History of Economic Thought. A. Marshall - leader of the Cambridge school of marginalists (the most important)

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History of Economic Thought. A. Marshall - leader of the Cambridge school of marginalists (the most important)

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45. A. MARSHALL - LEADER OF THE CAMBRIDGE SCHOOL OF MARGINALISTS

The theory of the Cambridge school is represented by research Alfred Marshall (1842-1924), Francis Edgeworth (1845-1926), Arthur Cecil Pigou (1877-1959).

1. The most significant contribution was made by A. Marshall, one of the largest bourgeois scientists in the history of economic thought. His theory, the foundations of which are outlined in "Principles of Political Economy", became not only a systematization and generalization of the provisions of post-Recardian English political economy and other movements. It marked the beginning of a new direction in modern economic science - neoclassical political economy.

The focus of Cambridge School economists was mechanism of market price formation. Marshall believed that, on the one hand, the market mechanism, acting in conditions of unlimited competition, establishes the dependence of supply and demand on price. On the other hand, the market system works in the opposite direction, determining the price movement by supply and demand. According to A. Marshall this is an ideal picture of market interaction, when supply and demand equally affect the price change. However, it varies greatly depending on the duration of the considered time intervals. When a short-term period is studied, some patterns appear, when a long-term perspective is analyzed, others. Equality disappears: either demand or supply takes on the role of the main price regulator.

Research of interest A. Marshall problems of demand for individual goods, more precisely, developed by him elasticity of demand concept.

Marshall put demand for a particular product in dependence on three main factors - marginal utility, market price and money income used for consumption, with a special place given to the first of them.

Since marginal utility equal to the maximum price that the buyer is still willing to pay for this product, it becomes the upper limit of the market price fluctuation.

Maximum price, argued A. Marshall, is an autonomous demand price, independent of the market, and is determined only by the need for the product and its stock. If we now look at the market process through the eyes of the buyer (consumer), it turns out that it is from here, from the point of demand price, that the market price, driven by supply and demand, begins its path towards market equilibrium.

In the Cambridge School created by economists supply theory the leading role belongs to the concept marginal cost, which refers to the cost of production of the last unit of a particular product. Proceeding in the same way as in demand research, A. Marshall identified marginal costs with the minimum price (offer price) at which the entrepreneur is still ready to supply his product to the market.

The theorists of the Cambridge school saw in the marginal cost the amount of income accruing to the owners of certain factors of production. These included wages, interest on money capital and entrepreneurial income.

Author: Tatarnikov E.A.

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