Alfred Marshall. Cambridge School of Economics

Neoclassical economic school includes Cambridge and Anglo-American. The first is considered the most important direction in the development of discipline. The formation of this school of economics is associated with the names of outstanding scientists. Among them - Walras, Clark, Pigou. One of the key figures in the formation of new ideas was Alfred Marshall (1842-1924). The system, which he developed jointly with colleagues, was a continuation of the development of classical provisions with the inclusion of a new method and limit analysis. It was his work that largely determined the future direction of world thought.

Alfred Marshall: Biography

This figure was born in the 19th century in London. He graduated from Cambridge University. In 1877, his administrative activities began at the Bristol Institute. In the period from 1883 to 1884 he lectured in Oxford. After that, he returned to Cambridge University and from 1885 to 1903 he worked there as a professor. In the early nineties of the 19th century, he acted as a member of the Royal Labor Commission. In 1908 he left the department of political economy in Cambridge. From that moment until the end of his life, he conducted his own research.

Alfred Marshall: Contribution to the Economy

This figure is considered one of the founders of the neoclassical direction. He introduced the concept of "economics" into discipline, thus emphasizing his own understanding of the subject of research. He believed that this very concept most accurately and fully reflects the object of study. Within the framework of science, economic conditions and aspects of social life, prerequisites for economic activity are explored. It is an applied discipline and can not help but consider practical questions. However, the problems of economic policy are not relevant to its subject matter. Economic life, according to Marshall, should be considered outside of political influence and state intervention. He believed that the truths that were put forward by the classics will remain important throughout the entire period of the world's existence. However, many of the provisions developed earlier should be clarified and comprehended in accordance with changed conditions. Among the leading scientists there were disputes about what it is to consider as a source of value: production factors, labor costs or utility. Economist Alfred Marshall was able to translate the discussion into a different plane. He came to the conclusion that there is no need to determine the source of value. It is more expedient to study the factors influencing the cost, its level and dynamics.

Supply and demand

First of all, it is necessary to determine which method of research Alfred Marshall chose. The main ideas of the figure were based on a polemic around issues of value. In his works he defined a clear way out of this discussion. Considering the theory of factors of production, he preferred one of its variants - the concept of the victims of these elements. In the course of the research, a kind of compromise was found between different directions of thought. The key idea was to shift the center of gravity in the writings of bourgeois scholars from disputes over value issues to the study of the patterns of formation and interaction of supply and demand. Proceeding from this, in turn, it was possible to form the concept of price. Thus, a compromise combination of the most important categories and concepts from different theoretical directions was proposed. A number of concepts on production factors were included in the system for justifying the regularities in the formation of the supply of products. The ideas of the theory of marginal utility, like herself, included, in turn, the structure of the explanation of the laws of the emergence of consumer demand. In the course of the research, several new approaches were put forward, categories and concepts were introduced, which later became firmly established in discipline.

Time factor

Alfred Marshall stressed the necessity of including it in price analysis. The main aspect, in his opinion, was the interaction between production costs and the formation of value. This interaction depended on the nature of the approach to be laid down in the analysis. In the short term, with a significant increase in demand over supply, the inability to eliminate this superiority by means of available capacity, the so-called quasi rent mechanism is launched. Those entrepreneurs who produce scarce products, before the introduction of new capacities have the opportunity to significantly increase prices. Due to this they receive an additional, "quasi-rent" income through the formation of such profits. Alfred Marshall described the reaction of market forces to fluctuations in supply and demand in the short term.

The Essence of Compromise

The economic theory of Marshall was supported by his contemporaries. The compromise proposed to him was oriented toward the emergence of discipline from the impasse in which it found itself towards the end of the 19th century. His theory of price was further developed and began to form that part of political economy, which is called the microeconomic section. The scientist saw bourgeois society as a fairly harmonious system, which was devoid of any significant social and economic contradictions. Alfred Marshall conducted a thorough analysis of the formation and interaction of key categories, introduced new concepts. Discipline, in his opinion, explores not only the very nature of wealth. First of all, the study deals with the motivations of economic activity. The intensity of incentives is measured in money - that's what Alfred Marshall believed. The principles of economic science, therefore, were based on an analysis of the behavior of individuals.

Victims of Labor and Capital

Alfred Marshall considered issues related to the formation of the final price and sources of profit. In these studies, he continued the tradition of the English direction. The formulation of the concept was influenced by the work of Senior and a number of his followers. Alfred Marshall believed that for real production costs, real costs are hidden. It is they who ultimately determine the exchange rates of the turnover of goods. Real costs in the capitalist system are formed at the expense of capital and labor victims. From the concept, fixed costs and annuities were excluded. Explaining the notion of labor victims, Alfred Marshall almost completely followed the dogma of Senior. This category he treated as subjective negative emotions, which were associated with working efforts. The victim of capital according to Marshall is the abstention from immediate personal consumption of funds.

Cause of cause and effect

Alfred Marshall in his works pointed to her mobility and ambiguity. In addition, he drew attention to the specifics of the regularities, which usually acted in the form of trends. The scientist spoke about the specificity of economic laws. It was she who complicated the search for truth and required the use of appropriate analytical techniques. The theory was based on the proposition that any person seeks pleasure and goodness, avoids trouble. With each circumstance, people tend to get the maximum of anything one with a minimum of the other. Alfred Marshall proposed a method by which it is first necessary to identify the key causes, excluding the impact of other factors. He assumed that the influence of the main circumstances stands apart and will lead to concrete consequences. However, this is the case if a hypothesis is preliminarily accepted, according to which no other reason other than that clearly indicated by the doctrine will be taken into account. At the next stage, new factors are taken into account and studied. For example, changes in demand and supply for different product categories are taken into account. Oscillations are investigated in dynamics, and not in statistics. The forces that influence the movement of prices and demand are considered.

Partial balance

Alfred Marshall understood under him a certain conventionality and a certain limitation of the approach, which implies a removal from factors that do not currently have a determining value. Secondary circumstances that distort the general idea are translated into a separate, special "store". It is called "under other equal conditions". This reservation Alfred Marshall excludes the impact of other factors, not counting them inert at the same time. He ignores their impact only on time. Thus, there is only one reason - the price. It acts as a kind of magnet. The economic world develops under the influence of a single regulator, all incentives and forces influence the supply-demand system.

Problem analysis

Alfred Marshall sought to study current issues in the real world conditions of economic life. His work is filled with numerous comparisons, examples, which he took from practice. The scientist tries to combine theoretical and historical approaches. At the same time, his methods in some cases schematize, simplify the reality. Alfred Marshall wrote about the fact that discipline sets a goal, first of all, the acquisition of knowledge for oneself. The second task is to clarify practical issues. However, this does not mean that it is necessary to focus directly on the vital application of the results of the study. The construction of surveys should be based not on the basis of practical purposes, but according to the content of the subject matter of the analysis. Marshall spoke against Ricardo's ideas concerning excessive attention to production costs and shifting to the secondary position of demand analysis. This acted as one of the reasons for underestimating the importance of researching issues that are related to the study of human needs.

Demand curve

It is related to the evaluation of utility. Marshall put forward the pattern of saturation or loss of value as a habitual, fundamental property of the person's nature. According to the scientist's conclusion, the demand curve usually has a negative slope. Increasing the volume of the good reduces the utility of its marginal unit. The law of demand is interpreted by Marshall in the following form: "The number of goods for which demand is demanded increases when the price decreases and decreases when it increases."

The steepness of the curve for different products is not the same. For some benefits, it declines sharply, for others - relatively smoothly. The degree of steepness (angle of inclination) will vary in accordance with changes in demand under the influence of price fluctuations. If this happens quickly, then it will be elastic, if slow, then inelastic. These concepts were new to economic analysis, and it was Marshall who introduced them into the theory.

Offer and production costs

Exploring these categories, Marshall shares the costs of additional and basic. In modern terminology, these are fixed and variable costs. Some costs in the short term can not be changed. The volume of output of goods is affected by the variable cost indicator. The optimum quantity of a product is achieved if the marginal cost is equalized with the marginal revenue.

New categories

In the long run, lowering production costs is due to external and internal savings. These terms were also introduced by the scientist. Achieving internal savings is possible through improving the organization and production technology. External, in turn, is due to the level of concentration, costs, transport possibilities. These factors apply to the whole society. In fact, this provision reflects the difference between private and general production costs.