Table Of ContentAlfred Marshall and Modern Economics
AlsobyNeilHart
EQUILIBRIUMANDEVOLUTION:AlfredMarshallandtheMarshallians
(PalgraveMacmillan2012)
Alfred Marshall and
Modern Economics
Equilibrium Theory and Evolutionary
Economics
Neil Hart
SeniorLecturerinEconomics,UniversityofWesternSydney,andVisitingFellow,
IndustrialRelationsResearchCentre,UniversityofNewSouthWales,Australia
ISBN 978-1-349-33778-1 ISBN 978-1-137-02975-1 (eBook)
DOI 10.1057/9781137029751
©NeilHart2013
Foreword©J.S.Metcalfe2013
Softcover reprint of the hardcover 1st edition 2013 978-0-230-30271-6
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To Yolanda and Maggie
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Contents
Foreword ix
PrefaceandAcknowledgements xi
1 Introduction:EquilibriumandEvolution 1
1.1 Outlineofthebook 3
1.2 Equilibriumanalogiesineconomictheory 4
1.3 Towardsa‘morebiologicalparadigm’ 9
2 AlfredMarshall’sEconomicBiologyMeccaand
MechanicalAnalogies 14
2.1 Marshall’seconomicbiology,increasingreturns,and
therepresentativefirmtheory 14
2.2 MechanicalanalogiesandMarshall’s‘reconciliation
problem’ 23
2.3 MarshallandtheMarshallians 30
2.4 Marshall’s‘loyalbutfaithless’followers 39
3 EquilibriumEconomicsafterMarshall 42
3.1 Theimperfectcompetition‘revolution’:exorcisingthe
Marshallianincubus? 42
3.2 Generalequilibrium,economiesofscale,and
imperfectcompetition 48
3.3 Challengestotheascendencyofequilibriumanalysis:
infidels,palacerevolts,andtruebelievers 54
3.4 EquilibriumGames 61
Appendix:Thecapitaltheorydebatesand‘Marshall’stheory’ 67
4 Keynes’MarshallianHeritageandtheWalrasianEclipse 75
4.1 MarshallandKeynes 75
4.2 Keynes’GeneralTheory 78
4.3 Walrasianinterpretations 83
4.4 Theneoclassicalsynthesisandbeyond 85
5 EquilibriumGrowthandCumulativeCausation 93
5.1 AdamSmithoneconomicprogress 94
5.2 Equilibriumgrowth 96
vii
viii Contents
5.3 ‘NewGrowthTheory’:oldwinefornewbottles? 100
5.4 Keynesianendogenousgrowththeory 104
5.5 AllynYoung,thetraverseandcumulativecausation 106
5.6 Cumulativecausationandeconomicevolution 111
6 TheRevitalisationofMarshall’sIndustrialEconomics 114
6.1 Marshall’sappliedindustrialeconomics 115
6.2 Post-Marshallianvisionsofindustrialeconomics 121
6.3 ThereawakeningofinterestinMarshall’sindustrial
economics 128
7 ThemesinEvolutionaryEconomics 135
7.1 VeblenandSchumpeter:twopioneeringfiguresin
evolutionaryeconomics 137
7.2 Goodwin’sdynamics 143
7.3 Biologicalevolutionandevolutionaryeconomics 145
7.4 NelsonandWinterandmodernevolutionary
economics 148
8 Marshall,EvolutionaryEconomics,andPost-Keynesian
Theory 157
8.1 Marshall’seconomicbiologyandcontemporary
evolutionaryeconomics 158
8.2 Marshall’s‘reconciliationproblem’andevolutionary
economics 164
8.3 Long-periodanalysisandevolutionaryeconomics 168
8.4 EvolutionaryeconomicsandPost-Keynesian
economics 173
9 Conclusion 181
Notes 189
Bibliography 223
Index 260
Foreword
How are we to understand the salient features of modern capitalism,
particularlytheever-presentcapacityfordevelopmentfromwithin?We
knowthatthesystemisneveratrest;historydocumentshoweveryposi-
tionseemstobeopentopotentialchallengeandhoweachgeneration
lives within a different economic landscape from its forebears and its
successors.Thisisthequestionthathaschallengedandoccupiedsome
ofthegreatvisionariesofeconomicthought,thegrandsystembuilders
with their magnificent dynamics. Marx, Schumpeter and Veblen are
readily understood to be members of this select group and, now that
we have Neil Hart’s work before us, there can be no doubt that Alfred
Marshall is a key member of this group too. Yet Marshall is a marginal
figureinmoderneconomics,rememberedinthetextbooksforhispartial
equilibriummethod,thetoolsofconsumersurplus,thenicetiesofstatic
industry analysis and little else. The central theme of Alfred Marshall
and Modern Economics is to show not only that this is a false record of
Marshall’s endeavours in The Principles and Industry and Trade but that
the neglect of Marshallian ideas has seriously limited our comprehen-
sion of the way capitalism operates: how it is a system that is strongly
ordered by markets and their instituted frames, yet in such a way that
thedevelopmentofknowledgeandorganisationaregivenfreereignas
theprimesourcesofeconomictransformation.Thereaderofthisbook
willfindwithinitacogentexplanationofhowthiscameabout,partic-
ularly through the refusal of subsequent generations of economists to
takeseriouslyMarshall’sevolutionarycredentials:whenheinsistedthat
‘biologyistheMeccaoftheeconomist’hemeantit,whenhestatedthat
‘variationisthechiefsourceofprogress’hemeantitandcasthisaccount
oflong-termandseculareconomicprocessesaccordingly.Quintessential
Marshallian ideas, the particular expenses curve, quasi rents, free com-
petition,theperiodisationscheme,thetheoryofcumulativeinvention,
therepresentativefirmandtheboxofinternalandexternaleconomies
find their rightful place as the means to show how the formation of
pricesisintegraltothedevelopmentofthesystem.Thepricesystemis
to be valued not only for its attributes in allocating resources but for
its attributes in inducing changes in the knowledge and organisation
onwhichtheallocationofresourcesdepends.Thesystemsofcapitalism
ix
