In the mid-nineteenth century classical school of political economy was in crisis, as its theory was based on the interpretation of cost values and could explain some of the pressing problems of the economy. The weakest point of the classical school was that it was poorly focused on the subject-user, for which production takes place. The opinion of the classical school was confined to the manufacturer. An exit of the crisis was found by the marginalists. This direction of economic thought emerged in the last third of the XIX century in the center of this system is subject to needs. To be more precise, the user in it is the head. Marginalistic revolution took place in two stages. The first phase covers 70 - 80-ies of the XIX century, the second phase (1890s) got the name of the neoclassical school. Many scientists began marginalistic revolution and contributed to creating a deeper neoclassical theory. Marginalistic revolution carried out a brilliant galaxy of such scientists as Carl Menger (1840-1921), Friedrich von Wieser (1851-1926), William Stanley Jevans (1835-1882), Francis Edgeworth (1845-1926), Leon Valras (1834-1910), John Bates Clark (1847-1938), Alfred Marshall (1842-1924), and others. (Bodkin, Ronald G) The marginalists had their predecessors as well. The first of the founders of marginal analysis was Johann von Thunen (1783-1850), who developed the theory of marginal productivity. The pioneers of marginal analysis were Antoine Augustin Cournot (1801-1877), who wrote a book "The Mathematical foundations of the theory of wealth"; Jules Dupuis, who dealt with the problem of measurement of utility of public services and Herman Gossen (1810-1858), who formulated the laws of marginal utility (Bodkin, Ronald G). However, the writings of the founders of marginal analysis have remained unclaimed by society. All of them had to open it again, but their achievements were included in modern economic theory.
Mostly marginalist revolution is associated with the names of Stanley Jevons, Léon Walras and Carl Menger. These three thinkers autonomously came up with similar new methods of economic analysis, pioneered new techniques (based on mathematics) and raised similar questions about the economy. Altogether, they set the foundations for a methodological revolution in the study of the economy which marked the progressive decline and fall of classical political economy.
Explaining the essence of this “revolution” and note that marginalism is based on fundamentally new methods of economic analysis that allows you to apply the limit values for the characteristics of the changes in the phenomena. In this it differs from classical Economics, which the authors used only the characteristics of the essence of economic phenomena (categories) expressed in average or total value. In the classical concept of the definition of price is the cost principle, matching its value with the cost of labor. According to the concept marginalists, the formation of prices (through the marginal utility theory) is linked to the consumption of the product, that is, given the fact, how will change the demand for the product, which is estimated, if consumed an additional unit of this good. (Glimcher, Paul W)
Another "revolutionary" feature of marginalism is that of the classics shared economic phenomena biased, considering in particular the sphere of production is primary in the sphere of circulation and the cost of the source category economic analysis and marginally the economy considered as a system of interdependent economic entities disposing of economic goods, financial and labor resources. That is why the marginal theory of problems of equilibrium and sustainable economic development have become the subject of analysis of the results of interaction with the environment as the companies and firms and the national economy as a whole.
In addition, in comparison with the classical marginal theory widely uses mathematical methods, including differential calculus. Moreover, mathematics is used marginally not only for the analysis of marginal economic performance, but also to justify the notion of optimal solutions for the choice of the best variant from several possible hypotheses. So, M. Friedman hypotheses about wrote that their content can be "explained" using actual data and even show the hypothesis is "correct" or "incorrect", or be "accepted" as valid or "rejected" because "the only specific test that allows to assess the justification hypothesis may be comparing it with reality."
The "revolutionary" developments led to marginalism in the field of quantity theory of money. Classics, as opposed to primitive place also their predecessors of the mercantilist, since the days of Hume that is more than 100 years ago, "proved" the extent of non-neutrality of money at least in the short term. And expressing disagreement with Hume, they did not anticipate the possibility of a positive impact of "creeping" inflation on production and employment. According to their interpretation of the quantity theory of money we are talking about a "simple and straightforward theorem of proportionality". So, the "marginal revolution" gave a new proof in favor of a gradual change in the Orthodox version of the quantity theory of money Ricardo – Mile. As a result, "it's time" informal definitions of the basic functions of money as medium of exchange, measure of value, means of accumulation. Moreover, no longer need to search among the various functions of money primary functions; it became possible to admit that "Money is what makes money. All that performs the functions of money is money." (Rima, Ingrid Hahne)
The first named authors of discoveries were I. Fischer and A. Pigou. So, developing the tradition of the "American school" of marginalism, Irving Fisher brought the so-called equation of exchange: MV=PT, where M – quantity of money, V – velocity of circulation, P is the medium balanced by the price level, T – number of all goods. (Glimcher, Paul W) On this basis, only in the case where it binds the value of money with the value of the monetary material, and the velocity of circulation and quantity of commodity weight in the short term is considered constant, there would have been Orthodox version of the quantity theory of money: the collision of goods and money change in the price of the goods would depend solely on the amount of money.
Arthur Pigou has made adjustments to the research methodology of money Fisher, proposing to consider the motives of economic entities at the micro level, despite their "propensity to liquidity" - the desire to set aside some money as reserve in the form of Bank deposits or securities. From here, as did Pigou, to the extent that will have liquidity of money will occur and adequate price adjustment. (Barber, William J)
It is also possible to recognize as "revolutionary" the feature that the methodological tools of marginalism allowed to make such important classics of the question of how the primary and secondary economic categories. This was primarily due to the preference for causal approach, which became the most important tool in the analysis of the transformation of the economy into an exact science.
Why marginalism gradually became virtually the official economic theory in the Western countries? Yes, because it denies the entire theoretical line of classical political economy, leading to the detection of capitalist exploitation: the principle of the primacy of production, labor theory of value, doctrine of the dual nature of value labor theory of surplus value. Capital does not want to hear anything about surplus value, capitalist exploitation. Even the most advanced bourgeois know and understand the true sources of his wealth, but they don't want to talk about it. Rightly arguing that their wealth is their personal merit, they believe that the question about the true sources of their wealth is unnecessary and socially harmful knowledge. There are intentionally identified two very different things: the basis for the allocation of wealth and the source of this wealth. And marginalism (and then neo-classical as a whole, and the economy) without this knowledge. Why marginalism is actually adopted capital; so it was in the twentieth century, is now and hardly the role of marginalism will be able to change in the near future.
The marginalistic revolution that happened independently, autonomous from trying immediate predecessors of marginalism led the following circumstances: first, the internal logic of the development of the general economic theory, the objective necessity of the extension of the research subject, the growing demand of the economic market practices that created the need for a more concrete analysis of economic relations; second, the dissemination of knowledge of mathematics among economists and expanding the use of achievements of other Sciences in most of the general economic theory was to lead at some point (historically the time period) to a qualitative leap in the development of economic science; third, the appearance and gradual spread of Marxian political economy as a theoretical and ideological expression of the interests of the social forces that suffered from the domination of the bourgeoisie. All these circumstances agreed by the end of 60-ies of XX century, leading to the marginalistic revolution.
Marginalism has made a great contribution to the development of science, stimulating interest in the analysis of consumer psychology by developing and applying a number of unique mathematical constructions.
In modern conditions, however, the marginalism is not an independent dimension in the economic analysis although the tools, the principle of application of limits are widely used in many theoretical constructions.
Works Cited
Barber, William J. A History Of Economic Thought. 1st ed., Middletown, Conn., Wesleyan University Press, 2009,.
Bodkin, Ronald G. The Marginal Revolution After One Hundred Years. 1st ed., New Haven, Cowles Foundation For Research In Economics, Yale University, 1972,.
Glimcher, Paul W. Neuroeconomics. 1st ed., London, Academic Press, 2009,.
Rima, Ingrid Hahne. Development Of Economic Analysis. 6th ed., Homewood, Ill., R.D. Irwin, 2012,.