Marginalist Revolution

This article is under construction

The Marginalist Revolution refers to the establishment of what has been called Neoclassical economic theory. The dating of this "revolution" is commonly ascribed to 1871-74, when the concept of "diminishing marginal utility" was introduced, independently and almost simultaneoulsy, by William Stanley Jevons, Carl Mengerand Léon Walras, to analyse the character of demand -- thus the term "Marginalist". Actually the fundamental principles of marginalism had been discovered much earlier, in 1854, by the Prussian civil servant Hermann Heinrich Gossen (1810-1858), who first formulated, in a rare and unknown book, the "Gossen second law" or "the law of diminishing marginal utility", which was his most original contribution and presaged the Marginalist Revolution of 1871-74. Gossen's work was utterly disparaged by scions of the all-powerful German Historical School (Schmoller dismissed him as an "ingenious idiot"). Gossen died bitter and unknown. His work was only uncovered and graciously acknowledged by Jevons in 1878.

The Marginalist Revolution set the foundations for the Neoclassical theory of value, which was bound to replace the "Classical" theory of value of Adam Smith, David Ricardo, John Stuart Mill and Karl Marx. However, the task of establishing the Neoclassical theory as the dominant approach to economics took quite some time, it can be roughly divided in three steps:

(1) 1871-74: the use of the the concept of "diminishing marginal utility" as the basis of a theory of exchange -- accomplished independently by William Stanley Jevons, Carl Menger and Léon Walras.

(2) 1890-1894: the establishment of the marginal productivity theory of distribution by John Bates Clark, Phillip H. Wicksteed and Knut Wicksell.

(3) 1934-1947: the period of Paretian revival, whereby the introduction of ordinal utility and the solidification of the Neoclassical theory of value -- including its welfare implications -- helped resurrect Neoclassical theory from its moribund state; the critical figures here were John Hicks, Harold Hotelling, Oskar Lange, Maurice Allais and Paul Samuelson.

Bibliography

• TUBARO, Paola. Doctoral dissertation. The Origins of Mathematical Economics: Calculus and Price Theory. Joint Doctoral Program, Université Paris X – Nanterre (France) and J.W. Goethe-Universität Frankfurt am Main (Germany).