Alfred Marshall and Neoclassicism

Alfred Marshall (18421924) a British economics professor at Oxford University, developed economics into a more rigorous, professional discipline than ever before. He invented concepts such as price elasticity, the representative firm, consumers surplus, and other ideas that significantly enlarged the analytical tool kit of the economist. Darwins ideas about biological evolution especially influenced Marshall, who learned a great deal about economic behavior by viewing a business firm as a biological organism, complete with a life cycle. Marshall also analyzed the effects on a business firm of a neighborhood of direct competitors, anticipating the clustering behavior of firms in the same industry (e.g. autos in Detroit). Marshall is perhaps best remembered for explaining the interaction of supply (i.e. costs of production) and demand (i.e. consumer utility), using the famous scissors metaphor to explain how these forces determine the price of an object.