Marginalism: The Harvest

Economic theory is about the sources of individual conduct and the consequences of its interaction. It is the intimate fusing together of the two questions, concerning the mode of choice of conduct and the outcome of the combination of many men’s choices, that constitutes economics as a distinct body of ideas and a discipline on its own. Its identity and separateness are especially confirmed by its possession of an incisive and, once its presuppositions are accepted, all-conquering principle. The method of the economic analyst is to assume that men pursue their interests by applying reason to their circumstances. A man will do what reason dictates: that is the key to all conduct in the business sphere, in the view of the economic theoretician. Therefore the theoretician has only to apply his own reasoning powers to a general, universally applicable description of men’s basic predicament in order to know not only the essential character of a correct policy for the individual in each of his various business capacities but also what, in fact, the individual will do. The law of gravitation is hardly simpler in essence, and economics can aspire, so it might seem, to rival celestial mechanics in its sweep and certainty. It is small wonder that marginalism, the necessary reflection of reason confronted with diversity of need and scarcity of means, should have seized and held the imagination of the economists of the competitive world for half a century.