Summary
Neoclassical economics is really the birth of mathematics as an inescapable tool for constructing theories that are internally coherent (that is, explained in and of themselves without requiring casuistic examples), escaping the slightly lackadaisical approach of many classical economists like the great Ricardo. This allowed Economics to develop at a much faster pace, and provided the basis for how Economics is studied and investigated today.Marginalism:
Neoclassical economists:
- Alfred Marshall
- Francis Y. Edgeworth
- Arthur C. Pigou
- Vilfredo Pareto
- Irving Fisher
Alfred Marshall was an English economist (1842-1924), and the true founder of the neoclassical school of economics, which combined the study of wealth distribution of the classical school with the marginalism of the Austrian School and the Lausanne School. Professor at Cambridge, he was the author of “Principles of Economics”, 1890, which became the most widely read manual in microeconomics in his time. This book, which is his major work, established a radical change on how economics were taught. Instead of just writing long pages, Marshall draw diagrams throughout the chapters, allowing a better understanding of economic theories and models, such as J. S. Mill’s reciprocal demand, or an analysis on the differences between fixed and variable cost, and the importance of time periods when analyzing these matters. In fact, Marshall is the precursor of today’s cost analysis.
Of unquestionable educational clarity and filled with profound social principles, Marshall contributed to economic science with concepts such as elasticity and the further development of other subjects, surpluses for instance. Although he did not invent the term nor did he initiate this theory, he did made a clearer separation and definition of different kind of surpluses, such as consumer’s and producer’s surplus.
Also in his “Principles of Economics”, he stated the differences between internal and external economies of scale, as well as a diagram which depicted the fluctuations in supply and demand that took place before arriving to a steady state, a general equilibrium. This equilibrium was reached by means of changing amounts, not prices, as Léon Walras stated.
He is also considered as founder of the Cambridge School, where he taught economics until his retirement. Other renowned economists belonging to this school are Arthur C. Pigou and J. M. Keynes.
