Alfred Marshall was born on 26 July 1842 in the London suburb of Bermondsey into a lower middle-class family, which subsequently moved to the suburb of Clapham.
After attending the Merchant Taylors’ School, thanks to a loan from an Australian uncle and an open exhibition to St John’s College he entered Cambridge University and in 1865 completed the Mathematical Tripos.
A Fellow of St John’s, in 1868 he was appointed Lecturer in Moral Science and lectured on political economy. In 1875 he visited the United States to study at first hand the costs and benefits of protectionism. The manuscripts he was working on, collected in Whitaker (1975), were partly printed by Henry Sidgwick in 1879 under the titles The Pure Theory of Foreign Trade and The Pure Theory of Domestic Values. After his marriage to Mary Paley, one of his women students of the foundation that was to become Newnham College, in 1877, he had to resign his Fellowship, as celibacy requirements at Cambridge University were not removed until 1882. The young couple moved to Bristol, where Alfred became Principal of University College and later Professor of Political Economy. In 1879 Alfred and Mary published The Economics of Industry, a primer of political economy. In 1881 he resigned his posts and spent a year in Palermo, where he started to compose Principles of Economics. After another year spent in Bristol, and one in Oxford as lecturer to candidates for the Indian Civil Service, in January 1885 he returned to Cambridge as Professor of Political Economy, a chair he held until 1908, when he resigned. In 1903 he achieved the goal of establishing an independent Tripos in Economics and Politics. In 1890 he published Principles of Economics. Vol. I, which from the sixth edition, in 1910, became Principles of Economics. An Introductory Volume. A condensation of this book, Elements of the Economics of Industry, meant to replace the early Economics of Industry, which he had come to dislike, was published in 1892. In 1891-94 he was engaged as a member of the Royal Commission on Labour. Part of the material that should have been printed in volumes II and III of Principles was printed separately as Industry and Trade (1919) and Money, Credit and Commerce (1923). Marshall died on 13 July 1924. After his death, two of his pupils collected his occasional writings and his contributions to government inquiries, respectively in Memorials of Alfred Marshall, edited by Arthur Cecil Pigou in 1925, and Official Papers of Alfred Marshall, edited by John Maynard Keynes in 1926 (a supplement to the latter has been edited by Groenewegen in 1996).The language of modern and contemporary economic analysis is greatly indebted to Marshall. Thanks to his work, “‘marginal productivity,’ ‘elasticity,’ ‘substitution,’ the distinction between long and short periods, ‘quasi-rent,’ ‘prime’ and ‘supplementary’ cost, the elegant and serviceable expository device of plane-curves, became the stock-intrade of the professional economist” (Shove 1942: 313).
Second wrangler in 1865, Marshall put his mathematics to task “to disentangle the interwoven effects of complex causes” (Guillebaud 1961, II: 173). His self-taught training in economics consisted in translating “Ricardo’s reasonings into mathematics”, in the endeavour “to make them more general” (Keynes 1924: 328), and “[Mill’s] doctrines into differential equations as far they would go; and as a rule, rejecting those which would not go” (Pigou 1925: 412).
Meanwhile, before engaging in the study of economics, as a young philosopher and aspiring psychologist Marshall was fascinated by the “inquiries into the possibilities of
the higher and more rapid development of human faculties” (Keynes 1924: 320). As he later recollected, around 1871-72 he was uncertain whether to devote his life to psychology or economics and spent a year in doubt (Whitaker, 1966, II: 285). In an early manuscript he contrived a model of the functioning of the human mind that would later act as the frame of reference for economic analysis (Raffaelli 1994: 116-32).
The model conveys the idea of a decomposable, cumulative set of mental devices in continuous evolution. It displays not only the source of Marshall’s lifelong interrogation on the shortcomings of the mathematics of the physical sciences when applied to economics, but also the origin of his firm conviction that biology is the economist’s Mecca (Marshall 1898: 43, 1920: xiv).If one adds the young Marshall’s keen interest in theories of human progress (Cook 2009), his two-faced attitude towards economic analysis becomes almost obvious. On the one hand, he argued that analytical “machinery” is essential, and its growth coincides with scientific progress:
When the same operation has to be performed over and over again in the same way, it generally pays to make a machine to do the work.... Similarly in knowledge, when there are processes of investigation or reasoning in which the same kind of work has to be done over and over again in the same kind of way; then it is worth while to reduce the processes to system, to organize methods of reasoning and to formulate general propositions to be used as machinery for working on the facts and as vices for holding them firmly in position for the work. (Marshall 1920, app. C: 779)
On the other hand, this analytical machinery is but an “organon”, “an engine for the discovery of concrete truth, similar to, say, the theory of mechanics” (Pigou 1925: 159). Its main weakness consists in the intrinsic inability to deal with the evolutionary character of economics, as of any other human science: “every movement that takes place in the moral world alters the magnitude if not the character of the forces that govern succeeding movements” (Whitaker 1975, II: 163; emphasis added, see below). Though Marshall tried to circumscribe the problem, in order to extend the applicability of his analytical tools, he could not avoid it when dealing with increasing returns and distribution, where irreversibility is prominent and demand-supply equilibrium analysis fails.
Far from being exceptions, these two cases reveal the inner structure of Marshall’s analysis and the difficulties and ambiguities it met with.After Marshall’s death, his concepts were recast into the mainstream of economic theory, represented by general equilibrium theory. Economics took from Marshall what suited the new paradigm, relegating the rest to the old curiosity shop. This gave rise to the paradox of a science that bought up Marshall’s analytical tools, relocating them in an allogeneous setting. Recent developments in industrial and evolutionary economics have triggered a revival of interest in Marshall’s original programme.
These are the main coordinates of the puzzle that was Marshall: the theoretician who greatly contributed to modern economic analysis; the almost disparaging critic of the growing tendency to freely explore the potentialities of abstract, mathematical theory; the pioneer of evolutionary economics, whose intuitions were lost along the main road taken by twentieth-century economics. What follows aims to put Marshall’s quandaries into their historical and cultural context, avoiding the temptation to break them apart as if there were two Marshalls, irreconcilable with each other.