The Distribution Theory of Marshall’s Principles

Abstract

Alfred Marshall’s Principles of Economics [Marshall, 1890] is well known for its contributions to the theory of value.¹ It is less widely appreciated that the book also contains a well-developed theory of distribution. Just as Marshall’s value theory retained a strong classical infusion, especially in its treatment of supply, so too did his distribution theory preserve much of the classical viewpoint. This was especially the case in the treatment of rent and factor supply, but also in the concern with secular changes. It was only when dealing with the demand for labor and other factors that Marshall came to diverge crucially from his classical forebearers and must be classified as essentially a marginal-productivity theorist. Much interest attaches to the intellectual processes leading from Marshall’s earliest and distinctly classical formulation of distribution theory to the mature version embodied in the Principles. However, concern here will be restricted to describing and assessing the latter, leaving the earlier versions aside.² Only the long-period aspects of Marshall’s distribution theory will be considered. There are hints — no more — of a short-period theory of distribution over the trade cycle, but no attempt will be made to follow out this train of thought.