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Alfred Marshall's Cardinal Theory of Value: The Strong Law of Demand

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  • Donald Brown
  • Caterina Calsamiglia

Abstract

Abstract We show that all the fundamental properties of competitive equilibrium in Marshall’s cardinal theory of value, as presented in Note XXI of the mathematical appendix to his Principles of Economics (1890), derive from the Strong Law of Demand. That is, existence, uniqueness, optimality, and global stability of equilibrium prices with respect to tatonnement price adjustment follow from the cyclical monotonicity of the market demand function in the Marshallian general equilibrium model. We propose a refutable model of Marshall’s cardinal theory of value: the Marshallian equilibrium inequalities. We show that the Marshallian equilibrium inequalities have a solution iff the finite market data set consisting of observations on market prices and social endowments is cyclically monotone.
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  • Donald Brown & Caterina Calsamiglia, 2013. "Alfred Marshall's Cardinal Theory of Value: The Strong Law of Demand," Levine's Working Paper Archive 786969000000000760, David K. Levine.
  • Handle: RePEc:cla:levarc:786969000000000760
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    References listed on IDEAS

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    1. John K.-H. Quah, 2000. "The Monotonicity of Individual and Market Demand," Econometrica, Econometric Society, vol. 68(4), pages 911-930, July.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    3. Bewley, Truman, 1980. "The permanent income hypothesis and short-run price stability," Journal of Economic Theory, Elsevier, vol. 23(3), pages 323-333, December.
    4. Hildenbrand, Werner, 1983. "On the "Law of Demand."," Econometrica, Econometric Society, vol. 51(4), pages 997-1019, July.
    5. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
    6. Donald Brown & Caterina Calsamiglia, 2007. "The Nonparametric Approach to Applied Welfare Analysis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(1), pages 183-188, April.
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    1. repec:spr:decfin:v:40:y:2017:i:1:d:10.1007_s10203-017-0202-z is not listed on IDEAS

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    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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