Marginalist (or Neoclassical) Economics

Abstract

Marginalist economics is foremost an application of differential calculus to major problems of rational economic choice. Some clear marginalist ideas were put forward since the early decades of the nineteenth centuty. A first proper wave of marginalism occurred in 1871–77; it focused mainly on marginal utility as a measure of scarcity and formalized a theory of exchange characterized by proportionality between prices and marginal utilities; the marginalist principles referred to production were at that time still rather tentative and incomplete. Further studies at the turn of the nineteenth century both improved the analytical description of utility and provided a marginal productivity theory of the demand for factor services: a ‘supply and demand’ theory of prices and distribution was then built on marginalist principles. A third wave (1934–39) brought the analytical structure of marginalism to the present state. In more recent times it became a terminological convention to describe marginalist economics as ‘neoclassical’.