Marshall

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ALFRED MARSHALL (1842-1924)

Alfred Marshall can be described as being a purist in the most common sense. For nearly all of his working life Marshall worked within universities. His contribution to economics was in his works 'Principles of Economics'.

The school of thought to which Marshall belonged was the neo-classical school of economics. We shall now briefly discuss the main areas of his work:

MARSHALL ON THE ROLE OF ECONOMICS - Marshall believed that economics was linked to human nature, he first states 'Economics is a study of mankind in the ordinary business of life.'

Marshall further stated 'The advantage which economics has over other branches of social sciences appears then to arise from the fact that its special field of work gives rather opportunities for exact methods than any other branch.

It concerns itself chiefly with those desires, aspirations and other affections of human nature, the outward manifestations of which appear as incentives to action in such form that the force or quantity of the incentives can be estimated and measured with some approach to accuracy; and by which are in some degree amenable to treatment by scientific machinery.

An opening is made for the methods and the tests of science as soon as the force of a persons motives - not the motives themselves - can be approximately measured by the sum of money, which he will just give up in order to secure a desired satisfaction; or again by the sum which is just desired satisfaction; or again by the sum which is just required to induce him to undergo a certain fatigue'

ECONOMIC GROWTH & PRICING - Marshall like other writers from the neo-classical believed that agriculture was not the only way to look at both economic growth and income distribution. The neo-classicists believed in looking at urbanised land as well.

The neo-classical school felt economic growth could be attributed to land, labour, capital and organisational skill. As Marshall states:

'It is not true that the spinning of yarn in a factory, after allowance has been made for the wear-and-tear of the machinery, is the product of the labour of operatives. It is the product of their labour, together with that of the employer and subordinate managers, and of the capital employed.'

MARSHALL ON DEMAND - Marshall believed demand should be looked on as the relationship between the price of good and the quantity demanded. This was in contrast to the classical school of economics who firmly believed there would be demand for all produced goods.

What Marshall was suggesting although rather simplistic today, was quite radical at the time. Marshall developed this concept into 'diminishing marginal utility' - which suggested that as consumers entered a marketplace the more products they can afford to purchase the more comfort they receive.

PRODUCTIVE AND UN-PRODUCTIVE LABOUR - Marshall declared all labour as being productive:

'We may define labour as any exertion of mind or body undergone partly or wholly with a view to some good other than the pleasure derived directly from the work. And if we had to make a fresh start, it would regard all labour as productive'

WAGES - Marshall recognised that different labour skills required differing wage rates.

PRODUCTION - Marshall felt the price manufacturers sold their goods at, was down to the distribution channels, and the supply and demand factors. In other words they could only sell goods at the price the market demanded.

However, manufacturers focused on reducing costs to maximise profits. Marshall's looked at how manufacturers reacted to changes in market conditions. Marshall departed from looking merely at the long run time perspective, his works looked at short/medium/long run time perspectives.

NATURAL MARKET FORCE - Marshall defined a natural force which would prevent businesses and markets from becoming too large, he stated:

'Nature still presses on the private business by limiting the length of its original founders, and by limiting even more narrowly that part of their lives in which their faculties retain full vigour. And so after a while, the guidance of the business falls into the hands of people with less energy and less genius, if not with less active interest in its prosperity.'

ESSENTIAL FEATURES OF THE WORKS OF ALFRED MARSHALL

Economics is the business of life.
Introduced the concept of consumer demand and reward.
All labour is productive.
Different skill levels require differing wage rates.
Market changes needs to be observed in terms of short, medium and long run time frames.
Nature prevented businesses from becoming too powerful.

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