Alfred Marshall Scope of Economics

Alfred Marshall Scope of Economics

Marshall's Principles of Economics begins with a broad, flexible definition of economics: "Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being."

An interesting and somewhat ironic aspect of this definition is that the concept is referred to by two different terms, political economy and economics. Given his broad definition of economics, one would have expected Marshall to use the broader political economy terminology. Marshall's use of both terms reflects some of the methodological issues of his time. The term political economy, which was more common than economics at the time, implies that economics and politics are related and that economics, as a discipline in the social sciences, is intimately connected with normative judgments. But John Neville Keynes, a colleague and friend of Marshall who was particularly interested in methodo­logical issues, published a work in 1891 titled The Scope and Method of Political Economy in which he clearly distinguished three branches of economics: positive economics, encompassing the scientific branch of economics; normative econom­ics, which considered what the goals of society should be; and an art of economics, which related the insights of the positive science branch to the goals determined in the normative branch. Keynes asserted that in discussions of the positive branch, the terms economics and economic science were preferable to political economy, because these names stressed the scientific character of economics. Unlike Ricardo and J. S. Mill, Marshall chose to call his book Principles of Economics rather than Principles of Political Economy, and eventu­ally he dropped the term political economy in favor of the term economics. What is ironic about his choice of the term economics is that he, more than almost any of his contemporaries, practiced the art, not the science, of economics. He focused on applied theory and was uninterested in the pure science of economics. There are two likely reasons for the shift. The first may have been Marshall's desire to differentiate his approach from Marx's approach, which was often referred to as political economy. The second is that Marshall was attempting to gain the acceptance of economics as a separate field of study at Cambridge, where he taught, and the term political economy, which suggested an overlap among fields, was not helpful in that attempt.

Another interesting aspect of the definition is its breadth and flexibility—some might say its flabbiness. Based on the definition, how can economics be distin­guished from political science, sociology, psychology, anthropology, and history? Marshall's loose definition springs not from careless, unfocused thinking but from a conscious reluctance to sharply divide economics from the other social sciences. Nature draws no such sharp lines, he pointed out, and the economist accomplishes nothing by defining the scope of the discipline too narrowly. In Appendix C, titled "The Scope and Method of Economics," Marshall considered (in his characteristically compromising fashion) the relative merits and feasibil­ity of developing a unified social science as opposed to allowing each discipline to develop separately. The idea of unifying the social sciences appealed to him, but he recalled that both the great Comte and Herbert Spencer had failed in their attempts to accomplish it. On the other hand, he observed, the physical sciences had made great strides by means of specialization. He decided ultimately that the issue could not be resolved in the absence of some concrete question:

is greater than the gain resulting from its greater breadth of outlook, is not to be decided by any hard and fast rule.

Marshall suggested that each economist define the scope of economics to suit his or her own inclination, as some economists are more likely to do their best work within a rather narrow definition of the scope of economics, while others work within a broader framework. Those who choose a broad definition of economics and extend their analysis toward other areas of the social sciences must exercise extreme caution, he warned, but if they work carefully they perform a great service to economics and the other social sciences.

Marshall introduced one other interesting issue in his discussion of the scope of economics, namely, the complexity of the relationship between the wants of society and its economic activity. Could economics be described as a study of the ways in which economic activity satisfies the wants of society? Marshall rejected this definition because it suggests that wants are an independent given, to which economic activities are secondary. He assessed the relative importance of demand (wants) and supply (activities) in the broadest possible context. His position was that our wants are not something that arise within us independent of our activities; on the contrary, many of our wants are direct outgrowths of our activities. To apply this thinking to the 2000s, it would be wrong to view a "yuppie" family's desire for a minivan as the starting point of economic analysis, because this want probably arises from the family's perception of its role in society. Marshall suggested that economists begin with a preliminary study of demand, proceed to activities and supply, and then return to demand. This, he contended, will enable them to appreciate the complex interconnections between wants and activities. Forced to choose between the supremacy of wants and the supremacy of activities in economic analysis, Marshall would opt for activities; this reflects his affinity for classical economics, which emphasized supply, and contrasts him with Jevons and Menger, who emphasized demand:

For much that is of chief interest in the science of wants is borrowed from the science of efforts and activities. These two supplement one another; either is incomplete without the other. But if either, more than the other, may claim to be the interpreter of the history of man, whether on the economic side or any other, it is the science of activities and not that of wants.

Marshall's religiously based humanitarian concerns led him to regard the elimination of poverty as the chief task of economics. He maintained that the key to solving these problems lay in the facts and theories of the economists, and his fondest hope was that the engine of inquiry he was constructing might uncover the causes of poverty and eventually discern how to remedy it. In Appendix B of his review of the history of economic theory, he castigated the classical theorists, particularly Ricardo, for not recognizing that poverty breeds poverty, because the poor do not have sufficient income to attain the health and training that would enable them to earn more. In contrast to the classical theorists, Marshall wholeheartedly believed in the possibility of significantly increasing the well-being of the working classes.

His discussion of the scope of economics reveals his desires to respond to the criticisms of the historically oriented economists, who wanted a broader defini­tion of economics; to discuss the question of whether economics should develop as a narrow, abstract discipline or develop into a unified social science; to answer the marginal utility writers, who insisted that the theory of consumption should take precedence over the theory of cost and supply; and to take issue with the part of classical economics that had troubled J. S. Mill because it held out so little hope for the elimination of poverty. As usual, Marshall tried to present a balanced judgment on these issues and seldom took a clear-cut position.