Neoclassical school of economics includes Cambridge and Anglo-American. The first is considered the most important direction in the development of the discipline. The formation of this school of economics is associated with the names of prominent 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 together with his colleagues, was a continuation of the development of the classical positions with the inclusion of a new method and limit analysis. It was his work that largely determined the further direction of world thought.
Alfred Marshall: biography
This figure was born in the 19th century in London. He graduated from the University of Cambridge. In 1877 he began his administrative work at the Bristol Institute. Between 1883 and 1884 he lectured at Oxford. After that, he returned to the University of Cambridge and from 1885 to 1903 worked as a professor there. In the early 90s of the 19th century, he carried out activities as a member of the Royallabor commission. In 1908 he left the chair of political economy at 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 trend. He introduced the concept of "economics" into the discipline, thus emphasizing his own understanding of the subject of research. He believed that this 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 studied. It is an applied discipline and cannot but consider practical issues. However, the problems of economic policy do not belong to its subject. Economic life, according to Marshall, should be considered outside of political influence and government interference. He believed that the truths that were put forward by the classics will retain their significance throughout the entire period of the existence of the world. However, many of the provisions developed earlier should be clarified and comprehended in accordance with the changed conditions. Among leading scientists there were disputes about what exactly should be considered a source of value: factors of production, labor costs or utility. Economist Alfred Marshall was able to take the discussion to another level. He concluded that there was no need to identify the source of value. It is more expedient to study the factors affecting the cost, its level and dynamics.
Demand and supply
FirstThe next step is to determine which research method Alfred Marshall chose. The main ideas of the figure were based on the controversy around the issues of value. In his writings, he identified a clear way out of this debate. Considering the theory of factors of production, he preferred one of its variants - the concept of sacrifices of these elements. In the course of 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 scientists from disputes over questions of value to the study of the patterns of formation and interaction between supply and demand. Based on 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 substantiating the patterns of formation of product supply. The ideas of the theory of marginal utility, like itself, entered, in turn, into the structure of explaining the laws of the formation of consumer demand. In the course of the research, several new approaches were put forward, categories and concepts were introduced, which later firmly entered the discipline.
Time factor
The need to include it in price analysis was emphasized in his research by Alfred Marshall. 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 put into the analysis. AtIn the short term, with a significant increase in demand over supply, the inability to eliminate this superiority through existing capacities, 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 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
Marshall's economic theory was supported by his contemporaries. The compromise he proposed was aimed at breaking the deadlock in which the discipline 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 Marshal 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 we alth. First of all, the study concerns the incentive motives of economic activity. The intensity of incentives is measured by money - so Alfred Marshall believed. The principles of economics were thus based on the analysis of the behavior of individuals.
Victims of labor and capital
Alfred Marshallconsidered issues related to the formation of the final price and sources of profit. In these studies, he continued the traditions 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 real costs were hidden behind monetary production costs. It is they who ultimately determine the exchange proportions of the turnover of goods. The real costs in the capitalist system are formed at the expense of capital and labor sacrifices. Fixed costs and rents were excluded from the concept. Explaining the concept of victims of labor, Alfred Marshal almost completely followed Senior's dogma. He interpreted this category as subjective negative emotions that were associated with work efforts. Marshall's sacrifice of capital is abstention from immediate personal consumption of funds.
Relationship between cause and effect
Alfred Marshall in his writings pointed to its mobility and ambiguity. In addition, he drew attention to the specific patterns that 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 premise that any person seeks pleasure and good, avoids trouble. Under every circumstance, people tend to get the maximum of one while having the minimum of the other. Alfred Marshall proposed a method by which you first need to highlight the keycauses, excluding the influence of other factors. He assumed that the influence of the main circumstances acts separately and will lead to specific consequences. However, this provision holds if the hypothesis is previously accepted, for which no other reason 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 supply and demand for different product categories are taken into account. Fluctuations are studied in dynamics, not in statistics. The forces that influence the movement of prices and demand are considered.
Partial equilibrium
Alfred Marshall understood it as a certain conditionality and a certain limitation of the approach, which involves the removal of factors that are not currently of decisive importance. Secondary circumstances that distort the general idea are translated into a separate, special "reserve". It is referred to as "other things being equal". With this reservation, Alfred Marshall excludes the influence of other factors, not considering them to be inert. He ignores their effects only for the time being. 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 affect the supply-demand system.
Problem analysis
Alfred Marshall sought to study topical issues in the plane of the real conditions of economic life. His work is fillednumerous comparisons, examples that he took from practice. The scientist is trying to combine theoretical and historical approaches. At the same time, his methods in some cases schematize and simplify reality. Alfred Marshall wrote that discipline aims primarily at acquiring knowledge for itself. The second task is to clarify practical issues. However, this does not mean that it is necessary to focus directly on the life application of the results of the study. The construction of surveys must be based not on the basis of practical goals, but according to the content of the subject of analysis itself. Marshall spoke out against Ricardo's ideas of focusing too much on production costs and relegating demand analysis to a secondary position. This acted as one of the reasons for underestimating the importance of the study of issues that are associated with the study of human needs.
Demand curve
It has to do with utility evaluation. Marshall put forward the pattern of saturation or decrease in value as a habitual, fundamental property of human nature. According to the scientist's conclusion, the demand curve usually has a negative slope. An increase in the amount of a good reduces the utility of its marginal unit. The law of demand is interpreted by Marshall in the following form: "The quantity of a commodity for which demand is presented increases when the price falls and decreases when it rises."
The steepness of the curve for different products is not the same. For some goods, it decreases sharply, for others - relativelysmoothly. The degree of steepness (angle of inclination) will change in accordance with changes in demand under the influence of price fluctuations. If this happens quickly, then it will be elastic, if slowly, then inelastic. These concepts were new to economic analysis and it was Marshall who introduced them into theory.
Offer and production costs
Exploring these categories, Marshall divides costs into additional and basic. In modern terminology, these are fixed and variable costs. Some costs cannot be changed in the short run. The volume of output of goods is affected by the indicator of variable costs. The optimal amount of product is reached when marginal cost equalizes marginal revenue.
New categories
In the long run, the reduction in production costs is driven by external and internal savings. These terms have also been introduced by scientists. Achieving internal savings is possible by improving the organization and technology of production. External, in turn, is determined by the level of concentration, costs, and transport capabilities. These factors apply to the whole society. In essence, this provision reflects the difference between private and general production costs.
