Alfred Marshall ranks as one of the most influential scholar who left an indelible mark in field of economics. Marshall was born in London, England on July 26 th 1842 and died on July 13 th 1924. He is renowned for having served as a Chief founder of the school of Neoclassical economists’ school. He also chaperoned Bristol University College as the first principle between years 1877 to 1881. As Keynes (1924) notes, Alfred Marshall had his specialty in micro-economics particularly on the study of industry environments and individual markets. He is credited for having made an immense contribution regarding the price elasticity of demand concept. The postulation measures buyer’s sensitivity to price changes. The scholarly works by Alfred Marshall brought the ideas of supply and demand, production costs and marginal utility into becoming coherent whole concepts (Marshall, 1980). As a founder of neoclassical economics, Alfred Marshall elevated the realm of economics into a mathematically rigorous level. The study explores Alfred Marshall by detailing his contributions to the understanding of concepts such as elasticity of demand, consumer surpluses, Marshallian Utility, wants and their satisfaction, factors of production as well as supply and costs.
Alfred Marshall contributions played a major role in subsequent development of economics. In one of his keynote assertions, Marshall underscored the fact that supply and demand are critical factors in determining price and output of a commodity. Today, the concept has endured with many economists attempting to understand changes in price of a particular commodity by evaluating factors that cause shift in demand and supply curves ( Keynes, 1924) . Alfred Marshall used his ingenuity in coming up with the concept of consumer surplus. He inferred that the price for each unit purchased is usually the same. He however stated that it is the value of each added unit that decreases. He explained that a consumer purchases units up to the level where the price is equal to the marginal value. He deduced that a consumer gains benefit on all units previous to the last one by committing less monies than the value of the good to himself. According to Marshall, consumer surplus refers to the size of the benefit reaped which is equivalent to the difference between the consumer’s total unit’s value and the amount channelled towards purchasing the units. Alfred Marshall also made a significant contribution by creating the concept of producer surplus. He described the idea as the amount paid to a producer less the monies the same producer would willingly take. The two concepts by Alfred Marshall were applied in measuring changes in wellbeing on policies by the government such as taxation. His basic approach that was termed as welfare economic is still relevant in the modern day era.
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Alfred Marshall is distinguished for having introduced the idea of three periods. He did so in an attempt to understand the dynamics of markets towards changes in supply or demand over time. The first period according to Marshall refers to the duration when a commodity stock is fixed. The second period denotes the time when supply can be increased by not injecting more capital but by putting additional inputs and labour. Alfred Marshall termed the third period as the duration taken for capital to be increased. He operationalized the classical mechanics tools which encompassed the concept of optimization. Marshall compared economy to an evolutionary process where people’s behaviour evolved along market institutions, people’s preferences, and technology.
Alfred Marshall reputation grew worldwide following his authorship of principles of economics . The book transformed the teaching of economics in Anglophone countries. The book majored on issues such as increasing and diminishing returns, elasticity, consumer and producer surplus, marginal utility as well as short terms and long terms. His efforts were focused on reconciling the classical and modern paradigms of value. Marshall used approaches developed by John Stuart and Jevons who were economists but laid his focus more on costs. Alfred Marshall keenly noted that market value is dependent on demand and that supply would remain unchanged in the short run. He however made an elaboration that expansion of production is feasible during an intermediate period by working on existing facilities for example machines and buildings. Marshall deduced that since they do not require renewal, the facilities’ costs termed as overhead or fixed have minimal effect on commodity prices. He inferred that it is the variable costs that have a significant influence on product sale price during the intermediate period. In an extended period, Marshal pointed out that the facilities (machines and buildings) do wear out thus necessitating replacement. According to Alfred Marshall the sale of the product must be sufficient to cover the expended replacement costs. The costs classification for example fixed and variable as well as the emphasis on time element embodies one of Alfred Marshall’s prime contribution to the economic theory. The micro-economist laid his focus more on partial equilibrium models instead of general equilibrium.
Marshall’s teachings and the principles of economics book earned him success due to his effective employment of diagrams that were taken over by instructors and micro-economists gurus worldwide. Marshall is distinguished for having pioneered the development of standard demand and supply graphical illustrations. The graphs demonstrated a number of critical elements in respect to demand and supply for example the market equilibrium, supply and demand curves and the quantity and price relationship pertaining demand and supply ( Marshall, 1980) . The model as developed by Alfred Marshal has been employed by multiple economists to demonstrate numerous economic principles using different variables. Visual representations of complex economic concepts were only realised through utilization of the Marshall’s model. Previously, economic fundamentals could only be demonstrated through words. Teachers today can make clear and concise representations on the economic concepts explained through visual and graphical representations.
Figure 1.1: Supply and Demand graph by Alfred Marshall
Source: Marshall (1980)
Alfred Marshall is termed as an influential economist who made substantial theoretical contributions in micro-economics. As a neoclassical economist, Marshall extended economics and popularised the field as a study of human behaviour. He used utility analysis to explain demand curves and substitution principle. He introduced the scissor’s analysis which brought together demand and supply as a representation of utility and costs of production.
Marshall efforts to codify economic thought are undisputable. His popularization of utilization of demand and supply functions for price determination is difficult to deny. His efforts led to introduction of price shifts and curve shifts. He contributed towards ‘marginal revolution’ which is the concept where consumers try to alter consumption levels until marginal utility is equivalent to product price (Groenewegen, 1995). As an extension of ideas, Marshall presented the concepts of price elasticity of demand. The producer and consumer surplus are usually termed as Marshallian surplus. In addition to analysing the effect of taxes and price shifts on market welfare, Marshall identified the idea of quasi rents.
One of Marshall’s references were the cultural and social linkages in the England industrial districts. The institutional economics on clustering on learning organizations employed Marshall’s references as a starting point. Marshall’s works greatly influenced Gary Becker’s scholarly works, as mentioned by Gary who was a Nobel laureate in 1992. Alfred Marshall’s contributions enabled differentiation of internal and external economies of scale concepts. He termed the idea as the concept attained when production costs and input factors decrease. According to Marshall, the concept is a negative externality that is out of control of organizations and has an influence on all firms in a market environment.
Conclusively, Marshall lectured economics at Cambridge school until his retirement. Although aged, he revised his examinations of international economy. At 77 years, he published his scholarly work, Industry and Trade. He in 1923 made another publishment on Commerce, Money and Credit. He left a legacy as a revered father of the economics profession. His immense role in the field of economics set the tone for the remainder of the twentieth century in furthering the foundations established by him. He is fondly remembered for having contributed to economic science, elasticity and surpluses concepts as well as his efforts towards furthering development of other subjects. His books created a turnaround and brought radical change on how teachers lecture economics. To remember his crucial contributions in the field of economics, The Marshall library of economics was constructed in his honour.
References
Groenewegen, P. (1995). A soaring eagle: Alfred Marshall 1842–1924. Books .
Marshall, A. (1996). The correspondence of Alfred Marshall, economist (Vol. 3). Cambridge University Press.
Marshall, A. (1980). Principle of Economics, I edizione.
Keynes, J. M. (1924). Alfred Marshall, 1842-1924. The Economic Journal , 34 (135), 311-372.
