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The Economics of Alfred Marshall: Revisiting Marshall’s Legacy

Author(s):Arena, Richard
Quéré, Michel
Reviewer(s):Caldari, Katia

Published by EH.NET (September 2004)


Richard Arena and Michel Qu?r?, editors, The Economics of Alfred Marshall: Revisiting Marshall’s Legacy. New York: Palgrave MacMillan, 2003. ix + 281 pp. ?55/$75 (cloth), ISBN: 1-4039-0168-6.

Reviewed for EH.NET by Katia Caldari, Department of Economics, University of Padua.

This volume’s aim is to “revisit” Alfred Marshall’s legacy through the insights of the most renowned scholars currently studying Marshall’s thought. The book has two parts. The first is properly on “The Legacy of Marshall’s Economics.” It includes works by Becattini, Marchionatti, Reisman, Moss, Dardi and Groenewegen. The second part of the book is on “Economic Evolution and the Organization of Industry: Marshallian Insights” and includes papers by Whitaker, Hart, Qu?r?, Loasby, Arena, Bellandi and Raffaelli.

The papers of the first part are all intended to underline those aspects of Marshall’s thought that have been often neglected but are the necessary key for fully appreciating the contribution to economics of this Cambridge economist.

The opening paper is “The Return of the White Elephant” by Giacomo Becattini. Through what Becattini calls “a turning point in Marshallian studies” (p. 13), new and unexpected “potential capacities in Marshall’s thought” (p. 13) have been underlined more and more so that Marshall “is now increasingly mentioned and more often in a favourable light” (p. 14). According to Becattini, Marshall cannot be considered a “neoclassical economist,” as most interpretations of the past did, because of the presence of important “anomalies” that make him clearly a “sui generis” economist, as Walras once put it, calling his English “colleague” a “white elephant.”

The second paper is “Dealing with the Complexity: Marshall and Keynes on the Nature of Economic Thinking” by Roberto Marchionatti. An interesting comparison between Marshall and Keynes is suggested: despite the fact that most studies of Keynes “largely neglected the role of Marshall in the development of Keynes’ methodological reflection” (p. 39), Marchionatti proves that “both Marshall and Keynes developed a conception of economics as a science that attempts to deal with the complexity using several tools. Both saw a limited scope for the fruitful use of mathematics in economics” (p. 48).

The third paper by David Reisman is on Alfred Marshall and social capital. Considering a number of themes dear to Marshall (industrial districts, trade unions, socialism, health, quality of life), Reisman suggests that Marshall was an important forerunner of the modern concept of social capital.

With the fourth paper, “Marshall’s Objective: Making Orthodox Economics Intelligible to Business Leaders,” Laurent S. Moss intends to contribute to the understanding of why Marshall’s scientific papers “did not live up to several of his stated goals, both scientific and personal” (p. 67). Moss considers mainly three of these goals: 1) to write texts “accessible to non-academics, especially business leaders,” 2) “to construct an analytical structure that would draw on the pioneering work of his many predecessor economists,” and 3) to conciliate the two preceding goals, since on the one hand “he wanted to communicate with business people … about things they knew well and experienced personally” (pp. 76-77), but on the other hand “the conversation Marshall wanted to create had to be structured within an economic framework that was deeply rooted in the older orthodox tradition” (p. 77). The “reconciliation problem” is given as an example.

Coming to the following paper “Alfred Marshall’s Partial Equilibrium: Dynamics in Disguise” by Marco Dardi, the reader is pushed into a more technical and analytical context — an inquiry into the concept of equilibrium, especially in its attempts to cope with the “fundamental problem of economic change” (p. 89). Dardi suggests that even though Marshall “chose not to follow a formalized approach” (p. 89) he did have “a unitary frame of analysis” (p. 89). In order to prove this thesis, Dardi works out “an abstract logical framework which links all the Marshallian narrations to a few structural hypotheses that account for the most basic aspects of his theory” (p. 89). The experiment is interesting since it highlights the relationship between equilibrium and economic change in Marshall’s writings and moreover the important nexus between ceteris paribus method and human mind structure. Focusing on Marshall’s studies of the human mind recently edited and analyzed by Raffaelli (2003), Dardi underlines how the static method and partial equilibria can be seen in a new light “… less contingent, less tainted with pragmatic compromise, than has been suggested by many interpreters” (p. 100).

The last paper of this part is by Peter Groenewegen and deals with “Competition and Evolution: The Marshallian Conciliation Enterprise.” Through a deep exploration of the concept of competition and evolution, Groenewegen underlines the dilemma between Marshall the realistic economist” and Marshall “the theorist.” This dilemma was the cause of Marshall’s methodological choice often criticized and considered “unacceptable to the economics profession at large, both past and present” (p. 131).

As the second part of the book suggests, Marshall’s major insights were about economic evolution and industrial organization. The first paper is by John K. Whitaker and the title is “Alfred Marshall’s Principles and Industry and Trade: Two Books or One? Marshall and the Joint Stock Company.” Here the author analyzes the relationship between Marshall’s two most important works through the special lens of the role he attributed to joint stock companies. The Principles, which is primarily theoretical, fails to “anticipate the rapidity” (p. 153) of the rise of large stock companies and use a tool, the representative firm, that would have become more and more outdated. In Industry and Trade, more of an applied work, Marshall pays greater attention to joint stock company in order to focus on the “struggle between small private businesses and large public ones” (p. 139).

Neil Hart’s article on the representative firm aims to explain “why Marshall was not a Marshallian.” According to Hart, “Marshall intended the representative firm to play a pivotal role in the attempt to construct an equilibrium framework in a world acknowledged to be characterized by disequilibrium and organic processes” (p. 176). That attempt was unsuccessful, as Marshall himself admitted. On the contrary, Marshallians “evaded Marshall’s impasse by constricting the industrial organization process so as to render the analysis amenable to static equilibrium conditions” (p. 176). The representative firm should have solved the so-called “reconciliation problem,” centered on the “difficulties associated with representing, within an equilibrium framework, outcomes of evolutionary processes identified directly with the increasing returns and thus the long-period industry supply schedule” (p. 168). The problem was neglected by the Marshallians who reasoned in terms of the “equilibrium firm.”

“Increasing Returns and Competition: Learning from a Marshallian Perspective,” by Michel Qu?r?, starts from the “reconciliation problem.” Here the focus is on some methodological difficulties Marshall tried to overcome and the meaning he gave to competition in order to reconcile it with increasing returns. Once again, the reader is told to refer to Industry and Trade more than Principles that, as aiming to provide “a single unified framework” (p. 199), is said to be “unsatisfactory.”

The following paper is on “Efficiency and Time” by Brian Loasby. The starting point of the paper is a quotation from Groenewegen’s biography according to which “For Marshall, economists do not only have to explain their world. They have an unambiguous duty to assist in changing it for the better” (1995, p. 761). Marshall the economist always tried to understand the real world and find possible ways to promote the progress of society. Loasby focuses on the pivotal role of knowledge in Marshall’s economics and explains it as “a selective network of connections between elements, built up, modified and sometimes abandoned over time” (p. 210). This concept of knowledge, very far from the perfect information of the neoclassical world, explains why Marshall could never have reasoned in terms of “Pareto efficiency” but at most in terms of “sufficiency,” that is more apt to explain a world where uncertainty is widespread.

Knowledge is also the central issue of the paper by Richard Arena, “Organization and Knowledge in Alfred Marshall’s Economics.” According to Arena, Marshall’s concept of knowledge was “among the most advanced” (p. 221). Knowledge is strictly connected with organization, in its turn centered on differentiation and integration. Arena proves how “organization and knowledge appear to be the main engine of economic evolution in Marshall” (p. 238), even though, he underlines, “Marshall’s contribution does not provide us with a ready-made theoretical framework” (p. 238).

“Some Remarks on Marshallian External Economics and Industrial Tendencies” by Marco Bellandi explains the meaning of external economies and the role played by industrial districts in Marshall’s economics. The reader is again invited to take into consideration Industry and Trade more than Principles since “In Industry and Trade, ‘place’ is explicitly considered at different inter-linked territorial levels, such as time whose different scales receive great attention in the Principles” (p. 242). The “places” considered in the book are nations, regions, cities and industrial districts. While the nation-level, “where great financial, ideological, political, and military resources are coordinated, has an importance that Marshall considers seriously” (p. 243), “the local level seems to function here as the basic unit” (p. 245).

The last paper is “Requirements and Patterns of Marshallian Evolution: Their Impact on the Notion of Industrial District” by Tiziano Raffaelli. As the author maintains, the aim of the paper “is to show that Marshall’s wider evolutionary framework helps us to understand better the theoretical relevance of district organization” (p. 254). Raffaelli suggests that industrial district “was not an appendix to his [Marshall’s] social thought but was directly connected to its core and constituted a specific way of dealing with the growth of capital that was inherent in economic progress” (p. 254). Co-evolution — considered as the essence of all social systems and the characteristic aspect of interrelation between animal species and their environment — is the mechanism that explains “change.” Raffaelli uses the functioning of evolutionary mechanisms, “whose first instance Marshall found in the human mind” (p. 255), as means to explain the dynamics of the industrial district, considered as “an ideal evolutionary environment” (p. 263).

According to the editors the book has two main messages: “the first is that economists are far from having fully exploited the potentialities of the originality of Marshall’s approach, and the second is that Marshallian economics is not mainly a topic for historians of economic thought; its modernity reveals how useful it is to re-read Marshall’s contributions from the standpoint of the renovation of contemporary economics” (p. 1).

Coming to the end of the book, the reader cannot neglect these two messages: a new and less known Marshall emerges from the book and the unusual and interesting aspects of his thought which are discussed reveal a very modern economist.

In the introduction, the editors anticipate most of the issues developed in the volume: “methodological perspectives,” “the reconciliation problem,” “internal and external economies,” “competition, production and evolution,” “knowledge, organization and institutions.” Other general aspects of the volume are also worth underlining: the necessity of reading Industry and Trade to understand Marshall’s economic thought and the usefulness of applying the model of the mind, to better clarify the structure of Marshall’s reasoning.

As we have seen, the reader will find a number of interesting and stimulating suggestions on how to reconsider and reread Alfred Marshall. But since each chapter is in the form of an independent paper, I would have found it useful (and interesting) to put a summary scheme or conclusive remarks at the end of the volume.

Another comment is on the structure of the book. I found the two parts slightly off balance. While each paper of the first part underlines a different aspect, in the second part too much emphasis is perhaps given to the “Representative Firm” and the “Reconciliation Problem,” the aspects of Marshall’s thought more debated in the past. Other issues could be given more attention as expression of the great originality and richness of Marshall’s thought: the modern idea of progress; the attention given to the quality of life; and the analysis of firms (marketing, scientific management, the contrast between large and small firms). But, of course, a book cannot be exhaustive, especially with an author such as Alfred Marshall.

It is a well known motto “it’s all in Marshall.” Reisman in the introduction of his paper writes “Marshall here as usual, knew it all” (p. 53). This book suggests a number of aspects in Marshall’s thought that deserve attention and probably further discussions. It seems to give evidence to the motto cited above. No doubt it proves that in Marshall there is much but not because he knew it all, I think, but because he saw it all, the real world, being an economist in the round, theoretical but also applied, and moreover considering economics not a science as an end in itself but a means for bettering human life. This aspect is too often forgotten by modern economists but I think it is the strongest message of the great Marshall’s legacy.


Groenewegen P. (1995) A Soaring Eagle: Alfred Marshall, 1842-1924, Aldershot, Edward Elgar.

Raffaelli T. (2003), Marshall’s Evolutionary Economics, London, Routledge.

Katia Caldari’s works include “Alfred Marshall’s Idea of Progress and Sustainable Development,” forthcoming in the Journal of the History of Economic Thought.


Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII