Alfred Marshall 1842-1924

Alfred Marshall by David R. Henderson
Cited from Econlib.org

Alfred Marshall was the authority on British economics from 1890 until his death in 1924, an authority that was itself a power in world economics. His specialty was microeconomics, the study of individual markets and industries, as opposed to the study of the economy as a whole. In his most important book "Principles of Economics" (Translator's note: first edition 1890), Marshall emphasized that the price and output of goods are determined by both supply and demand—the two curves (supply curve and demand curve) intersect at the point of equilibrium like the blades of a pair of scissors. When modern economists try to understand why the price of a good changes, they start by looking for factors that shift the supply and demand curves—an approach that originated with Marshall.
The concept of price elasticity of demand also originated with Marshall. It represents a buyer's sensitivity to price.
Consumer surplus is another of Marshall's contributions. He noticed that while the price of the goods a consumer buys is typically the same, the value to the consumer per additional unit is (gradually) decreasing. Consumers will buy up to the point where the price equals the marginal value. For all units before the very last one, the consumer reaps a benefit by paying less than the value to him. The magnitude of the benefit is equal to the difference between the value to the consumer of all units and the amount paid for those units. This difference is called consumer surplus. It is the surplus value or utility enjoyed by the consumer. Marshall also introduced the concept of producer surplus. Its magnitude is the amount the producer is actually paid minus what he is willing to accept (Translator's note: costs). Marshall used these concepts to measure changes in welfare caused by government policies such as taxation. Although economists have refined their tools since Marshall's time, Marshall's basic approach still remains in what is now called welfare economics.
To understand how markets adapt to changes in supply and demand over time, Marshall proposed the idea of three time periods. The first is the market period, during which the stock of goods is (still) fixed. The second is the short run, during which capital is not increased, but (production supply) is increased through labor and other inputs. The third is the long run, during which (production supply) is increased by also increasing capital (appliances).
To make economics dynamic rather than static, Marshall used the tools of classical mechanics, including the concept of optimization. By doing so, he, like the neoclassical economists who followed his footnotes, took technology, market institutions, and people's preferences as given. However, Marshall was not satisfied with his own approach. He once wrote, "The Mecca of the economist lies in economic biology rather than in economic dynamics." In other words, Marshall meant that the economy is in an evolutionary process, and that technology, market institutions, and people's preferences evolve along with people's behavior.
Marshall rarely made statements or expressed views without adding numerous conditions, exceptions, and footnotes. He sometimes introduced himself as a mathematician of sorts, having studied mathematics at St. John's College, Cambridge. His limited use of quantitative expression may have appealed to the layman.
Marshall was born into a middle-class family in London and was raised to become a clergyman. He rejected his parents' wishes and became a scholar in mathematics and economics.

(Explanatory note) The following explanation of "Thinking like an economist" seeks the significance of Marshall in his statement of marginal utility theory, which determines the price of goods at the point where supply and demand are in equilibrium and equal to the consumer's marginal utility, moving away from the labor theory of value, which emphasizes the labor time required for production in explaining the value = price of goods. However, it is known that such marginal utility theory was advocated around the same time in the 1870s by Jevons, Menger, Walras, and others. Marshall's role may have been not so much to propose marginal utility theory as to state and systematize it as rigorously as possible.
As for the founders of marginal utility theory, William Stanley Jevons (1835-1882) with "The Theory of Political Economy" (1871), Carl Menger (1840-1921) with "Principles of Economics" (1871), and Léon Walras (1834-1910) with "Elements of Pure Economics" (Part 1 1874, Part 2 1877) are pointed out. However, it took time for the significance of what was written there to be understood and for their economics to be understood as revolutionary. In that sense, the fact that Marshall's authoritative text "Principles of Economics" (1890) accepted and summarized marginal utility theory has great significance in the history of economics, does it not?
On the other hand, can it be said that Marshall had already developed the explanations found in neoclassical textbooks by this time? In neoclassical economics, the supply curve is explained as a line where marginal cost = price. Masao Fukuoka, in "Marshall's Supply Curve" (Mita Journal of Economics 103-1, 2010), argues that Marshall's explanation of the supply curve is complex, as it includes the idea of emphasizing the production costs of the marginal producer in addition to marginal cost. While it is true that Marshall is one of the founders of modern economics, an examination based on the original text is necessary for an understanding of "Principles of Economics" (1890) itself.