Marshal And The Neoclassical Synthesis
By Benjamin Bowman
Marshal had a very interesting
childhood. Although, I would guess Marshal would describe it as torture. As a
young child, his father often drilled him on his schoolwork until midnight.
Though it may have seemed as torture at the time, I’m sure it made college seem
like a breeze. He turned down a scholarship to Oxford, and being too poor to
pay for college, his uncle funded his schooling at Cambridge. In his younger
years, his father forbid his two passions, math and chess. I can’t imagine
those things being forbidden by any parent I know, but it was a different time
then, and it sounded like his father wanted him to be a minister. At Cambridge
he was able to pursue these passions. By tutoring math, he was able to repay
his uncle for the cost of school.
Like many of his predecessors,
Marshal did not train to be an economist. In fact it seemed that he had other
pursuits and stumbled upon political economy while trying to justify the
inequalities of his day. After walking through some of the poorest neighborhoods
he could find, he seemed to confirm his desire for political economy and began
a fervent study of the subject that lasted his whole life. Like many great
students, he was always striving to learn more. Fifty years of writing produced
eighty-two publications, the number of which an accomplishment in itself.
However, his publications are not
the majority of his contributions. Like any good instructor, his largest influence
was that which he had on his pupils and protégés. By the end of his life a
large portion of economist in Europe were trained by him and or followed his
teachings. I think all teachers would like to think they have a positive influence
on their students. I would agree that good teachers do.
Although Marshall loved math, and
frequently used math in economics, he did so simply out of convince for
himself. He felt that relying on math too much in economics would “lead us
astray in pursuit of intellectual toys, imaginary problems not conforming to
the conditions of real life,” and may cause, “us to neglect factors that could
not easily be worked up in the mathematical machine.” This is somewhat
surprising to me. His timing and skill set was perfect to apply mathematical
strategies to describe economic principles. Math was his passion, and I would
think it would only be natural for him to try to apply math to economics. I
wonder what he would think of our economics today? Would he think there is too
much math involved in our current anlaysis?
One of Marshall’s greatest
contributions to the science of economics is his recognition of the importance
of time and how it affected economic analysis. As Angel Versetti suggested in my second
reading, “History of Neoclassical Economics – Analysis of Failures of
Neoclassical Thought,” the lack of consideration for time and its affect on
economic aliases was one of the failures of most Neoclassical thought. That
would lead me to believe that Marshall’s consideration of time was even more significant
to neoclassical thought.
Marshall said the answer to time
was constantly stating conditions like “all other things constant, “etc. However,
Angel Versetti mentions that the numerous assumptions required by neoclassical
thought limits the usefulness of the analysis. Despite this obvious
observation, I think Marshall’s attempt to account for time in his analyses is
significant.
He was the first to consider both
the short-run and the long-run and apply them to analysis of the firm and
industry. He applied this kind of analysis toward subjects such as increasing
and decreasing costs and internal and external economies. He also understood
the limits to this method. An example of this is Long-period supply, in which
it is difficult to explain certain aspects of the long-run supply curve. He
even applied time to his analysis of elasticity, which is important because how
quickly change happens is directly related to elasticity.
I find his observation about class
and elasticity interesting. In his
analysis, he mentions that meat is more expensive in rich neighborhoods because
the rich will not by the poor cuts and those cuts have to be sent to somewhere
people will buy them (poorer neighborhoods). Though maybe not intentional it’s
an interesting explanation for Veblen goods.
Another significant contribution of
Marshall was his work on the demand curve. He recognized numerous assumptions
required to draw a demand schedule. He applied his ideas of time to his
analysis. He also recognized the effect of income changes on demand.
Marshall also used utility theory
to analyze several different methods of government intervention as an attempt
to provide the public with greater utility. Angel Versetti pointed out that
this use of utility assumes that people will act rationally maximizing their
utility, when in reality people do not always act rationally. However, Marshall
used utility to discuss subjects such as taxes and subsidies on increasing and
decreasing cost industries. He also analyzed economic welfare and monopoly. Although the utility theory that he used for
his analysis was flawed, he was still able to make some interesting and
insightful conclusions.
Yet another contribution is his
analysis of factor demand. It seems that his analysis of elasticity and the
advances he made in its determinates, help him have a unique insight into
factor demand. Where most authors assumed long-term equilibrium in their
analysis, Marshall instead assumed that there would be some cases in which some
change caused disequilibrium for time enough to affect the supply chain to be
affected. With this basis he was able to offer unique analysis.
As we can see, Marshall wrote on
pretty much every subject of political economies. He studied and wrote on the
subject for years and years. Nevertheless, most of his contributions were not
based on original thoughts; instead he mostly gave new insight to already
existing ideas. He was able to organize, develop and refine all the theories of
the neoclassical era. He basically made a really good compilation of
Neoclassical theories.
I find it very interesting that the
author attributes his fame and reputation to simple luck. He wrote a book and
because it was not directed toward the scientist, but toward the intelligent
layperson, the book was successful and happen to catch the “academic spirit” at
the time. Not that the author discounts
or disregards his contributions to economics, but the author seams to think
that he was not too outstanding at original economic thought. He also mentions
that he owe a portion of his reputation to the fact that many of his students
choose to expound upon his ideas therefore perpetuating his reputation.
As Angel Versetti points out, there
are many limits to Neoclassical thought. However, there is still a use for
these kinds of theories. I think that Marshall did what he could with the world
he lived in. I also believed that he achieved much and contributed greatly to
economic thought.
http://www.academia.edu/1951576/History_of_the_Neoclassical_Economics_-_Analysis_of_Failures_of_the_Neoclassical_Thought
(Angel Versetti)
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