[Mankiw Economics] Alfred Marshall
Although Alfred Marshall was born into a poor family in London, he established the Faculty
of Economics in the University of Cambridge in Britain and made a big contribution to the field
of study. He became famous in Britain as an economist after publishing The Principles of
Economics in 1890. Thanks to his efforts, economics came to take an independent position as a branch
of social science. His book contains a scientific explanation of concepts such as supply, demand,
and marginal utility. He delivered a well-known speech at his inauguration as Professor of
Economics at the University of Cambridge. He forbade students who had never been to slum areas
to visit his laboratory. Economists before Marshall explained the principle of determining the price
of a mobile phone as follows. The value of a mobile phone is determined by the labor put in
to produce it, and the size of the value is proportional to the hours of labor required
to produce the mobile phone. The size of the value is not proportional to the hours of labor
required to produce the mobile phone. It exactly matches the hours of labor. Marshall's answer to
such varied views was extremely simple. The price of a product is the point where production cost
meets consumers' marginal utility. For example, if war breaks out in the Middle East, the supply
of crude oil decreases in the international market, thereby raising the price of crude oil.
Like this, if the supply of a product decreases, its price increases. Marginal utility is the
When the unit of consumption grows, the satisfaction from those goods decreases.
For example, the satisfaction is big when you have the first dish at a buffet restaurant.
The more dishes you have, the smaller the satisfaction you have from an additional dish.
That means marginal utility is in inverse proportion to consumption. Marshall introduces
a new way to analyze economic phenomena. While reviewing one factor, other factors are temporarily
put aside. This approach helps to determine the causality between economic phenomena.
The narrower the scope of a problem, the easier and clearer is the analysis of an economic phenomenon.
There are many variables that affect the demand for ice cream. They include the price,
the income levels of consumers, the price of substitutional goods, and preference.
However, in order to analyze the general relation between price and demand for ice cream,
we have to temporarily ignore other variables. Because the demand for ice cream also declines
when income declines. The law of demand also holds in such a controlled situation,
when other conditions are the same, the demand for a certain product decreases when its price goes up.
Economics was originally studied as part of the political means to govern a nation.
Therefore, early economics can be called political economics. But the book that Marshall wrote was
titled Principles of Economics. The term political was deleted since economic phenomena were general
phenomena not limited to politics and the scientific method of research was used.
Marshall also trained and educated many economists. His pupils include Pigou and Keynes.
The dispute between Marshall and Marx was well known too. The system of collective ownership
and socialism ruins the economy and destroys individual lives, and even families.
Best Seller of Economics Principles of Economics Graphic Edition