I.

ACADEMIC BACKGROUND

Alfred Marshall was one of the most significant economists of his time. He is known as
one of the founders of neoclassical economics and for his book, Principles of Economics that
brought ideas about of supply and demand, marginal utility, and costs of production. Every great
individual has a history of what helped them become who they are. Alfred Marshall is one of
them and to know him further, we shall study what molded him to become a great economist of
his time.

Alfred Marshall was born on July 26, 1842 in England, to William Marshall, an employee
in the Bank of England, and Rebecca Oliver. He was from a middle-class family and had a
comfortable childhood. His father was a very strict person; however, he was able to resist his
parent’s desire for him to join the ministry. He instead opted to go down the educational route.
He attended St. John's College, Cambridge, University of Cambridge, and Merchant Taylors'
School.

Marshall went to the Merchant Taylors’ School before moving on to St. John’s College,
Cambridge, rebelling against his father who expected him to go to Oxford with a classics
scholarship. He was a bright student having a deep interest in mathematics and science,
unfortunately, he experienced a mental crisis while at college and switched to philosophy.
However, his interest in metaphysics led him to ethics which in turn motivated him to study
economics. His initial interest in economics stemmed from the fact that economics was crucial
for the improvement of the working class. His ethical stance guided him in his work on
economics.

He enrolled in St. John’s College, Cambridge, in 1862 where he pursued mathematics

due to his extraordinary talent in the field. The Mathematical Tripos, as the degree was called,
was the most prestigious one offered by the institution, which Marshall managed to complete in
1865 with distinction after receiving the rank of Second Wrangler. He received fellowship at the
university the same year after graduating.

By exploring the fields of physics and philosophy, only to return to developing theories of
economics in the early 1870’s, Marshall has expanded his interests. His brief digressions saw
him teach moral sciences. Nevertheless, he began lecturing on economics and political
economies later at the University College, Bristol, where he was also become a principal. He
returned to Cambridge in 1885 in the capacity of a professor of Political Economy, a title he held
until his retirement in 1908. Marshall also lead the ‘Cambridge School’ during this time, and after
he retired, he passed his responsibility on to Arthur Pigou and John Keynes.

Marshall’s dedication towards making innovations in economics let him travel to other
countries, such as in 1875 he was able to go to the United States to expand his range of study
on major issues to get further perspective. He firmly believed that if physical success was to be
appreciated and distributed, it would have to be helped by social and political agents as well
rather than just rely on economic theory. His early works saw him comment on international
trade, especially policies implemented by the government to safeguard domestic industries, and
write essays concerning other issues. It was only until 1879 that he published his first book titled
‘The Economics of Industry’, which he co-wrote with his wife. Marshall sought to give economics
a mathematical foundation in this book to add scientific value to the discipline itself.

Marshall rose to world in 1990, after writing his book, Principles of Economics, which
assumed other works as the main economics course book. This book gave Marshall leading
status in the area of microeconomics. Marshall emphasized in the text how demand and supply
are the prime influences behind the price and output levels of goods. He also drew attention to
the factors which shift their curves, and lastly, redefined the notions of consumer and producer
surplus which were beforehand undistinguishable. Marginal utility ideas which determine how
consumer derive utility from each additional unit falls were also introduced in this book, along
with the conceptions of short run, intermediate run, and long run in business cycles which
determine the level of factor inputs to production.

In the course of his lifetime and professional career, he had the opportunity to work with
a number of other well-known intellectuals, including John Keynes, Henry Sidgwick and William
Jevons. He passed away on July 13, 1924 leaving the world with key ideas which form the very
grassroots of all economic theory today, only going on to highlight how significant his
contributions were to economics.
II. POLITICAL ECONOMIC VIEWS

Contributing significantly through his discoveries and notions, Alfred Marshall has placed
a strong foundation to the multifaceted of economics. A professor specializing political economy
starting from 1868, his influence garnered a lot of attention and still stretches until to the
contemporary discipline. In his notable book entitled Principles of Economics (1890), he defined
Political Economy as “a study of mankind in the ordinary business of life; it examines that part of
individual and social action which is most closely connected with the attainment and with the
use of material requisites of well-being.” Inasmuch as wealth and power can be considered as
the primary vehicle of economics and politics, he regarded men, themselves, and their
interactions with one another as the determinants of Political Economy.

In the same book, he elucidated that “the production of wealth is but a means to the
sustenance of man; to the satisfaction of his wants; and to the development of his activities,
physical, mental and moral”. Whatever the man’s actions are, its ultimate goal is intended for his
own survival and welfare. And welfare is closely associated with the conduct of economics.
Such perception connotes a larger scope into the economics as it can be related with different
areas of study such as politics, psychology, ethics and so on.

Inasmuch as he defined the political economy, he noted the obvious fact that many
economists have induced. Through his book of Industry and Trade (1919), he stated that “the
difficulty of obtaining adequate supplies of food and raw produce would ere long weigh heavily
on densely peopled countries”. Though scarcity of resources is ipso facto constant, however,
one should be mindful that it is much more persistent in populated countries. This is one of the
driving factors why many of the countries with highest population heavily depend on the
exportation of resources or worst, succumb to the horrors of poverty. Overpopulation is a
dilemma that can destroy the stability of both economic and political elements of the state;
thereby possibly can hinder the opportunities towards progress. This progress, moreover,
should be the means towards sustainable development where the present generation meet its
needs without compromising the ability of the future generations to meet its own needs.

Deepening his outlook on microeconomics, he regarded “consumption as negative

production. Just as man can produce only utilities, so he can consume nothing more.” It is in this
manner where the utilities are destroyed due to human’s consumption. But logically speaking,
utilities are created for a purpose of consumption so it is the man’s job to create, refine or
modify the utilities which can produce a product accordingly to the extent of his changing
satisfaction. Thus, consumption and production are evolutionary and indivisible concept.

Services which produces labor can only a man provide other than immaterial products or
utilities. He defined 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.” A physical
contribution of man for a pleasure not solely comes within him but also from other people or
things, anything other than himself.

However, Alfred Marshall is a capitalist and utilitarianist in nature as he has ideological

defense of capitalism. In his Theory of Firm, he believed “in general, large-scale firms are more
efficient”. He was a “firm believer in the economic dynamic of private property, market
exchange, individual interest and calculative rationality.” It only leads the people to believe that
private enterprises are significant in a state as efficiency and progress can be attained and
maximized by an establishment of a free system. To be more specific, he is an advocate of
capitalist realism and regards socialism as a failure whereby its defenders claim that
competition should be abolished, private property and wage-labor. But insofar as he relates with
the capitalists, he still thought that problems in poverty should be solved.
III. ANALYSIS

Alfred Marshall was born into a middle-class family in London and raised to enter the
clergy. However, he defied his parents’ wishes and instead fulfill his ambition and became an
academic in mathematics and economics.

Marshall was known to be one of the intellectuals in the world of economics. He

specialized in microeconomics wherein he studies individual, markets, and industries. In his
book, he highlighted that the price and output of a good are determined by the two curves that
are like scissor blades that intersect at equilibrium in which is called the supply and demand.
Modern economists tried to understand why the price of a good changes still start by looking for
factors that may have shifted demand or supply, an idea they owe to Marshall. He was also
credited for the concept of elasticity of demand which measures the buyers’ sensitivity to price
and the concept of consumer surplus in which he noted that the price is typically the same for
each unit of a commodity that a consumer buys, but the value to the consumer of each
additional unit declines. Consumer surplus is the difference between the maximum price a
consumer is willing to pay and the actual price they do pay. If a consumer would be willing to
pay more than the current asking price, then they are getting more benefit from the purchased
product than they initially paid. An example of a good with generally high consumer surplus is
drinking water. People would pay very high prices for drinking water, as they need it to survive.
The difference in the price that they would pay, if they had to, and the amount that they pay now
is their consumer surplus. Note that the utility of the first few liters of drinking water is very high
(as it prevents death), so the first few liters would likely have more consumer surplus than
subsequent liters.

Marshall also introduced the concept of producer surplus, the amount the producer is
paid minus the amount that he would willingly accept. He used these ideas to measure and
observe the changes in well-being from government policies like taxation. Producer surplus is
the amount that producers benefit by selling at a market price that is higher than the least that
they would be willing to sell for; this is roughly equal to profit because producers are not
normally willing to sell at a loss and are normally indifferent to selling at a breakeven price.
 In order to understand how markets, adjust to changes in supply or demand over time,
Alfred Marshall presented the idea of three periods. First is the market period, the amount of
time for which the stock of a commodity is fixed. Secondly, the short period is the time in which
the supply can be increased by adding labor and other inputs but not by adding capital in which
his term was called “appliances”. Third, the long period is the amount of time taken for capital or
“appliances” to be increased.

To make economics dynamic rather than static, Marshall used the tools of classical
mechanics, including the concept of optimization. With these tools he, like neoclassical
economists who have followed in his footsteps, took as givens technology, market institutions,
and people’s preferences. But Marshall was not satisfied with his approach, he argues that the
economy is an evolutionary process in which technology, market institutions, and people’s
preferences evolve along with people’s behavior.

Marshall rarely attempted a statement or took a position without expressing countless

qualifications, exceptions, and footnotes. He showed himself to be an astute mathematician—he
studied math at St. John’s College, Cambridge—but limited his quantitative expressions so that
he might appeal to the layman.
REFERENCES:

Alfred Marshall. (n.d.). Retrieved from https://www.econlib.org/library/Enc/bios/Marshall.html

Britannica, T. E. (2018, September 28). Alfred Marshall. Retrieved from

https://www.britannica.com/biography/Alfred-Marshall

Economist Alfred Marshall - Biography, Theories and Books. (n.d.). Retrieved from
https://www.famouseconomists.net/alfred-marshall

Who was Alfred Marshall? Everything You Need to Know. (n.d.). Retrieved from
https://www.thefamouspeople.com/profiles/alfred-marshall-3571.php

Marshall, Alfred (1890). "Principles of Economics". Retrieved April 20, 2019.