Money, Credit, and Commerce

Alfred Marshall (1842-1924), distinguished British economist and one of the founders of the neoclassical school of economics, established his reputation with the magisterial Principles of Economics (1890). That magnum opus quickly became a standard reference work, went through eight editions in Marshall’s lifetime, and to this day is considered one of the classic economic treatises. Among his areas of expertise was monetary analysis, but he did not have the opportunity to publish a systematic presentation of his views until his later years. Money, Credit, and Commerce, devoted to this subject, was his last major work.Among the proposals made in this work for which he is most remembered is the adoption of ＂symmetalism,＂ a plan for the combined use of gold and silver as the monetary base. Marshall also expressed his views on the relation of business fluctuations and the credit market to general unemployment. He saw reckless inflation of credit as the main cause of economic troubles.As the foremost British economist of his time, he influenced a later generation of economists. One of his most gifted students was John Maynard Keynes, who disagreed with some of Marshall’s ideas, yet continued to refer to Marshall’s contributions as essential groundwork. For students of economics and monetary policy Money, Credit, and Commerce remains a valuable book.

ALFRED MARSHALL, distinguished British economist, was born in London on July 26, 1842. His interest in economics arose out of his earlier studies of philosophy and mathematics. Following his tenure as first principal of University College, Bristol (1877-1881), Marshall taught at Cambridge University from 1885 to 1908, and lived in Cambridge for the remainder of his life.

Marshall’s chief work is the Principles of Economics (1890; eighth edition 1920). One of the founders of the so-called neo-classical school, Marshall argued that the economy would run best if left on its own, and that the normal functioning of a market econ-omy leads to full employment. Though influenced by the ideas of John Stuart Mill, Marshall substantially altered Mill’s frame of ref-erence: instead of analyzing how the production of goods and the distribution of income among different social classes affected, often dramatically, economic well-being, he studied price setting in a static context, focusing on small, gradual changes and the complex interrelations by which market balance, or ＂equilibrium,＂ is achieved. And while the earlier political economists Adam Smith and David Ricardo had identified labor as the force deter-mining the exchange value of goods, Marshall identified it as sat-isfaction of consumers’ desires, or utility.

Marshall’s orderly Victorian picture of supply, demand, and price, particularly at a time when contemporary socialists and trade unions were challenging the status quo, came under attack by later economists, including John Maynard Keynes, who demon-strated that market forces can be ineffective in promoting full employment and who advocated enlightened government inter-vention over laissez-faire policies. Nonetheless, Marshall’s work continues to influence orthodox economics. Alfred Marshall died in Cambridge on July 13, 1924.

Marshall’s other published works include Industry and Trade (1919) and Money, Credit, and Commerce (1923).