------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (September 2004)
Richard Arena and Michel Qu=E9r=E9, editors, _The Economics of
AlfredMarshall: Revisiting Marshall's Legacy_. New York: PalgraveMacMillan,
2003. ix + 281 pp. =A355/$75 (cloth), ISBN: 1-4039-0168-6.
Reviewed for EH.NET by Katia Caldari, Department of Economics,University of
Padua.
This volume's aim is to "revisit" Alfred Marshall's legacy throughthe
insights of the most renowned scholars currently studyingMarshall's
thought. The book has two parts. The first is properly on"The Legacy of
Marshall's Economics." It includes works by Becattini,Marchionatti,
Reisman, Moss, Dardi and Groenewegen. The second partof the book is on
"Economic Evolution and the Organization ofIndustry: Marshallian Insights"
and includes papers by Whitaker,Hart, Qu=E9r=E9, Loasby, Arena, Bellandi
and Raffaelli.
The papers of the first part are all intended to underline thoseaspects of
Marshall's thought that have been often neglected but arethe necessary key
for fully appreciating the contribution toeconomics of this Cambridge
economist.
The opening paper is "The Return of the White Elephant" by
GiacomoBecattini. Through what Becattini calls "a turning point
inMarshallian studies" (p. 13), new and unexpected "potentialcapacities in
Marshall's thought" (p. 13) have been underlined moreand more so that
Marshall "is now increasingly mentioned and moreoften in a favourable
light" (p. 14). According to Becattini,Marshall cannot be considered a
"neoclassical economist," as mostinterpretations of the past did, because
of the presence of important"anomalies" that make him clearly a "sui
generis" economist, asWalras once put it, calling his English "colleague" a
"whiteelephant."
The second paper is "Dealing with the Complexity: Marshall and Keyneson the
Nature of Economic Thinking" by Roberto Marchionatti. Aninteresting
comparison between Marshall and Keynes is suggested:despite the fact that
most studies of Keynes "largely neglected therole of Marshall in the
development of Keynes' methodologicalreflection" (p. 39), Marchionatti
proves that "both Marshall andKeynes developed a conception of economics as
a science that attemptsto deal with the complexity using several tools.
Both saw a limitedscope for the fruitful use of mathematics in economics"
(p. 48).
The third paper by David Reisman is on Alfred Marshall and socialcapital.
Considering a number of themes dear to Marshall (industrialdistricts, trade
unions, socialism, health, quality of life), Reismansuggests that Marshall
was an important forerunner of the modernconcept of social capital.
With the fourth paper, "Marshall's Objective: Making OrthodoxEconomics
Intelligible to Business Leaders," Laurent S. Moss intendsto contribute to
the understanding of why Marshall's scientificpapers "did not live up to
several of his stated goals, bothscientific and personal" (p. 67). Moss
considers mainly three ofthese goals: 1) to write texts "accessible to
non-academics,especially business leaders," 2) "to construct an
analyticalstructure that would draw on the pioneering work of his
manypredecessor economists," and 3) to conciliate the two precedinggoals,
since on the one hand "he wanted to communicate with businesspeople ...
about things they knew well and experienced personally"(pp. 76-77), but on
the other hand "the conversation Marshall wantedto create had to be
structured within an economic framework that wasdeeply rooted in the older
orthodox tradition" (p. 77). The"reconciliation problem" is given as an
example.
Coming to the following paper "Alfred Marshall's Partial
Equilibrium:Dynamics in Disguise" by Marco Dardi, the reader is pushed into
amore technical and analytical context -- an inquiry into the conceptof
equilibrium, especially in its attempts to cope with the"fundamental
problem of economic change" (p. 89). Dardi suggests thateven though
Marshall "chose not to follow a formalized approach" (p.89) he did have "a
unitary frame of analysis" (p. 89). In order toprove this thesis, Dardi
works out "an abstract logical frameworkwhich links all the Marshallian
narrations to a few structuralhypotheses that account for the most basic
aspects of his theory" (p.89). The experiment is interesting since it
highlights therelationship between equilibrium and economic change in
Marshall'swritings and moreover the important nexus between ceteris
paribusmethod and human mind structure. Focusing on Marshall's studies
ofthe human mind recently edited and analyzed by Raffaelli (2003),Dardi
underlines how the static method and partial equilibria can beseen in a new
light "... less contingent, less tainted with pragmaticcompromise, than has
been suggested by many interpreters" (p. 100).
The last paper of this part is by Peter Groenewegen and deals
with"Competition and Evolution: The Marshallian Conciliation
Enterprise."Through a deep exploration of the concept of competition
andevolution, Groenewegen underlines the dilemma between Marshall
therealistic economist" and Marshall "the theorist." This dilemma wasthe
cause of Marshall's methodological choice often criticized andconsidered
"unacceptable to the economics profession at large, bothpast and present"
(p. 131).
As the second part of the book suggests, Marshall's major insightswere
about economic evolution and industrial organization. The firstpaper is by
John K. Whitaker and the title is "Alfred Marshall's_Principles_ and
_Industry and Trade_: Two Books or One? Marshall andthe Joint Stock
Company." Here the author analyzes the relationshipbetween Marshall's two
most important works through the special lensof the role he attributed to
joint stock companies. _The Principles_,which is primarily theoretical,
fails to "anticipate the rapidity"(p. 153) of the rise of large stock
companies and use a tool, therepresentative firm, that would have become
more and more outdated.In _Industry and Trade_, more of an applied work,
Marshall paysgreater attention to joint stock company in order to focus on
the"struggle between small private businesses and large public ones"
(p.139).
Neil Hart's article on the representative firm aims to explain "whyMarshall
was not a Marshallian." According to Hart, "Marshallintended the
representative firm to play a pivotal role in theattempt to construct an
equilibrium framework in a world acknowledgedto be characterized by
disequilibrium and organic processes" (p.176). That attempt was
unsuccessful, as Marshall himself admitted. Onthe contrary, Marshallians
"evaded Marshall's impasse by constrictingthe industrial organization
process so as to render the analysisamenable to static equilibrium
conditions" (p. 176). Therepresentative firm should have solved the
so-called "reconciliationproblem," centered on the "difficulties associated
with representing,within an equilibrium framework, outcomes of evolutionary
processesidentified directly with the increasing returns and thus
thelong-period industry supply schedule" (p. 168). The problem wasneglected
by the Marshallians who reasoned in terms of the"equilibrium firm."
"Increasing Returns and Competition: Learning from a
MarshallianPerspective," by Michel Qu=E9r=E9, starts from the
"reconciliationproblem." Here the focus is on some methodological
difficultiesMarshall tried to overcome and the meaning he gave to
competition inorder to reconcile it with increasing returns. Once again,
the readeris told to refer to _Industry and Trade_ more than _Principles_
that,as aiming to provide "a single unified framework" (p. 199), is saidto
be "unsatisfactory."
The following paper is on "Efficiency and Time" by Brian Loasby.
Thestarting point of the paper is a quotation from Groenewegen'sbiography
according to which "For Marshall, economists do not onlyhave to explain
their world. They have an unambiguous duty to assistin changing it for the
better" (1995, p. 761). Marshall the economistalways tried to understand
the real world and find possible ways topromote the progress of society.
Loasby focuses on the pivotal roleof knowledge in Marshall's economics and
explains it as "a selectivenetwork of connections between elements, built
up, modified andsometimes abandoned over time" (p. 210). This concept of
knowledge,very far from the perfect information of the neoclassical
world,explains why Marshall could never have reasoned in terms of
"Paretoefficiency" but at most in terms of "sufficiency," that is more
aptto explain a world where uncertainty is widespread.
Knowledge is also the central issue of the paper by Richard
Arena,"Organization and Knowledge in Alfred Marshall's Economics."According
to Arena, Marshall's concept of knowledge was "among themost advanced" (p.
221). Knowledge is strictly connected withorganization, in its turn
centered on differentiation andintegration. Arena proves how "organization
and knowledge appear tobe the main engine of economic evolution in
Marshall" (p. 238), eventhough, he underlines, "Marshall's contribution
does not provide uswith a ready-made theoretical framework" (p. 238).
"Some Remarks on Marshallian External Economics and IndustrialTendencies"
by Marco Bellandi explains the meaning of externaleconomies and the role
played by industrial districts in Marshall'seconomics. The reader is again
invited to take into consideration_Industry and Trade_ more than
_Principles_ since "In _Industry andTrade_, 'place' is explicitly
considered at different inter-linkedterritorial levels, such as time whose
different scales receive greatattention in the _Principles_" (p. 242). The
"places" considered inthe book are nations, regions, cities and industrial
districts. Whilethe nation-level, "where great financial, ideological,
political, andmilitary resources are coordinated, has an importance that
Marshallconsiders seriously" (p. 243), "the local level seems to
functionhere as the basic unit" (p. 245).
The last paper is "Requirements and Patterns of MarshallianEvolution: Their
Impact on the Notion of Industrial District" byTiziano Raffaelli. As the
author maintains, the aim of the paper "isto show that Marshall's wider
evolutionary framework helps us tounderstand better the theoretical
relevance of district organization"(p. 254). Raffaelli suggests that
industrial district "was not anappendix to his [Marshall's] social thought
but was directlyconnected to its core and constituted a specific way of
dealing withthe growth of capital that was inherent in economic progress"
(p.254). Co-evolution -- considered as the essence of all social systemsand
the characteristic aspect of interrelation between animal speciesand their
environment -- is the mechanism that explains "change."Raffaelli uses the
functioning of evolutionary mechanisms, "whosefirst instance Marshall found
in the human mind" (p. 255), as meansto explain the dynamics of the
industrial district, considered as "anideal evolutionary environment" (p.
263).
According to the editors the book has two main messages: "the firstis that
economists are far from having fully exploited thepotentialities of the
originality of Marshall's approach, and thesecond is that Marshallian
economics is not mainly a topic forhistorians of economic thought; its
modernity reveals how useful itis to re-read Marshall's contributions from
the standpoint of therenovation of contemporary economics" (p. 1).
Coming to the end of the book, the reader cannot neglect these twomessages:
a new and less known Marshall emerges from the book and theunusual and
interesting aspects of his thought which are discussedreveal a very modern
economist.
In the introduction, the editors anticipate most of the issuesdeveloped in
the volume: "methodological perspectives," "thereconciliation problem,"
"internal and external economies,""competition, production and evolution,"
"knowledge, organization andinstitutions." Other general aspects of the
volume are also worthunderlining: the necessity of reading _Industry and
Trade_ tounderstand Marshall's economic thought and the usefulness of
applyingthe model of the mind, to better clarify the structure of
Marshall'sreasoning.
As we have seen, the reader will find a number of interesting
andstimulating suggestions on how to reconsider and reread AlfredMarshall.
But since each chapter is in the form of an independentpaper, I would have
found it useful (and interesting) to put asummary scheme or conclusive
remarks at the end of the volume.
Another comment is on the structure of the book. I found the twoparts
slightly off balance. While each paper of the first partunderlines a
different aspect, in the second part too much emphasisis perhaps given to
the "Representative Firm" and the "ReconciliationProblem," the aspects of
Marshall's thought more debated in the past.Other issues could be given
more attention as expression of the greatoriginality and richness of
Marshall's thought: the modern idea ofprogress; the attention given to the
quality of life; and theanalysis of firms (marketing, scientific
management, the contrastbetween large and small firms). But, of course, a
book cannot beexhaustive, especially with an author such as Alfred
Marshall.
It is a well known motto "it's all in Marshall." Reisman in theintroduction
of his paper writes "Marshall here as usual, knew itall" (p. 53). This book
suggests a number of aspects in Marshall'sthought that deserve attention
and probably further discussions. Itseems to give evidence to the motto
cited above. No doubt it provesthat in Marshall there is much but not
because he _knew_ it all, Ithink, but because he _saw_ it all, the real
world, being aneconomist in the round, theoretical but also applied, and
moreoverconsidering economics not a science as an end in itself but a
meansfor bettering human life. This aspect is too often forgotten bymodern
economists but I think it is the strongest message of thegreat Marshall's
legacy.
References:
Groenewegen P. (1995) _A Soaring Eagle: Alfred Marshall,
1842-1924_,Aldershot, Edward Elgar.
Raffaelli T. (2003), _Marshall's Evolutionary Economics_, London, Routled=
ge.
Katia Caldari's works include "Alfred Marshall's Idea of Progress
andSustainable Development," forthcoming in the _Journal of the Historyof
Economic Thought_.
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