ABSTRACT
The neoclassical breakthrough is often dated to the 1870s. A characteristic feature of neoclassicism is its use of marginal concepts – such as marginal utility, marginal cost and marginal revenue – to determine the behaviour that drives the market forces of supply and demand. Therefore, some authors prefer the term marginalism for the approach that was introduced almost simultaneously by Stanley Jevons (1835–1882) of Manchester, Carl Menger (1840–1921) of Vienna, and Léon Walras (1834–1910) of Lausanne. In their use of the marginal principle, the neoclassicists referred to classical rent theory as developed by Ricardo (see Chapter 3), but the term neoclassical itself was apparently coined only a generation later, mainly referring to other aspects of marginalism. Thorstein Veblen (an institutionalist whom we will meet in the next chapter) used it in 1900, in a review of Principles of Economics (1890), a most influential textbook by the Cambridge economist Alfred Marshall. In Veblen’s opinion, Marshall’s economics was neoclassical, because it shared a utilitarian base with classical political economy. It should also be noted that, between 1870 and 1900, economists had begun to change the name of their discipline. Jevons stated in the preface to the second edition of his Theory of Political Economy (1879) that, in comparison with the first edition of 1871, he had altered ‘political economy’ to ‘the single convenient term economics’ in the text.
