The man caught out by net prices

A Soaring Eagle
January 26, 1996

Alfred Marshall dominated British academic economics around the turn of the century. He inspired a whole generation of economists, including his most famous protege John Maynard Keynes. Even today his magnum opus, The Principles of Economics, continues to provide inspiration to sections of the profession. But Peter Groenewegen's book shows that as a person he seems to have been distinctly ordinary.

Marshall arrived as an undergraduate at St John's College, Cambridge, in 1861. Apart from a few years at Bristol and Oxford, he spent the rest of his life in this sheltered environment. His dealings with the outside world were few, and even the fellows of St John's regarded him as a somewhat introverted man.

Groenewegen notes that the book took him ten years to write. Numerous archives, both in Cambridge and the rest of the world, have been researched with great thoroughness. Five leading Marshall scholars commented on the first draft; a task, as the author himself notes, "the enormity of which they may not have fathomed when they first agreed to my request". The book certainly succeeds in chronicling the minutiae of Marshall's life. The main text is almost 800 pages and with appendices and index stretches to nearly 900 pages.

A flavour of much of the content can be gathered at random from the index. We read, for example, that Foxwell, a contemporary economist of Marshall, is "told about Marshall's concern with his mother's health" and is also "told by Marshall about his cycling tour". Little is cited of Keynes's view of Marshall's economics, but his opinions are given on both Marshall's high-pitched voice and his lack of school friends. Leon Walras, who in the 1870s established the basis of modern neoclassical economic theory on which Marshall built, receives only ten entries, one of which being that he was "told in 1883 that he could expect a copy of Marshall's treatise in a year or two".

Marshall's main legacy is his writings. But he also succeeded, after a struggle over many years, in establishing the economics tripos at Cambridge. Groenewegen's book gives insights into the complex academic politics involved in this, the basic principles of which seem unaltered with the passage of time. There is an equally timeless quality to Marshall's own manoeuvrings on his retirement to secure his chair for Arthur Pigou instead of for his long-standing friend Foxwell.

Groenewegen quotes Joan Robinson's remark that "the more I learn about economics, the more I admire Marshall's intellect and the less I like his character". In many ways, this summarises the dilemma facing his biographer. The ideas of the man, whether right or wrong, are of interest to many economists. But a study of the man himself is much less rewarding.

Perhaps the most amusing and enlightening two pages are those which discuss the innovation that surrounded the first publication of the Principles of Economics. For Marshall's book was the very first to be published under the net-price system, as it was then called, which prohibited the practice of booksellers offering discounts on the listed price of books. Marshall apparently found the new system hard to understand, but his publishers explained patiently that the existing system reduced bookseller profitability "from the excessive price competition it induced". Even after publication, Marshall was writing to his publishers complaining that he still did not "comprehend all the features of the new system". How ironic that an economist who spent 50 years of his life working on the theory of competitive markets should be the first beneficiary of an anti-competitive device. And how marvellous that the great economist could not grasp the commercial principles of the innovative contract into which he entered.

Paul Ormerod is chairman of Postorthodox Economics and visiting professor of economics at the University of Manchester.

A Soaring Eagle: Alfred Marshall 1842-1924

Author - Peter Groenewegen
ISBN - 1 85898 151 4
Publisher - Edward Elgar
Price - £59.95
Pages - 874

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