Economist Alfred Marshall May Have Missed By A Mile On More Than One of His Economic Theories
Not long ago, I was talking with an acquaintance who lambasted corporations, and while there have been many a greedy corporate executive who has taken advantage of the political system and the consumer, we must also understand that more often than not it is the corporation that needs the shell of armor to protect itself, as everyone is after its deep pockets – politicians, unions, lawyers, and regulators. Okay so, let’s talk about economic theory for a moment shall we?
He noted that if a company’s efforts of production cause pollution and if that pollution flows into the water and onto another neighbor’s property, that company has escaped some of the costs of its production passing it onto someone else. Thus, he had reasoned we need government regulation to tax the company for that cost to level the playing field and we need to subsidize those who do pay for the costs of removing their pollution who compete to produce the same goods or services.
For a cite on that fact, please Listen to Audio Book; “Alfred Marshall & Neoclassicism – Economics Becomes A Science,” read by Louis Rukeyser,” part of the Great Economic Thinkers audio classic series. Or, you can read all about Alfred Marshall on WikiPedia.
Now then, although Marshall believed capitalism was the best socioeconomic strategy for a modern civilization, however, he uses his theory and finding above as justification of increased regulations to solve the problem of
Currently, we have a severe problem, regulation run amuck, some of which has occurred due to these original thoughts by Marshall. Today, we have over-regulation, and lawyers who sue companies for violations or even perceived violations of failure to adhere to supposed duties during their operations.
Now we have so much case law, many companies have huge risk management departments to ensure they don’t break even a mere fickle rule of Political Correctness. Add this to the lobbying of unions, and we have triple jeopardy for companies, all claiming to be balancing against unethical companies supposedly “only care about profits” and not other social concerns.
Marshall thus, stated that when the market fails to price in the costs of pollution to the producer of the those goods or services, we need to step in to balance the reality of the total costs, whether understood by the company or not, at the time of production. Indeed, had Marshall known what we know today, he might not have stated that such bold intervention was such a good idea in hindsight.
Oh sure he was well aware of the challenges of fiddling with Laize Faire philosophy in free-markets, but he seemed to believe intervention of that nature was the only way to right a perceived wrong. Perhaps he needs to revisit this argument, too bad he’s no longer with us today to have that intellectual debate or see what’s become of some of his theories. Please consider all this and think on it.
Economist Alfred Marshall
Alfred Marshall (1842-1924) was a highly influential British economist who is considered one of the founders of modern neoclassical economics. He made significant contributions to economic theory and played a crucial role in shaping the field during the late 19th and early 20th centuries.
Marshall was born on July 26, 1842, in London, England. He studied mathematics and philosophy at St. John’s College, Cambridge, where he later became a lecturer and eventually a professor of political economy. Marshall’s teaching career at Cambridge spanned over 40 years and had a profound impact on generations of economists.
Marshall’s most renowned work is his book “Principles of Economics,” first published in 1890. It became one of the most influential economics textbooks ever written and established Marshall as a leading figure in the field. In this work, Marshall developed a comprehensive analysis of supply and demand, emphasizing the role of individual consumers and firms in determining market prices and quantities. He introduced the concept of elasticity of demand and supply, the idea that the responsiveness of quantity demanded or supplied to changes in price can vary.
Marshall also introduced the concept of “marginal utility,” which refers to the additional satisfaction or benefit derived from consuming one more unit of a good or service. He used this concept to explain consumer behavior and the determination of prices. Marshall’s work laid the foundation for modern microeconomic analysis and greatly influenced subsequent economic thought.
Furthermore, Marshall made significant contributions to the theory of production and the concept of the firm. He emphasized the role of diminishing returns to inputs, arguing that as additional units of a variable input are added to a fixed input, the marginal product of the variable input eventually declines. This idea helped explain the shape of production functions and the optimal allocation of resources.
Marshall’s contributions extended beyond economic theory. He advocated for the use of mathematics in economic analysis and encouraged the use of statistical data to support economic arguments. Marshall believed that economics should be a practical and policy-oriented discipline, and he emphasized the importance of empirical evidence in understanding economic phenomena.
Alfred Marshall’s work continues to be influential in modern economics, and his ideas have shaped the way economists analyze markets, consumer behavior, and the role of firms. His emphasis on the interplay between supply and demand, marginal analysis, and empirical evidence has had a lasting impact on the field.
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Author: Mohammed A Bazzoun
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