Book 4, chapter 1: Introductory

§1. This first chapter introduces Book 4: The Agents of Production: Land, Labour, Capital and Organization.

Marshall defines “land” to include all that Nature has given freely, “labour” as human work not for pleasure, “capital” to include knowledge that might be private or public (as in the goods), and “organization” — an input not often included in production that Marshall defines as “aiding knowledge’ (p 115) but I would define as “institutions.”

Marshall then pivots to a model of production relying on two inputs: Nature and Man, given that man supplies labor, capital and organization. This definition does not ignore our present understanding of “natural capital” as Marshall just placed that value within Nature.

As if in passing, Marshall notes that “The growth of mankind in numbers, in health and strength, in knowledge, ability, and in richness of character is the end of all our studies” (p 116). This assertion still isn’t controversial today, but I look forward to Marshall’s thoughts on population, which was 1.9 billion — 25% of today’s — in 1920.

§2. Marshall defines demand as a “desire to obtain commodities… whereas supply depends on a willingness to overcome discommodities.” What are they? Consider:

The discommodity of labour may arise from bodily or mental fatigue, or from its being carried on in unhealthy surroundings, or with unwelcome associates, or from its occupying time that is wanted for recreation, or for social or intellectual pursuits. But whatever be the form of the discommodity, its intensity nearly always increases with the severity and the duration of labour. [p 117]

I find this a reasonable definition, especially for its contribution to a modern discussion of “work” being composed of unpleasant (labor) and pleasant (social or intellectual) tasks. By Marshall’s definition, I might describe my work as 50% “labor” (the part I dislike) and 50% “consumption” (the part I like).

Marshall does not follow this line. Using marginal analysis, he claims we work until our disutility rises to the level of the wage. In this setting (a supply curve), we are paid “more than necessary” for initial hours of work and “just enough” on the margin, which means we receive a producer’s surplus from those early hours.  Could this also be called “consumption”? Seems ok to me, but Marshall prefers, perhaps, to keep separate our consumer and producer roles.

Marshall ends by noting that the supply curve (and thus schedule of wages required to attract a targeted quantity of labor) is fixed in the short run but not in the long run, since people enter or switch trades.

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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