility, and a mathematical framework for using those tools.” (Palgrave, Macmillan).
The opening sentence in the Principles of Economics is a classic definition of the subject itself: “Political economy or economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.”(Alfred Marshall, Principles of Economics, Bk.I, Ch.1).
Marshall’s Great Contribution
Marshall was a great scholar whose lectures attracted a great deal of attention. One of his students was J.M.Keynes, whose revolutionary ideas had sprouted from within the framework of
Marshall’s ambit. His writings had an unhurried style. He never handed out judgments hastily and even in the possibly controversial standpoints put forth his views on solid grounds. In the preliminary survey of Book I, while writing on property rights, he calmly observes: “that the tendency of careful economic study is to base the rights of private property not on any abstract principle, but on the observation that in the past they have been inseparable from solid progress; and that therefore it is the part of responsible men to proceed cautiously and tentatively in abrogating or modifying even such rights as may seem to be inappropriate to the ideal conditions of social life.”(ibid).
Marshall had neatly woven the work of earlier masters in a splendid design and his lead is referred to as the neo-classical mould. Many of the welfare measures of the subsequent times could be traced to his benign approach.
Marshall’s ideas underscored continuity and substitution. He considered economics as one with a regular record of continuity in that changes reflect the changing times and preferences and man’s choice is conditioned by the manner in which the use of one good could be substituted by another. That will pave the way for marginal utility and the satisfaction the consumer would additionally derive by his choice.
It must also be mentioned that recognition of enterprise or knowledge and organization as the fourth factor in production should be attributed to Marshall. Marshall was aware of the relative importance of other factors but mere possession of capital without the knowledge to use it and organization skills to achieve optimum benefits amounted to nothing. His demand and supply curves as well as clear distinction between short-term and long-term developments are greatly to be admired.
The German scholar Wagner notes that the transition to neo-classical approach from the classical one has been very smooth in England and that great credit should be given to Marshall for accomplishing it. (Adolf Wagner, MARSHALL’S PRINCIPLES OF ECONOMICS. Quarterly Journal of Economics, volume 5, 1891, pp. 319-38.)
It is also often said that Marshall rejected the definition of Economics as the ‘Science of Wealth’ and ushered in the definition of Welfare Economics. The reason is quite obvious. By branding the science as the science of wealth, an attempt could be made to decry the discipline as deifying mammon. However, for all practical purposes, Marshall was interested in the use of the subject for promoting the common welfare of people. It must be noted that he did not agree with Karl Marx that the labor was the sole producer of wealth. He believed that the labor received its share in the scheme of things wages and did not subscribe to the idea that there was total expropriation of the value of labor.
Society was indeed a complex matter and many factors contributed towards acquiring an equilibrium. Marshall did not believe in glorification of non-producing class. He believed that every decent human being wanted to ensure welfare of his children at least and therefore work was the purifying motive for human transactions. He also believed “that capitalism would be inherently progressive if it was made more efficient”.
Marginal Utility, elasticity of demand, production costs, and consumer surplus were some of the tools used by Marshall to explain his stand point. He gave a new dimension to proper appreciation of the demand and supply and how market forces generally reflected fairness to all parties. He believed that a redistribution of wealth from rich to the poor would no doubt increase ‘total satisfaction’.
Marshall’s analysis of the fourth factor of production must be specially mentioned. The level of society, the level of economy in that society, the position of a particular industry in that society and that of a firm in the industry are mainly discussed by him. This seemingly abstract ideas find concrete touch when care is taken to analyze the structure of the society, the relative strengths and the weaknesses in the society, the nature of industrial enterprise and the individual place of a firm in the cluster of firms. Marshall never leaves any analysis to chance. His objectivity and thoroughness are remarkable. They are characterized by a passion to arrive at the truth. Not through any dogmatic means; but by patient analytical method.
Conclusion
Political Economy was transferred from its narrow domain to larger social arena by the untiring work of Alfred Marshall. He was a pioneer in the field of economics in applying tested tools to meet the demands of time. No wonder his student JAM. Keynes could make a deep impact in the history of the subject by contributing a lasting impact.
It is also not a surprise that deep commitment to the nature of the subject and human nature itself made Marshall and his followers to stick to the individualist streak, reject collectivism or authoritarian outlook, and believe in the over-riding essential benevolence of human nature to assert itself. In that context the survival of capitalist structure with massive doses of humanism should be attributed to the robust faith in human nature by Alfred Marshall and the inspiration he gave for critical evaluation and objective analyses.
References
Adolf Wagner, MARSHALL’S PRINCIPLES OF ECONOMICS. Quarterly Journal of Economics, Volume 5, 1891, pp.319-38.
A. C Pigou, Review of the Fifth Edition of Marshall’s Principles of Economics* The Economic Journal, volume 17, 1907, pp. 532-5.
Peter Groenewegen, Great Thinkers in Economics, Alfred Marshall, Palgrave Macmillan, 2007.
Alfred Marshall, Principles of Economics, 1890.
Alfred Marshall, Brittanica Online Encyclopedia.