Alfred Marshall (economist)
Alfred Marshall was a prominent British economist, recognized as a leading figure in the field from the late 19th century to the early 20th century. Born on July 26, 1842, in London, he pursued his education at St. John's College, Cambridge, where he developed a strong interest in economics. His most significant contribution to the discipline is the book *Principles of Economics*, which introduced crucial concepts such as supply and demand curves and consumer and producer surplus. Marshall's innovative use of diagrams to illustrate economic theories made complex ideas more accessible to a broader audience.
He is often referred to as the father of neoclassical economics, as he integrated classic theories with new insights into market behavior. His concepts have laid the groundwork for microeconomics, influencing the study of individual markets and consumer behavior. Throughout his career, Marshall emphasized the importance of practical observations in economic theory, visiting various industries to better understand the real-world implications of economic activities. In his personal life, Marshall married Mary Paley, also an economist, who contributed to his work and the field as a lecturer. Marshall’s legacy continues to impact economic thought and education to this day.
Alfred Marshall (economist)
Economist
- Born: July 26, 1842
- Place of Birth: London, England
- Died: July 13, 1924
- Place of Death: Cambridge, England
Education: St. John's College, Cambridge
Significance: Alfred Marshall was a British economist and the foremost figure in his field from the late nineteenth century to the early twentieth century. His ideas provided the basis for microeconomics, the study of individual markets and consumer behavior. Marshall's landmark work, Principles of Economics, was the premier economics textbook of the period.
Background
Alfred Marshall was born on July 26, 1842, in London, England, to a middle-class family. His parents were William Marshall, a cashier at the Bank of England, and Rebecca Oliver Marshall, who came from a family of butchers.
Marshall was the second of five children. His older brother, Charles William, was born in 1841. His sisters, Agnes and Mabel Louisa, were born in 1845 and 1850, respectively. The family's youngest child, Walter, was born in 1853.
William Marshall used his cashier's salary to secure his son a good education. From 1852 to 1861, Marshall attended the Merchant Taylors' School in London, where he excelled in mathematics. Marshall's father was a strict and religious man who wanted his son to enter the clergy, and he initially dismissed his son's aptitude for math.
However, Marshall wanted to study mathematics, going against his family's wishes. He eventually received his father's permission to enroll at St. John's College at Cambridge University in 1862.
As a student at Cambridge, Marshall became interested in economics, the study of how people allocate scarce resources. In 1865, he received a fellowship at the university. He gave up the fellowship in the mid-1870s when he got married, violating one of its conditions.
After leaving Cambridge, Marshall taught economics at University College Bristol (later University of Bristol), becoming its first professor of political economy. In 1879, Marshall cowrote his first significant work, The Economics of Industry, with his wife, Mary Paley Marshall.
In 1883, Marshall left Bristol to teach at Oxford. Two years later, he returned to Cambridge as its professor of political economy.
Life's Work
Five years after returning to Cambridge, Marshall wrote his most important work, Principles of Economics. The text propelled Marshall to become the leading economic thinker of his day.
In his book, Marshall devises supply and demand curves and invents the diagrams to illustrate them. He explains that supply and demand influence the price and output levels of goods. Marshall describes the supply and demand curves as the blades on a pair of scissors—the blades intersect at equilibrium, which determines the price. Marshall's theory gave consumers a role in establishing the price of goods. The previous school of thought pointed to the producer setting the price.
Marshall also clarifies the concept of consumer surplus and introduces producer surplus in this work. Consumer surplus is tied to the idea of marginal utility, which theorizes that the price a consumer is willing to pay for a good is equal to the amount of utility, or enjoyment, the consumer gets from the item. In Principles of Economics, Marshall describes consumer surplus as a triangular area on the supply-demand diagram between the demand curve and the market price. The graphical area shows what consumers are willing to pay for a good compared to its market price. When consumers are willing to pay more for an item than its current price, the difference is the consumer surplus. Consumers experience the benefit of paying less than what they were willing to pay, receiving additional utility from the good. Conversely, Marshall developed the concept of a producer surplus. This occurs when the amount the producers are paid is greater than the amount they were willing to accept.
Marshall is also credited with the idea of elasticity, which refers to how the quantities of supply and demand shift in response to a change in a good's price. Marshall demonstrated that producers have some flexibility to change the prices of goods without affecting revenues.
In Principles of Economics, Marshall defines three periods that affect production decisions. The periods refer to the length of time during which factors of production—such as resources, labor, and capital—can be varied to affect output. During the market period, the factors of production are fixed and cannot change. In the short period, or short run, labor and other factors, except for capital, are flexible. During the long period, or long run, the amount of capital can be adjusted.
Marshall wanted the average reader to understand and digest his work. Despite his own mathematical talents, he restricted his calculations and equations to footnotes and appendices. This became common practice for economic texts. He also believed in ensuring his observations were more than theoretical. To this end, for a time he relentlessly traveled to factories, docks, mines, and other businesses, where he spoke with owners, workers, and union leaders. His understanding of how supply and demand of both labor and goods was founded in an understanding of how businesses worked and how changes impacted both production and workers' lives.
After his observations and theories were published in Principles of Economics, Marshall became known as the father of neoclassical economics, which combined classic economic theories with new ideas. He published more works exploring the behavior of industries and markets, including Industry and Trade in 1919 and Money, Credit and Commerce in 1923.
Marshall retired from Cambridge in 1908, after enjoying a teaching career that spanned more than forty years. He died on July 13, 1924, in Cambridge, England.
Impact
Marshall's ideas shaped the foundation of microeconomics. His concepts of supply and demand are core principles. The supply-demand curves in Principles of Economics popularized the use of diagrams to depict economic theories and problems. The concept of consumer surplus is a key part of understanding the social benefits from market transactions, known as welfare economics. Principles of Economics was the leading economics text well into the twentieth century.
Marshall was pivotal in promoting the teaching of economics as its own field of study. Influenced by his teachings, Marshall's students formed a new school of thought, the Marshallian school of economics. The school's most distinguished members were British economists John Maynard Keynes, who went on to challenge many of Marshall's theories, and Arthur Cecil Pigou, who replaced Marshall upon his retirement at Cambridge.
Personal Life
Marshall married Mary Paley around 1877. An economist in her own right, Paley studied at Cambridge, where she met Marshall. She also joined the University College Bristol as an economics lecturer after Marshall started there, becoming its first female lecturer. The two remained married until Alfred Marshall's death in 1924.
Bibliography
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"Alfred Marshall." The Concise Encyclopedia of Economics, www.econlib.org/library/Enc/bios/Marshall.html. Accessed 4 Oct. 2024.
Atkinson, Brian, and Susan Johns. Studying Economics. Palgrave, 2001.
"Consumer Surplus." Investopedia, 21 June 2024, www.investopedia.com/terms/c/consumer‗surplus.asp. Accessed 4 Oct. 2024
Groenewegen, Peter. Alfred Marshall: Economist 1842–1924. Palgrave Macmillan, 2007.
Hutchens, Gareth. "What Our Politicians Could Learn About Poverty from the First-Hand Experiences of Economist Alfred Marshall." ABC News Australia, 13 Feb. 2021, www.abc.net.au/news/2021-02-14/alfred-marshalls-economic-insights-came-from-experience/13152778. Accessed 4 Oct. 2024.
Munger, Michael. "Alfred Marshall’s Scissors." American Institute for Economic Research, 24 Sept. 2024, www.aier.org/article/alfred-marshalls-scissors/. Accessed 4 Oct. 2024.
Schilling, Timothy P. "Marshall, Alfred." Economics: The Definitive Encyclopedia from Theory to Practice, edited by David A. Dieterle, vol. 1, ABC-CLIO, 2017, pp. 272–74.
"The School's History." University of Bristol, www.bristol.ac.uk/university/history/. Accessed 4 Oct. 2024.