The Emergence of the Theory of the Firm

Frontmatter

1. Method and Organisation

Abstract

This study analyses the way in which the theory of the firm’s production and selling decisions emerges from the eighteenth century until the death of Marshall in 1924. By the time of Marshall’s death the broad outlines of present debates in the field had been drawn. The penultimate chapter substantiates this proposition and reviews the evidence to determine whether we can distinguish good theory from bad.

Philip L. Williams

2. Adam Smith

Abstract

Chapter 1 pointed to the mid-seventeenth century as the beginning of scientific economics. This emerging scientific approach had many facets — one of which was the attempt by writers to increase the generality of propositions.

Philip L. Williams

3. J. S. Mill

Abstract

This chapter will focus on those writers of the English classical school who followed Adam Smith. The scope of the chapter is defined by the method of analysis and the writers’ choice of problem rather than by the time period. Those writers are included whose work elaborates the theory of the equilibrium and stability of resource allocation contained in The Wealth of Nations. The work of contemporary writers (such as Cournot, Dupuit and Ellet) who developed the seminal ideas of Turgot and elaborated the static equilibrium conditions for various categories of markets will be discussed in chapter 4.

Philip L. Williams

4. Alfred Marshall

Abstract

This chapter covers the period from 1870 until the death of Marshall while including some discussion of the work of Cournot, Dupuit and Ellet which was postponed from chapter 3. Once again, the chapter will be based upon Schumpeter’s chosen classical statement for the period.

Philip L. Williams

5. Marshall and the Post-Marshallians

Abstract

In his presidential address to Section F (Economic Science and Statistics) of the annual meeting of the British Association for the Advancement of Science of 1861, William Newmarch noted the increasingly empirical foundation of economics since the time of Adam Smith.

Philip L. Williams

6. Some Reflections

Abstract

The period from 1776 to the death of Marshall witnessed successive elaborations on the equilibrium and stability model presented in The Wealth of Nations. The model proposes an equilibrium in which price would equal unit costs plus the opportunity cost of capital. At such an equilibrium all firms would be earning similar rates of return on capital after allowance is made for differences in riskiness and agreeability. Impediments to the achievement of this equilibrium are labelled as monopolistic restrictions.

Philip L. Williams

Backmatter