marginalist revolution prior to marshall l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Marginalist Revolution (Prior to Marshall) PowerPoint Presentation
Download Presentation
Marginalist Revolution (Prior to Marshall)

Loading in 2 Seconds...

play fullscreen
1 / 19

Marginalist Revolution (Prior to Marshall) - PowerPoint PPT Presentation


  • 142 Views
  • Uploaded on

Marginalist Revolution (Prior to Marshall). ECON 205W Summer 2006 Prof. Cunningham. Identifying Elements. Applications of calculus, physics, engineering to economic analysis. Labor theory of value is disproved. Marginal principle provides a unifying framework. Less emphasis on growth.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

Marginalist Revolution (Prior to Marshall)


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
marginalist revolution prior to marshall

Marginalist Revolution(Prior to Marshall)

ECON 205W

Summer 2006

Prof. Cunningham

identifying elements
Identifying Elements
  • Applications of calculus, physics, engineering to economic analysis.
  • Labor theory of value is disproved.
  • Marginal principle provides a unifying framework.
  • Less emphasis on growth.
  • Focus on optimization.
  • Equilibrium method.
  • Mathematical methods and focus on economic science.
related issues
Related Issues
  • Was it a revolution?
  • What took so long?
    • Change in method.
    • Resistance by orthodoxy.
  • Three stages in the development of the marginalist principle.
the method of the marginalists
The Method of the Marginalists
  • Marginal principle.
  • Microeconomic emphasis.
  • Abstract, deductive method.
  • Assumption of perfect competition.
  • Less emphasis on supply, more on demand in price setting.
  • Subjective valuation.
  • Equilibrium approach.
  • Equal footing for all factors of production.
  • Rational agents.
  • Minimal government involvement.
additional considerations
Additional Considerations
  • Who benefits?
  • Implications?
  • Longevity of the theory?
forerunners of neoclassicals
Forerunners of neoclassicals
  • 1814, Malthus mentions that differential calculus might be useful in economics.
  • 1824, Perronet Thompson became the first writer in English economist to use the calculus in economic analysis.
  • 1815, Georg von Buquoy applied the calculus to an agricultural problem.
  • 1839, Charles Ellet used the calculus to determine an optimal tariff.
augustin cournot 1801 77
Augustin Cournot (1801-77)
  • Background
  • 1838, Researches into the Mathematical Principles of the Theory of Wealth
    • First systematic development of the application of the marginal principle to the firm
    • Math. Econ of the “pure” type
    • Approach was consistent with French Rationalism: a theory that reason is in itself a source of knowledge superior to and independent of sense perceptions
cournot 2
Cournot (2)
  • Supply and Demand
  • Hypothesis: each person seeks the greatest value from his/her property or labor.
  • Theory of monopoly, builds on this until he reaches the competitive case.
  • Theory of the firm
johann heinrich von th nen 1783 1850
Johann Heinrich von Thünen(1783-1850)
  • Background
  • The Isolated State
    • Sought empirical verification for certain principles he had deduced from observation.
    • Natural wage =
    • Isolated State = ideal closed economy
  • Developed principles of variable proportion and substitution
  • Widely acclaimed during his life.
hermann heinrich gossen 1810 58
Hermann Heinrich Gossen(1810-58)
  • Theory of Consumption
  • Frustrated by the neglect of others to his work.
  • 1854, Development of the Laws of Human Relationships and of the Rules to be Derived Therefrom for Human Action.
  • Gossen’s Two Laws.
  • Contributions largely unrecognized until 1878 when Jevons pointed out his work to Walras.
the revolution
The “Revolution”
  • Almost simultaneous publication in the 1870s of books by:
    • William Stanley Jevons (1871), The Theory of Political Economy (England)
    • Carl Menger (1871), Principles of Economics (Vienna, Austria)
    • Leon Walras (1874-77), Elements of Pure Economics (Switzerland)
revolution 2
Revolution (2)
  • Contributions of the three
  • Why were the able to promote the new theory now?
  • What was their influence?
william stanley jevons 1835 82
William Stanley Jevons (1835-82)
  • Background
  • 1971, Principles of Political Economy
  • Not aware of the work of Cournot, Thunen, or Gossen
  • Extensive use of utility theory
  • On the labor theory of value
  • Empirics
  • 1865, The Coal Question
  • 1884, Investigations in Currency and Finance
    • Includes a discussion of business cycles
francis ysidro edgeworth 1845 1926
Francis Ysidro Edgeworth(1845-1926)
  • Editor of the Economic Journal
  • Wrote many articles and a monograph entitled Mathematical Psychics (1881)
  • Sought to apply mathematics to the social sciences
  • Expanded Jevons notions on the utility function
  • Introduced indifference curves and the Edgeworth box
philip h wicksteed 1844 1927
Philip H. Wicksteed(1844-1927)
  • Developed a theory of marginal productivity and distribution.
  • He alone asked whether and under what conditions the total product would be exhausted by the marginal products
    • Answer: Euler’s Theorem
wicksteed 2
Wicksteed (2)
  • Argued that exhaustion of the marginal product requires a linear homogeneous production function.
  • Also argued that this requires constant returns to scale.
  • 1894, Essay on the coordination of the Laws of Distribution
  • Not a fan of Marshall’s supply-demand apparatus.
carl menger 1840 1921
Carl Menger (1840-1921)
  • Background
  • Had a substantial following, and came to be considered the leader of the Austrian School.
  • Opposed by the German Historical School.
  • Substantial legal training led him to make careful definitions.
  • Unlike Jevons and others, related utility maximization to “needs” not “pleasure”.
menger 2
Menger (2)
  • Theory of Imputation (Zurechnung)
    • Value is not inherent in goods, but is imputed to them.
    • Value = exchange value.
  • Monetary Theory
  • 1883, Problems of Economics and Sociology
    • Defense of Menger’s approach to economics
friedrich von wieser 1851 1926 eugen von bohm bawerk 1851 1914
Friedrich von Wieser (1851-1926)Eugen von Bohm-Bawerk (1851-1914)
  • Later Austrians—von Hayek, von Mises, Schumpeter—were students of these two.
  • Bohm-Bawerk always aware of the “cutting edge” of thinking, while von Wieser was completely attached from his time.
  • Both argued strongly against socialism.