By Neil Hart (auth.)
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Contributor be aware: This Routledge Classics version encompasses a new foreword by means of Jan Toporowski.
Publish yr word: First released in 1982
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Extra resources for Alfred Marshall and Modern Economics: Equilibrium Theory and Evolutionary Economics
Marshall believed that as a result of a gradual increase in demand, the representative ﬁrm could be expected to increase in size, and to have an increase in both internal and external economies at its disposal, indicating declining long-period industry supply prices (Principles: 460). As such, the long-period supply schedule derived from the representative ﬁrm is likely to be downward sloping. It is essential to realise that Marshall’s trees of the forest analogy and associated representative ﬁrm theory originated from Marshall’s endeavour to explain why increasing returns did not lead automatically to monopolisation.
Indeed, it is disequilibrium trading which provides the mechanism through which equilibrium may conceivably be achieved, as trading itself reveals the required information to market participants. Equilibrium price is very much an ex-post concept, with the movement towards equilibrium requiring the acquisition of knowledge that can only be obtained by participating in the market itself. 18 Marshall’s time period analysis is an enduring element of his equilibrium theory, where we ﬁnd the now familiar distinction between market- period (‘temporary equilibrium’), short-period, long-period and secular movements, with the four situations distinguished primarily by the capacity of supply adjustments to occur (Principles: 369–71).
It was the outcome of the establishment of routines on the one hand, and creativity through innovation on the other. Again, however, it can be observed that innovation is not purely random in nature, but often purposely selected to resolve a particular problem. Within Marshall’s system, order and transformation co-exit, with variety and changing competencies in production key elements of industrial development. Central to the process of industry organisation and change being described in Marshall’s Principles was the presence of increasing returns to scale.
Alfred Marshall and Modern Economics: Equilibrium Theory and Evolutionary Economics by Neil Hart (auth.)