The Marginal Revolution
- “Marginal revolution” redirects here. For the economics weblog, see Marginal Revolution (blog).
Marginalism eventually found a foot-hold by way of the work of three economists, Jevons in England, Menger in Austria, and Walras in Switzerland.
William Stanley Jevons first proposed the theory in “A General Mathematical Theory of Political Economy” (PDF), a paper presented in 1862 and published in 1863, followed by a series of works culminating in his book The Theory of Political Economy in 1871 that established his reputation as a leading political economist and logician of the time. Jevons' conception of utility was in the utilitarian tradition of Jeremy Bentham and of John Stuart Mill, but he differed from his classical predecessors in emphasizing that "value depends entirely upon utility", in particular, on "final utility upon which the theory of Economics will be found to turn." He later qualified this in deriving the result that in a model of exchange equilibrium, price ratios would be proportional to not only to ratios of "final degrees of utility" but costs of production.
Carl Menger presented the theory in Grundsätze der Volkswirtschaftslehre (translated as Principles of Economics) in 1871. Menger's presentation is peculiarly notable on two points. First, he took special pains to explain why individuals should be expected to rank possible uses and then to use marginal utility to decide amongst trade-offs. (For this reason, Menger and his followers are sometimes called “the Psychological School”, though they are more frequently known as “the Austrian School” or as “the Vienna School”.) Second, while his illustrative examples present utility as quantified, his essential assumptions do not. (Menger in fact crossed-out the numerical tables in his own copy of the published Grundsätze.) Menger also developed the law of diminishing marginal utility. Menger's work found a significant and appreciative audience.
Marie-Esprit-Léon Walras introduced the theory in Éléments d'économie politique pure, the first part of which was published in 1874 in a relatively mathematical exposition. Walras's work found relatively few readers at the time but was recognized and incorporated two decades later in the work of Pareto and Barone.
An American, John Bates Clark, is sometimes also mentioned. But, while Clark independently arrived at a marginal utility theory, he did little to advance it until it was clear that the followers of Jevons, Menger, and Walras were revolutionizing economics. Nonetheless, his contributions thereafter were profound.
Read more about this topic: Marginal Utility, History
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