miércoles, 24 de marzo de 2010

ECONOMY AND FINANCE: THE NEOCLASICS

By: Felipe Argote



In the late ninth century begins the emergence of a stream of economic thought pattern that differs from generally accepted so far to try to establish the value of the goods in terms of their components and especially the work needed to produce them.

The difference arises initially from the work of Carl Menger who in his book published in 1871 "Theory of Political Economy" differs from the classics economists in search of the value of a product by calculating production costs and instead proposed that the value is given by the market in the utility the product gives to individuals. For this position distant from the classical thought that dominated the intelligentsia Menger was teased and his thought was called Austrian school at a time when Austria was recently defeated by the Prussian army. Then William Stanley Jevons published in the same year 1871 and without any relation with Menger his book "Theory of Political Economy." Jevons was born in Manchester England; he lived part of his life in Australia and became a teacher at the University of Manchester when he went back to England. He died young at age 47 years drowned in a spa where he went to get cured of his ailments.

Then Leon Walras a Frenchman born in Evreux in 1834, published in 1874 his book "Elements of Pure Economics" and finally Alfred Marshall, born in Cambridge, England, Professor of Political Economy, University of Cambridge in 1890 published his book "Principles of Economics" Among all separately and were cementing what became known as the marginalist theory and their contributions as much as some other economists named the neoclassical theory.

Carl Menger was the first to venture the thesis that should be discarded theory of value of Adam Smith, David Ricardo and Karl Marx, and consider the utility from demand. According to Menger value is merely the importance that the specific goods purchased for us by the fact that we know that the satisfaction of our needs that we have depends on them. Without saying so explicitly established the marginalist theory stating that a consumer seek to cover their needs by obtaining the highest satisfaction with the currency units available, so it can gain the latest monetary unit equal satisfaction than any other.

Leon Walras's contribution was to establish a systemic approach in which theoretically has an economy in constant balance through general equilibrium model.

Meanwhile William Jevons brings to the ideas of Menger the concept that the utility cannot be considered in absolute terms and instead uses mathematical procedures for calculating profit using as basis the value of use.

But this is not consolidated until the great contributions of Alfred Marshall. This professor from Cambridge was the founder of the economy known as the Cambridge school. Additionally it is considered the pioneer of welfare economics as it was explicit in stating that the ultimate goal of economics is to meet the needs of society as a whole. For many years his book "Principles of Economics" was the reference book about economics, more important in the world.

Marshall takes the marginal analysis, but unlike Jevons, Walras and Menger located not far from the value at the demand side, neither place it as the classic expression in the supply of labor value. By contrast, he cites the case of scissors. Explain that it is not important to determine if the cut of the paper was made by the two sharp blades or the force exerted on the handle. Set as the value of an asset in the balance of supply and demand and took the currency units to calculate marginalist approach within the same satisfaction to buyers and vendors. Then replace economic theory as a calculus of determining prices instead of labor value theory. Marshall is he who gives the scheme of supply and demand curves, breakeven and elasticity among others.

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