wrote,1" was not very satisfactory, partly because I was gradually outgrowing the older and narrower conception of my book, in which the abstract reasoning which forms the backbone of the science was to be made prominent, and had not yet mustered courage to commit myself straight off to a two-volume book which should be the chief product (as gradually improved) of my life's work."2 In 1886, “my chief work was recasting the plan of my book. This came to a head during my stay at Sheringham near Cromer in the summer. I then put the contents of my book into something like their final form, at least so far as the first volume is concerned. And thenceforward for the first time I began to try to put individual chapters into a form in which I expected them to be printed." In 1887 (at Guernsey), “I did a great deal of writing at my book; and having arranged with Macmillan for its publication, I began just at the end of this academic year to send proofs to the printers: all of it except about half of Book VI. being typewritten in a form not ready for publication, but ready to be put into a form for publication— I mean the matter was nearly all there and the arrangement practically settled." In 1888, "by the end of the Long Vacation I had got Book V. at the printer's, Book IV. being almost out of my hands. Later on I decided to bring before the Book on Normal Value or Distribution and Exchange a new Book on Cost of Production further considered,3 putting into it (somewhat amplified) discussions which I had intended to keep for the later part of the Book on Normal Value. That Book now became Book VII. This decision was slowly reached, and not much further progress was made during this Calendar year.” “During the first four months of 1889 I worked at Book VI., finishing the first draft of the first four chapters of it, and working off Book V. Meanwhile I had paid a good deal of attention to the Mathematical Appendix and got a good part of that into print. The Long Vacation, of which eight weeks were spent at Bordeaux Harbour, was occupied chiefly with Book VI. chaps. v. and vi., and Book VII. chaps. i.-v." The work was now pushed rapidly to a conclusion and was published in July 1890.

By 1890 Marshall's fame stood high, and the Principles of

1 The following extracts are from some notes he put together summarising his work from 1885 to 1889.

2 Also, "Work during the summer a good deal interrupted by making plans for my new house in Madingley Road."

3 After the first edition, this Book was incorporated in Book V. So that Value again became Book VI.

4 65 Rarely in modern times," said the Scotsman, "has a man achieved such a high reputation as an authority on such a slender basis of published work."

1

Economics, Vol. I.,2 was delivered into an expectant world. Its success was immediate and complete. The book was the subject of leading articles and full-dress reviews throughout the Press. The journalists could not distinguish the precise contributions and innovations which it contributed to science; but they discerned with remarkable quickness that it ushered in a new age of economic thought. "It is a great thing," said the Pall Mall Gazette, "to have a Professor at one of our old Universities devoting the work of his life to recasting the science of Political Economy as the Science of Social Perfectibility." The New Political Economy had arrived, and the Old Political Economy, the dismal science, "which treated the individual man as a purely selfish and acquisitive animal, and the State as a mere conglomeration of such animals," had passed away.3 It will serve," said the Daily Chronicle, " to restore the shaken credit of political economy, and will probably become for the present generation what Mill's Principles was for the last." "It has made almost all other accounts of the science antiquated or obsolete," said the Manchester Guardian. "It is not premature to predict that Professor Marshall's treatise will form a landmark in the development of political economy, and that its influence on the direction and temper of economic inquiries will be wholly good." These are samples from a general chorus.

66

It is difficult for those of us who have been brought up entirely under the influences of Marshall and his book to appreciate the position of the science in the long interregnum between Mill's Principles of Political Economy and Marshall's Principles of Economics, or to define just what difference was made by the publication of the latter. The following is an attempt, with help from notes supplied by Professor Edgeworth, to indicate some of its more striking contributions to knowledge.1

(1) The unnecessary controversy, caused by the obscurity of

1 This was the first book in England to be published at a net price, which gives it an important place in the history of the publishing trade. (See Sir F. Macmillan's The Net Book Agreement, 1899, pp. 14-16.) The dates of the successive editions are given in the Bibliographical Note. 37,000 copies have been sold up to the present time.

2 The suffix Vol. I. was not dropped until the sixth edition in 1910.

* Not that Old P.E. was really thus, but this was the journalists' way of expressing the effect which Marshall's outlook made on them.

4 Including hints and anticipations in earlier writings; as Professor Edgeworth wrote, reviewing the first edition of the Principles (The Academy, Aug. 30, 1890): "Some of Professor Marshall's leading ideas have been more or less fully expressed in his earlier book (the little Economics of Industry), and in certain papers which, though unpublished, have not been unknown. The light of dawn was diffused before the orb of day appeared above the horizon."

Ricardo and the rebound of Jevons, about the respective parts played by Demand and by Cost of Production in the determination of Value was finally cleared up. After Marshall's analysis there was nothing more to be said. "The new light thrown on Cost of Production," Prof. Edgeworth writes, "enabled one more clearly to discern the great part which it plays in the determination of value; that the classical authors had been rightly guided by their intuitions, as Marshall has somewhere said, when they emphasised the forces of Supply above those of Demand. The rehabilitation of the older writers-much depreciated by Jevons, Böhm-Bawerk and others in the 'seventies and 'eighties of last century-produced on the reviewer of the first edition an impression which is thus expressed: The mists of ephemeral criticism are dispelled. The eternal mountains reappear in their natural sublimity, contemplated from a kindred height.'

(2) The general idea, underlying the proposition that Value is determined at the equilibrium point of Demand and Supply, was extended so as to discover a whole Copernican system, by which all the elements of the economic universe are kept in their places by mutual counterpoise and interaction.1 The general theory of economic equilibrium was strengthened and made effective as an organon of thought by two powerful subsidiary conceptions-the Margin and Substitution. The notion of the Margin was extended beyond Utility to describe the equilibrium point in given conditions of any economic factor which can be regarded as capable of small variations about a given value, or in its functional relation to a given value. The notion of Substitution was introduced to describe the process by which Equilibrium is restored or brought about. In particular the idea of Substitution at the Margin, not only between alternative objects of consumption, but also between the factors of production, was extraordinarily fruitful in results. Further, there is "the double relation in which the various agents of production stand to one another. On the one hand they are often rivals for employment; any one that is more efficient than another in proportion to its cost tending to be substituted for it, and thus limiting the demand price for the other. And on the other hand, they all constitute the field of employment for each other; there is no field of employment for any one, except in so

66

Already in 1872, in his review of Jevons, Marshall was in possession of the idea of the mutually dependent positions of the economic factors. 'Just as the motion of every body in the solar system," he there wrote, "affects and is affected by the motion of every other, so it is with the elements of the problem of political economy."

far as it is provided by the others: the national dividend which is the joint product of all, and which increases with the supply of each of them, is also the sole source of demand for each of them.'

" 1

This method allowed the subsumption of wages and profits under the general laws of value, supply and demand,-just as previously the theory of money had been so subsumed. At the same time the pecularities in the action of demand and supply which determine the wages of the labourer or the profits of the employer were fully analysed.

(3) The explicit introduction of the element of Time as a factor in economic analysis is mainly due to Marshall. The conceptions of the "long" and " " and "short" period are his, and one of his objects was to trace "a continuous thread running through and connecting the applications of the general theory of equilibrium of demand and supply to different periods of time.” 2 Connected with these there are further distinctions, which we now reckon essential to clear thinking, which are first explicit in Marshall-particularly those between "external" and "internal " economies and between "prime" and "supplementary" cost. Of these pairs the first was, I think, a complete novelty when the Principles appeared; the latter, however, already existed in the vocabulary of manufacture, if not in that of economic analysis.

3

By means of the distinction between the long and the short period, the meaning of "normal" value was made precise; and with the aid of two further characteristically Marshallian conceptions-Quasi-Rent and the Representative Firm-the doctrine of Normal Profit was evolved.

All these are path-breaking ideas which no one who wants to think clearly can do without. Nevertheless this is the quarter in which, in my opinion, the Marshall analysis is least complete and satisfactory, and where there remains most to do. As he says himself in the Preface to the first edition of the Principles, the element of time" is the centre of the chief difficulty of almost every economic problem."

(4) The special conception of Consumers' Rent or Surplus, which was a natural development of Jevonian ideas, has perhaps proved less fruitful of practical results than seemed likely at

1 Principles, Book VI. chap. xi. § 5.

2 Ibid., Book VI. chap. xi. § 1.

3 The vital importance of this distinction to a correct theory of Equilibrium under conditions of increasing return is, of course, now obvious. But it was not so before the Principles.

first. But one could not do without it as part of the apparatus of thought, and it is particularly important in the Principles because of the use of it (in Prof. Edgeworth's words) "to show that laissez-faire, the maximum of advantage attained by unrestricted competition, is not necessarily the greatest possible advantage attainable." Marshall's proof that laissez-faire breaks down in certain conditions theoretically, and not merely practically, regarded as a principle of maximum social advantage, was of great philosophical importance. But Marshall does not carry this particular argument very far,2 and the further exploration of that field has been left to Marshall's favourite pupil and successor, Professor Pigou, who has shown in it what a powerful engine for cutting a way in tangled and difficult country the Marshall analysis affords in the hands of one who has been brought up to understand it well.

(5) Marshall's analysis of Monopoly should also be mentioned in this place; and perhaps his analysis of increasing return, especially where external economies exist, belongs better here than where I have mentioned it above.

Marshall's theoretical conclusions in this field and his strong sympathy with socialistic ideas were compatible, however, with an old-fashioned belief in the strength of the forces of competition. Professor Edgeworth writes: "I may record the strong impression produced on me the first time I met Marshall-far back in the 'eighties, I think-by his strong expression of the conviction that Competition would for many a long day rule the roast as a main determinant of value. Those were not his words, but they were of a piece with the dictum in his article on The Old Generation of Economists and the New: When one person is willing to sell a thing at a price which another is willing to pay for it, the two manage to come together in spite of prohibitions of

3 6

1 Nevertheless, Professor Edgeworth points out, even "before the publication of the Principles Marshall quite understood-what the critics of the doctrine in question have not generally understood, and even some of the defenders have not adequately emphasised-that the said measurement applies accurately only to transactions which are on such a scale as not to disturb the marginal value of money."

"The

2 Industry and Trade, however, is partly devoted to illustrating it. present volume," he says in the Preface to that book, "is in the main occupied with the influences which still make for sectional and class selfishness: with the limited tendencies of self-interest to direct each individual's action on those lines, in which it will be most beneficial to others; and with the still surviving tendencies of associated action by capitalists and other business men, as well as by employees, to regulate output, and action generally, by a desire for sectional rather than national advantage."

3 Quarterly Journal of Economics, 1896, Vol. XI., p. 129.