Alfred Marshall was born in Bermondsey, a London suburb, on 26 July 1842. He died at Balliol Croft, his Cambridge home of many years, on 13 July 1924 at the age of 81. Professor of Political Economy at the University of Cambridge from 1885 to 1908, he was the founder of the Cambridge School of Economics which rose to great eminence in the 1920s and 1930s: Arthur Cecil Pigou and John Maynard Keynes, the most important figures in this development, were among his pupils. Alfred Marshall’s magnum opus, the Principles of Economics (Marshall, 1890a) was published in 1890 and went through eight editions in his lifetime. It was the most influential treatise of its era and was for many years the Bible of British economics, introducing many still-familiar concepts.
Alfred Marshall grew up in the London suburb of Clapham, being educated at the Merchant Taylor’s School where he showed academic promise and a particular aptitude for mathematics. Eschewing the more obvious path of a closed scholarship to Oxford and a classical education, he entered St John’s College, Cambridge, in 1862 on an open exhibition. There he read for the Mathematical Tripos, Cambridge University’s most prestigious degree competition, emerging in 1865 in the exalted position of Second Wrangler, bettered only by the future Lord Rayleigh. This success ensured Marshall’s election to a Fellowship at St John’s.
Supplementing his stipend by some mathematical coaching, and abandoning – doubtless because of a loss of religious conviction – half-formed earlier intentions of a clerical career, he became engrossed in the study of the philosophical foundations and moral basis for human behavior and social organization. In 1868 he became a College Lecturer in Moral Sciences at St John’s, specializing in teaching political economy. By about 1870 he seems to have committed his career to developing this subject and helping to transform it into a new science of economics.
For several years he labored persistently to develop and refine his economic ideas, and to deepen his understanding and grasp of both the existing economic literature and the economic reality which was its subject matter. In 1875 he visited the USA to probe economic conditions, and throughout his life he was tireless in his efforts to master the practicalities of the economic world. Prior to 1879 his publications were meager. He had embarked on a book on international trade and problems of protectionism in the mid-1870s, and before that he had worked out many of his distinctive theoretical ideas in the form of short essays. But the only part of this material to be made public was four of the theoretical appendices for the proposed international-trade volume. In 1879 HENRY SIDGWICK had these printed for private circulation under the title The Pure Theory of Foreign Trade: The Pure Theory of Domestic Values (1879a). The year 1879 also saw the publication of Alfred Marshall’s first book, The Economics of Industry (1879b), written jointly with his wife Mary Paley Marshall.
Mary Paley had been one of the first group of students at Newnham Hall (later Newnham College) and Marshall, an early supporter of the informal scheme of Cambridge lectures for women, taught her political economy. Their marriage in 1877 required Marshall to give up his Cambridge position under the celibacy rules then in force. He found a new livelihood as Principal of the recently established University College, Bristol, where he also became Professor of Political Economy. There the Economies of Industry was brought to completion and published by the house of Macmillan, which continued as Marshall’s publisher thereafter. Ostensibly an elementary primer, this book contained the first general statement of Marshall’s emerging theories, and a considerable sophistication lay beneath its deceptively simple surface. Together with the powerful Pure Theory chapters published by Sidgwick, a few copies of which circulated outside Cambridge, the Economics of Industry marked Marshall as a rising star in the economic firmament. With the death of W.S. Jevons in 1881, he moved into the public eye as the leader in Britain of the new scientific school of economies.
The duties of the Bristol Principalship proved irksome to Marshall, especially as the College was struggling financially. He was anxious to proceed with his writing, having by 1877 conceived the plan for the book which was to become the Principles. His frustrations were increased by the onset in 1879 of a debilitating illness, diagnosed as kidney stones, which restricted his activities. He was persuaded to continue as Principal until 1881, when he resigned both posts at the College. The next year was spent traveling, with an extended sojourn in Palermo, and it was in this year that composition of the new book began in earnest.
At Bristol, Alfred Marshall had got to know well Benjamin Jowett, the famed Master of Balliol, who was one of the governors of the struggling College. It was probably by Jowett’s generosity that Marshall was able to return to Bristol in 1882 as Professor of Political Economy. And it was doubtless at Jowett’s instigation that the Marshalls moved to Oxford in 1883, when a Balliol lectureship became vacant on the unexpected death of Arnold Toynbee. Marshall had considerable success as a teacher in Oxford and appeared settled in for an indefinite stay. But an ‘Oxford School of Economies’ was not to be. The sudden death of Henry Fawcett, who had been Professor of Political Economy at Cambridge since 1863, opened up the irresistible prospect of a return to Cambridge and a position with great potential for academic leadership. Marshall, the dominant candidate, was duly elected in December 1884, holding the chair until 1908, when he resigned to devote himself entirely to writing.
In many ways Cambridge’s inviting prospects were to prove illusory. Economics was taught as part of the Historical and Moral Sciences Triposes, but neither avenue provided a supply of able interested students, nor was there much scope for advanced work. Marshall struggled for many years, with limited success, to increase the scope for economic teaching. But it was not until 1903, with the establishment of a new Tripos in Economics and Politics, that his goal was achieved. Even then, few resources were made available for economic teaching by the University and Colleges, and the staffing of the new Tripos relied heavily on Marshall’s willingness to support two young lecturers from his own pocket. The flowering of the new school came about mainly after his retirement, but the seeds were certainly planted by his efforts.
Absorbed in the struggle for his own subject, Marshall took relatively little part in general University affairs. Indeed, his rather obsessive personality and proneness to magnify details would have made him ineffectual as a University statesman even if he had aspired in that direction. But he did play a prominent part in the successful campaign of 1896-1897 against the granting of Cambridge degrees to students of the women’s colleges – this despite his wife being at the time a lecturer at Newnham. He was not opposed to women’s education, indeed had been a warm supporter in his early days, but was vehemently opposed to the assimilation of women into an educational system designed for men.
But the dominant fact in Alfred Marshall’s life after his return to Cambridge, and certainly the aspect of greatest interest to posterity, is his long struggle to give adequate written expression to the stores of economic knowledge and understanding he had accumulated. The demands of teaching and administration left him little time or energy for sustained composition during term time and it was in the jealously guarded Long Vacations, usually spent away from Cambridge on the South Coast of England or in the Tyrol of Austria, that the only real progress could be made. By 1887 the book commenced in 1881 had grown into a projected two-volume treatise. He hoped to complete the first volume in time for it to appear in the autumn of that year with the second volume appearing by 1889. In fact, the first volume (1890a) appeared as the Principles of Economics, Volume One, only in July 1890, when it was received with great and immediate acclaim and established Marshall firmly as one of the world’s leading economists. The second volume never appeared. It was to have covered foreign trade, money, trade fluctuations, taxation, collectivism and aims for the future.
Marshall struggled for the next thirteen years for his intractable second volume, meanwhile spending much time on substantial, but not very substantive, recastings of the first volume in new editions of 1891, 1892, 1895 and 1898, and in preparing a digest of it to replace the earlier Economics of Industry which he had come to dislike intensely. (The digest (1892) appeared under the title Elements of the Economics of Industry, Volume One.)
By 1903 much material had been accumulated for the second volume, but the scope was becoming unmanageable as he became increasingly pre-occupied with problems of trusts, trades unions, international trade, and comparative economic development, and decreasingly concerned with matters of pure theory. In that year, partly from the impetus of writing a private memorandum on trade policy for the use of the then Chancellor of the Exchequer, and partly because the tariff controversy was at full heat, Marshall was tempted into writing a short topical book on foreign trade questions, intending to publish it speedily. But this project too grew unmanageably in his hands. In 1907, the preface to the fifth edition of the Principles (the last major rewriting) announced the abandonment of the proposed continuation and promised instead a volume, already partly in print, on ‘National Industry and Trade’, to be followed soon by a companion volume on Money, Credit and Employment’ (Guillebaud, 1961, Vol. 11, p. 46).
Retirement in 1908, at the age of 66, freed him to concentrate wholly on these projects, but progress continued slow. He appears to have suffered from recurrent dyspepsia and high blood pressure, which necessitated a strict regimen and limited his ability to work. But the more fundamental problem was that the world kept changing and the increasingly realistic and factual tone of his enquiry called for incessant recasting and revision. Nothing had been completed by the time war broke out in 1914, and then much rewriting was required to take into account the radical changes which were transforming the world economy and its post-war prospects. At last, in 1919, when Marshall was 77, Industry and Trade, his second masterpiece, finally appeared (1919). It was a magisterial, largely factual, consideration of trends in the British and international economy and of future economic prospects. But, lacking an obvious theoretical skeleton, it never received from economists the kind of attention lavished on the Principles.
In its final form, Industry and Trade was narrower in scope than had been intended earlier, while the proposed book on ‘Money, Credit and Employment’ still remained to be written. Over the next four years, by a remarkable effort, and despite rapidly waning powers, some of the mass of accumulated raw material remaining was pulled together in Money, Credit and Commerce (1923). This contains Alfred Marshall’s fullest treatment of the theories of money and international trade, but it is an imperfect pastiche of earlier material, some dating back almost fifty years.
In the last months of his life, Marshall toyed with the occasional writings and the memoranda and evidence to governmental enquiries prepared at various stages during his career, with the hope of editing them for publication in book form. This was not to be, but his plan was largely fulfilled after his death in two books sponsored by the Royal Economic Society (Pigou, 1925; Keynes, 1926).
Judged by what might have been, Marshall’s authorial performance after 1890 was a sorry one, marked by repeated procrastination and inconstancy and by chronically overoptimistic expectations. The mantle of leadership which he had assumed on Jevons’s death proved a heavy one. Both temperamentally and by virtue of his acknowledged position as the doyen of British economists, Marshall was compelled to attempt the magisterial and to denigrate the kind of forceful direct essay of which he was eminently capable.
As Cambridge Professor and unquestioned leader of British orthodox economists, Alfred Marshall could hardly avoid becoming a public figure whose pronouncements carried more than a personal weight. His consciousness of this, and of the precarious public standing of economics, as well as his own temperament,’ made him peculiarly reluctant to enter into public controversy, although he would on occasion fire off a letter to The Times on some issue of the day. He served as an expert witness for several government enquiries and was an influential member of the Royal Commission on Labor of 1890-1894. As President of Section F of the British Association in 1890 he took the formal lead in the movement to found the British (later Royal) Economic Association, but he was not a prime mover. Indeed, he was not a clubbable or organizational man and relied on others to further whatever goals he desired for economies and the economics profession at large. But neither was he a recluse. Balliol Croft received a continuing stream of visitors, ranging from working class leaders to distinguished foreign economists, while students or young colleagues were always welcomed and offered generous advice mixed with exhortation.
The undoubted fact of Marshall’s professional leadership of British economics calls for some explanation. He was far from suited to such a role by temperament, and his fussiness and inflexibility could be irritating. For example, Sidgwick, Keynes, and Foxwell, the most important of his early allies in Cambridge, were all eventually alienated. Marshall’s success can be attributed partly to sheer persistence. As in the case of the new Tripos, he had a clear idea of what he wanted to accomplish and worried away at it until he exhausted the opposition and was allowed to have his way. But it must also have been due to the lack of any alternative. The relevant question is not ‘Why Marshall?’ but ‘Who else?’ Economics was rapidly evolving as a profession around the turn of the century, creating a leadership vacuum. Leadership was unlikely to emanate from outside Oxford, Cambridge or London, but Edgeworth at Oxford was perhaps the last man capable of meeting the need, while Cannan at the new London School of Economics, although more suited than Marshall to the hurly-burly of professional politics, was too much the perennial critic and iconoclast to fill the bill. Moreover, whatever Marshall’s foibles, the sheer power of his intellectual vision, his international standing as Britain’s leading economic thinker, and his ability to inspire an impressive flow of budding scholars, all conspired to make him the only feasible contender.
Marshall saw economics as concerned with those aspects of human behavior open to pecuniary influences and sufficiently regular and ubiquitous to permit statements of broad scope and some persistence. While maintaining, especially in earlier work, that some heeded moral imperatives might be impervious to pecuniary considerations, he conceded that most behavior lay within the ambit of the measuring rod of money. On the other hand, he emphasized that motivation was not merely a matter of pursuing pecuniary self interest, even broadly conceived to include interests of family and friends. He stressed the human desire for social approbation or distinction, and the pleasures of skillful activity. He saw actors as diverse as captains of industry and sculptors driven more by the joys of creative activity and the striving for the regard of peers than by the desire for material acquisition.
As well as not being pecuniary maximizers in any narrow sense (Marshall was anxious to lay the ghost of homo economicus), individuals were for the most part seen as imperfect optimizers. The working classes, especially, often lacked the knowledge and foresight to judge their long-term interests. Marshall’s actors were not imbued with complete knowledge of their environment but had to acquire knowledge slowly, and often painfully, through experience. Nor were they endowed with fixed desires and an intrinsic, unchanging character. Indeed, character and preferences evolved as individuals were exposed to new possibilities and chose to enter into new activities. The workplace, in particular, was an important molder of character. Self-improvement and character development induced by environmental changes, planned or unplanned, both figured largely in Marshall’s world view.
Marshall was impelled to economics because ‘the study of the causes of poverty is the study of the causes of the degradation of a large part of mankind’ (1920, p. 3). For the bulk of the population, mired in poor living and working conditions, little progress in habits, aspirations and self-esteem could be expected without prior improvement in economic conditions. Such improvement was socially important not so much for its own sake, at least once the pangs of immediate want were assuaged, but because of its instrumental role in permitting and stimulating improvement in the quality and character of the population. What he really valued was not improvement in the standard of living but the enhancement of the standard of life which this improvement made possible. And he entertained little doubt about what constituted a qualitative improvement here, even though – or perhaps because – his values may seem quite parochial and culture bound, Economic improvement required appropriate institutions, incentives and attitudes, and would be threatened by wide-scale government intrusions into economic affairs, although some forced income redistribution could be tolerated. But even if economic conditions were improved, the full yield of social betterment would be garnered only if enlarged consumption was turned to ennobling and horizonexpanding channels (rather than, say, to strong drink), involved a due consumption of beneficial leisure, and was accompanied by healthier and less stultifying conditions of working and town life. The government had a guiding role to play here. But even more important would be the assistance and example of employers and the upper and middle classes, who must first rid themselves of a frequent propensity to showy and ostentatious consumption and excessive materialism. The working-class leaders and skilled artisans who had already raised their own standard of life had an important leadership role too. Voluntary individual efforts to assist the rise of the underprivileged must rest on an adequate understanding of economic consequences. For this, as well as to secure an informed electorate, the diffusion of sound economic knowledge was essential and an integral element in the process of socio-economic transformation. Economics thus was itself a noble activity of high importance for the future of mankind.
The broad view of the economy suggested by the foregoing is of a complex evolutionary process of combined economic, social and individual change in which each individual’s abilities, character, preferences and knowledge develop jointly, along with social institutions, markets and the technologies of production and communication. The pursuit of self interest, broadly conceived, is ubiquitous in directing this evolutionary process, but is subject to inertia, ignorance and limited foresight, not to mention individual mutability.
Unfortunately, Alfred Marshall was able to bring little formal analysis to bear on this general ‘biological’ vision of the economy and could only evoke it descriptively. It might be true that ‘the Mecca of the economist lies in economic biology rather than in economic dynamics’ (1920, p. xiv). Nevertheless, the only available tools were those of classical mechanics, tools which Marshall’s early mathematical training had equipped him to employ skillfully. In fact, chief reliance had to be put on that branch of classical mechanics dealing with statics. Dynamics, beyond a few qualitative applications, required more precise information than was likely to be available. Perforce then, much of Marshall’s formal analysis, like that of W.S. Jevons or Leon Walras, was based on simple assumptions of individual optimization and market equilibrium, which took preferences, technology and market institutions for granted. Such provisional or tentative ‘statical’ treatments could often be valuable. Indeed Marshall viewed them as indispensable for the correct analysis of many questions. But he was always anxious to stress that the analysis was preliminary, and perhaps of only transitory validity. This awareness made him impatient of overelaboration, so that, for example, he showed no interest at all in pushing the statical approach to its logical conclusion in the general equilibrium analysis of the stationary state. For him, equilibrium analysis was an indispensable but rough and ready instrument which needed to be employed with due caution and a continuing awareness of its limitations in the face of a complex ever-evolving reality. It was a tool and did not itself constitute concrete knowledge.
Alfred Marshall had no great profundity as a philosopher of science and had little patience with metaphysics. His discussions of methodology largely reflect the philosophical presuppositions of his day. His method was in the general deductive tradition of David Ricardo, John Stuart Mill and CAIRNES. But he sought to emphasize the relativity of particular theories, as contrasted with the universality of the general theoretical ‘organon’ or toolbox. And he was anxious to choose his assumptions with close regard to the facts of the case: anxious, too, to keep prominently in mind potential disturbing causes and to make due allowance for them. Marshall’s method was described by John Maynard Keynes as ‘deductive political economy guided by observation’ (1891, p. 217n.) and Keynes’s chapter ‘On the Deductive Method in Political Economy’ (1891, pp. 204-35) is perhaps as good a rationalization of Marshall’s method as one can find.
Major Works of Alfred Marshall
– Mr Jevons’s Theory of Political Economy, 1872, Academy
– A Note on Jevons, 1874, Academy
– The Future of the Working Classes, 1874, Eagle
– On Mr. Mill’s Theory of Value, 1876, Fortnightly Review
– The Economics of Industry, with Mary Paley Marshall, 1879
– The Pure Theory of Foreign Trade, 1879
– The Pure Theory of Domestic Values, 1879
– Review of F.Y. Edgeworth’s Mathematical Psychics, 1881, Academy
– Where to House the London Poor, 1884, Contemporary Review
– On the Graphical Method in Statistics, 1885, Jubilee Volume of Royal Statistical Society
– Preface, 1885, in W. Bagehot, Postulates of Political Economy
– The Present Position of Economics, 1885
– Remedies for Fluctuations of General Prices, 1887, Contemporary Review
– Preface, 1887, in L. Price, Industrial Peace
– Presidential Address before the Co-operative Congress, 1889
– Principles of Economics: an introductory text, 1890 – (Books 1 to 6; French 1906 transl.: Vol. 1, Vol. 2)
– Some Aspects of Competition, 1891, Report of British Association for Advancement of Science
– Elements of the Economics of Industry, 1892
– The Poor Law in Relation to State-Aided Pensions, 1892, EJ
– On Rent, 1893, EJ
– The Old Generation of Economists and the New, 1897, QJE
– Mechanical and Biological Analogies in Economics, 1898, EJ
– Distribution and Exchange, 1898, EJ
– A Plea for the Creation of a Curriculum in Economics and Associated Branches of Political Science, 1902
– Economic Teaching at the Universities in Relation to Public Wellbeing, 1902
– The New Cambridge Curriculum in Economics, 1903
– Introduction to the Tripos in Economics and Associated Branches of Political Science, 1906
– The Social Possibilities of Economic Chivalry, 1907, EJ
– National Taxation After the War, 1917, in Dawson, editor, After-War Problems
– Industry and Trade, 1919
– Money, Credit and Commerce, 1923
– Machinery and Life
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