Whatever happened to Marshall's industrial economics?

Abstract

Marshall’s views on industrial organization rest on his early interest in mental philosophy: routines are necessary for the functioning of both mind and society, though in either case they enhance the dangers of excessive specialization and ‘overburdening’. Marshall’s ideal mix was the subordination of a powerful and growing set of routines to human creativity and foresight. The ‘neurophysiological analogy’ helps to understand his opinions on division of labour, business concentration, localization, and other general issues of industrial economics. The paper aims to bring together the dispersed threads of Marshall’s seminal research on industrial economics, and examines how his conception inspired a group of Cambridge-trained industrial economists (MacGregor, Chapman, Layton, Robertson, A. Robinson, Lavington, Sargant Florence). However, the core of Marshall’s conception was never brought to the appropriate level of abstraction and slowly sank into oblivion. The final part of the paper highlights the rediscovery of Marshall’s industrial economics in the form of the capability theory of the firm, seen as the main alternative to Coase’s transaction cost explanation of firm size

Assessments of A. C. Pigou’s Fellowship Theses

“…But as the issue of increasing returns was set aside in his thesis, there is no obvious early indication of Pigou's subsequent contributions to this field. Interestingly, recent studies of Marshall's legacy, such as those by Neil Hart (2003) and Tiziano Raffaelli (2004), have presented Pigou as the economist who effectively terminated Marshall's promising evolutionary research agenda for industry economics.…”

Alfred Marshall and Modern Economics

“…8. For details on the content of these contributions the reader is referred to Raffaelli (2004) and to the relevant chapters in the Raffaelli et al (2011) edited volume. Aspects of the work of many of these economists are also discussed in Groenewegen's (2011b) volume covering the 'minor Marshallians'.…”

The Market for Entrepreneurs: The Story of a Failure

“…… a rise in the income to be earned sets in operation forces tending to increase the supply of those capable of earning it; and in either case, the accurate extent to which the supply will be increased by a given rise of income, depends upon the social and economic condition of those from whom the supply is drawn. (Marshall 1920, 303) Although Marshall led British economic theory and its teaching until 1920, his thoughts on business activity were broken down into relevant contributions about location, innovation and coordination costs by the Cambridge School (Raffaelli 2003). Only Frank Knight appeared to consider the entrepreneur from the perspective of supply and demand.…”