Greetings and welcome to the first edition of the Marshall 2020 Project, i.e., spending 2020 reading and discussing chapters from Alfred Marshall’s Principles of Economics, which was first published in 1890 and finally in 1920. Since it’s 2020, I thought it would be fun to read a book last published 100 years ago, to think about and (re-)learn the economics that predated a mathematical revolution (devolution), reflected on empires and imperialism, and had not considered women’s suffrage and the arrival of many other freedoms… and evils. I’m looking forward to learning how different or similar life was, as portrayed in Principles, which was the most-popular perspective on economics in those days.
This project is informal by participation but not in structure. We will read one chapter per week, starting today, and discuss points raised (and missing) in each chapter. I’m going to begin by posting on one-handed-economist, but I will cross-post onto the Marshall2020 subreddit, where I think we might get more participation and discussion. Feel free to participate in either location.
To get started, I think it’s useful for me to write my real-time reflections while reading the chapter. In the future, I may just say “what do you think?” but I’m trying to break the ice.
Feel free to comment with your own thoughts or reply to mine.
(NB: Email me if you can’t get past the anti-spam guards.)
Preface to the First Edition (1890)
[I’m writing comments as I read. I will try not to comment on every paragraph!]
The preface begins by claiming that economic thought does not jump by evolves gradually. The motto of the book (on the title page) is “Natura non facit saltum,” which I translate as “Nature — thus economies — do not jump.” This motto may come back to trouble us if it denies the existence of discontinuities (e.g., political upset or stock market panic).
The next paragraph swiftly defines economics as describing how things are rather than specifying ethics but ends with the claim (reasonable to me) that economics draws on common sense and thus provides a practical “guide in life.”
Wow. Now Marshall directly attacks the idea of a selfish “homo economicus” who cares only for themselves. He says that we all make altruistic gestures and that “continuity” requires economics to include altruism.
(This is a pretty heavy protest against what I thought was a much more recent ideal of homo economicus.)
Marshall then goes on to say that people will make the best decisions they can, whether they are “city men of ability” or “ordinary people who lack the will to conduct their affairs in a business-like way.” This sentiment denies the “rational calculator” stereotype that, along with self-interest (not altruism), was claimed of homo economicus.
(These words were written in 1890, but they could have been written as a counter-critique (not all deserved) to Milton and Rose Friedman’s Free to Choose [my review], published in 1980.)
Marshall then mentions that time also flows, rather than chopping, which means that our behavior in different times of our lives, or places, will deviate in a “continuous” manner from our other behaviors. This insight leaps to the continuous relation between renting and owning assets, which is mostly a question of time, since rents form the basis of income over time to property.
Marshall then offers an opaque (to me) rebuttal of Marx’s Labor Theory of Value, by saying that labor and effort are related to the value of objects, but that those values are not solely of labor (to be explained…)
Marshall then brings the continuity hammer down on those economists who would want to classify economic goods into discrete categories (public or private, normal or luxury), since their characteristics all flow into each other.
(I talk a lot about dividing the world into four types of goods, but I also know how they can change types but also fall into tricky edge cases.)
Marshal then alludes to the importance of biological, historical and mathematical perspectives on economic thinking, all of which are “continuous.” He then says:
“[I] attach great importance to the fact that our observations of nature, in the moral as in the physical world, relate not so much to aggregate quantities, as to increments of quantities, and that in particular the demand for a thing is a continuous function, of which the “marginal” increment is, in stable equilibrium, balanced against the corresponding increment of its cost of production.
In this, Marshall is evoking the “marginal revolution” that has just taken over much of economic thinking. He then says that the math used to explain these ideas is not necessary to understand them, although diagrams will be useful 🙂
The last delightful paragraph I leave for you to read.
Next week: Preface to the Eighth Edition.