Principles of Economics

759 Pages·2013·50.45 MB·English

by  Alfred Marshall (auth.)

Principles of Economics
Palgrave Classics in Economics
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Titles include:
Alfred Marshall
PRINCIPLES OF ECONOMICS, Eighth edition
W. Stanley Jevons
THE THEORY OF POLITICAL ECONOMY, Fourth edition
A.C. Pigou
THE ECONOMICS OF WELFARE, Fourth edition
Joan Robinson
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Principles of Economics
Eighth Edition
Alfred Marshall
Introduction © Peter Groenewegen, 2013
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First edition 1890,
Second edition 1891,
Third edition 1895,
Fourth edition 1898,
Fifth edition 1907,
Sixth edition 1910,
Seventh edition 1916,
Eighth edition 1920,
Reprinted 1922, 1925, 1927, 1930, 1936, 1938, 1946, 1947,
Reset and Reprinted 1949,
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ISBN 978-0-230-24929-5 ISBN 978-1-137-37526-1 (eBook)
DOI 10.1007/978-1-137-37526-1
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Contents
Introduction ix
Peter Groenewegen
Preface to the First Edition xix
Preface to the Eighth Edition xxiv
Book I Preliminary Survey
1 Introduction 1
2 The Substance of Economics 12
3 Economic Generalizations or Laws 24
4 The Order and Aims of Economic Studies 32
Book II Some Fundamental Notions
1 Introductory 41
2 Wealth 45
3 Production, Consumption, Labour, Necessaries 53
4 Income. Capital 60
Book III On Wants and
Their Satisfaction
1 Introductory 70
2 Wants in Relation to Activities 73
3 Gradations of Consumers’ Demand 78
4 The Elasticity of Wants 86
5 Choice between Different Uses of the Same Thing.
Immediate and Deferred Uses 98
6 Value and Utility 103
Book IV The Agents of Production, Land,
Labour, Capital and Organization
1 Introductory 116
2 The Fertility of Land 120
3 The Fertility of Land, continued. The Tendency to
Diminishing Return 125
v
vi Contents
4 T he Growth of Population 145
5 The Health and Strength of the Population 162
6 Industrial Training 170
7 The Growth of Wealth 183
8 Industrial Organization 200
9 Industrial Organization, continued. Division of Labour.
The Influence of Machinery 208
10 I ndustrial Organization, continued. The Concentration
of the Specialized Industries in Particular Localities 222
11 I ndustrial Organization, continued. Production on a
Large Scale 232
12 I ndustrial Organization, continued. Business
Management 243
13 C onclusion. Correlation of the Tendencies to Increasing
and to Diminishing Return 262
Book V General Relations of Demand,
Supply and Value
1 Introductory. On Markets 269
2 T emporary Equilibrium of Demand and Supply 276
3 Equilibrium of Normal Demand and Supply 281
4 The Investment and Distribution of Resources 292
5 Equilibrium of Normal Demand and Supply, continued,
with Reference to Long and Short Periods 302
6 J oint and Composite Demand. Joint and Composite Supply 316
7 Prime and Total Cost in Relation to Joint Products. Cost of
Marketing. Insurance against Risk. Cost of Reproduction 327
8 Marginal Costs in Relation to Values. General Principles 334
9 Marginal Costs in Relation to Values. General Principles,
continued 343
10 M arginal Costs in Relation to Agricultural Values 353
11 M arginal Costs in Relation to Urban Values 365
12 E quilibrium of Normal Demand and Supply, continued,
with Reference to the Law of Increasing Return 377
13 T heory of Changes of Normal Demand and Supply,
in Relation to the Doctrine of Maximum Satisfaction 383
14 T he Theory of Monopolies 395
15 S ummary of the General Theory of Equilibrium of
Demand and Supply 411
Contents vii
Book VI The Distribution of the
National Income
1 Preliminary Survey of Distribution 418
2 Preliminary Survey of Distribution, continued 436
3 Earnings of Labour 454
4 Earnings of Labour, continued 465
5 Earnings of Labour, continued 474
6 Interest of Capital 482
7 Profits of Capital and Business Power 495
8 Profits of Capital and Business Power, continued 506
9 Rent of Land 523
10 L and Tenure 530
11 G eneral View of Distribution 549
12 G eneral Influences of Progress on Value 556
13 P rogress in Relation to Standards of Life 574
Appendix A The Growth of Free Industry and Enterprise 602
Appendix B The Growth of Economic Science 624
Appendix C The Scope and Method of Economics 636
Appendix D Uses of Abstract Reasoning in Economics 644
Appendix E Definitions of Capital 647
Appendix F Barter 652
Appendix G The Incidence of Local Rates, with Some
Suggestions as to Policy 655
Appendix H Limitations of the Use of Statical Assumptions in
Regard to Increasing Return 664
Appendix I Ricardo’s Theory of Value 670
Appendix J The Doctrine of the Wages-Fund 677
Appendix K Certain Kinds of Surplus 683
Appendix L Ricardo’s Doctrine as to Taxes and Improvements
in Agriculture 686
Mathematical Appendix 690
Index 707
Comparative Index 720
Introduction
Peter Groenewegen
In 1890, during his sixth year as professor of economics at the University
of Cambridge, Alfred Marshall published the first edition of what became
his major book on the subject, Principles of Economics. Thirty years
later, in 1920, the book’s eighth edition appeared, a volume frequently
reprinted (in 1922, 1925, 1930, 1936, 1938, reset and reprinted in 1949,
1952, 1956, 1959, ninth variorum edition in 1961, and so on). It greatly
outsold the copies of the book sold during its author’s lifetime, which
ended in 1924 (26,297 copies had by then been sold in England and
America; 39,890 were sold from 1924–25 to 1941–42). Moreover, the
book was continuously in print throughout the twentieth century, and
at the time of writing was available in a variety of different reprints.
The eighth edition of Marshall’s Principles therefore taught thousands
and thousands students of economics not only the foundations of the
subject but also many of its more advanced parts. This makes Marshall’s
Principles a true classic in the literature of economics, even in the special
sense in which Marshall himself defined classical writers in a letter to
James Bonar on 27 November 1898, the year its fourth edition was
published. ‘A classical author…is one who by the form or the matter of
his words or deeds has stated or indicated architectonic ideas in thought
or sentiment, which are in some degree his own, and which, once
created, can never die but are an existing yeast ceaselessly working in
the Cosmos’. Marshall’s Principles contain many of these architectonic
ideas, which have become such important parts of the language of econ-
omists that their origin in Marshall’s book is often forgotten.
An overview of the contents of the eighth edition enables a clear
insight into the high originality of the work as presented in the last
version revised by its author. The six books into which the text is divided
provide a ‘Preliminary Survey’ and ‘Some Fundamental Notions’, before
examining ‘Wants and Their Satisfaction’; ‘The Agents of Production:
Land, Labour, Capital and Organization’; ‘General Relations of Demand,
Supply, and Value’; and finally ‘The Distribution of the National Income’
as the earnings of labour, the interest of capital, profit and the rent of
land. The text’s Table of Contents (pp. v–vii) therefore indicates that
these parts of the contents were subdivided into six Books. In addition,
ix
x Introduction
the contents included 12 appendices (from A to L) on a range of topics,
a Mathematical Appendix, an index, and prefaces to both the 1890 first
edition and the 1920 eighth edition. By contrast, the 1890 first edition
had contained seven Books, no Appendices apart from a Mathematical
Appendix, and an index. Its size was 754 pages (including the index); by
1920 the eighth edition contained 871 pages (including the index).
The prefaces to the first and the eighth edition which, as indicated
above, are part of the text of the eighth edition, both drew attention to the
fact that Marshall had intended initially to publish Principles of Economics
in two volumes. The planned second volume would most probably have
presented ‘Foreign Trade’ in Book VII, ‘Money and Banking’ in Book VIII,
‘Trade Fluctuations’ in Book IX, ‘Taxation’ in Book X, ‘Collectivism’ in
Book XI and ‘Aims for the Future’ in Book XII. Like the first volume, the
projected second volume was to have its own Mathematical Appendix.
This plan was not fully abandoned until the appearance of the sixth
edition in 1910. It was then replaced, as the preface to the eighth edition
makes clear, by an intention to produce a group of companion volumes.
These included Industry and Trade(published in 1919) and a volume on
trade, finance and the industrial future, parts of which were published in
1923 as Money, Credit and Commerce. Even by that late year in Marshall’s
life, the second ‘companion’ was to be followed by a book on ‘the possi-
bilities of social advance’, a topic on which Marshall had many ideas
he had pondered for the greater part of his life. Book VI, Chapter XIII,
included from the fifth edition of the Principles, presents some of these
expectations about the future by way of conclusion to his major work
on economics. The final sentence of the concluding chapter suggests
that its final two Books, V and VI, contain material ‘the most difficult
of the whole province of economics; and command, and give access to,
the remainder’.
The view imparted in this final sentence of Marshall’s Principles (at
least in the later editions) may be further explored in order to shed
light on the intentions of its author visible in the formal structure of
the book. The major theoretical framework of Marshall’s Principles of
Economics can be summarized in four brief phrases: things are wanted
and are therefore produced; these products are sold in the market at an
exchange value determined by supply and demand; and this market
value is distributed as income to those who helped to produce it, that is,
the labourers, owners of capital, entrepreneurs (Marshall preferred the
English term ‘undertakers’) and landlords.
The first two books provided background and definitional material.
Economics is defined as both the science of wealth and as part of the