ABSTRACT
During the 1930s and 1940s an important debate developed regarding the validity of marginal theory for solving real world economic problems, particularly in the production sphere. The point of contention was whether or not firms, in making their everyday output and employment decisions, were using marginal principles. One group of economists maintained that pricing, employment and output decisions were executed on the basis of wage bills and the marginal productivity of labor. Another faction argued that firm decisions were more institutionalized. They maintained that the intricate marginalist calculations were based on information that was not readily available in a form that could be easily used to execute these decisions. Many papers appeared in the American Economic Review over a span of that decade or so, arguing as to the exact nature of pricing, output and employment decision-making mechanisms.
