School of Economic Thought: Marginalists Essay

Approximately to 1870 was formed the alternative system of looks to the price, getting the name of marginalism. Marginalists, as a little bit before John Mill, supposed that the cost of one or another commodity was determined by its utility, or degree of satisfaction, which a commodity delivers to a buyer. Exactly Marginalists seriously began to think that another side of every market is demand. That’s why many principles of Marginalists theory were based on this conclusion. In addition to their theory and conclusion Marginalists found an opinion that prices also depend upon the level of demand and it has an straight influence on consumer satisfaction after product buying which is provided by individual goods and services. That is not one reason for the price forming process, also classical economists proved that prices are determined by the costs of production.

Modern macroeconomic was provided by Marginalists with using the basic analytic tools of demand and supply, also with understanding consumer utility and mathematical framework for their correct execution. Analyzing market system, especially free market economy, was received such information that the main factors of production: among them are land, labor and capital – become equal to their contributions to production. It is an important principle of Marginalists theory and it was sometimes used to justify the existing distribution of income. Explaining these last words would be good to say that people earned exactly what they contributed to production.

For the best understanding the main idea of Marginalists theory and it importance for economy it will be good to pay attention on the most important aspects:

1. There was a narrowing of the research area, refusal from the wide approach to the economy and concentrating on an analysis only of separate economic aspects. From the account of Marginalists economy thoughts was going to the analysis only of the most developed form of market (disengaging oneself from a natural economy, appropriating nature using, simply-shaped of market etc.) Marginalists studied the conduct of individual in the conditions of modern market – costs minimization  and profit maximization.

2. Marginalists widely apply mathematical methods for description, design of economic processes. This is important and at the same time it conduces to scholastic manipulation numbers. Usually Marginalists hypertrophy mathematical methods and ignore the logical and dialectical grounds of economic science.

3. Marginalists had concentrated of studying maximum sizes in economic processes, what gave the name to this school – marginalism. It was the development of the before formed tendency and  must integrated an economic theory.

4. Marginalists widely use psychology for explanation of economy.

Main feature of marginalism considered their position which based on psychological knowledge – the value of commodities is determined by the not amount of labour, which was expended on their production, as Smit considered, and even by the not costs of production, as considered Miles, but depends on the subjective psychological features of perception of commodity by a buyer.

Perception by the buyers of commodity value individually and depends on an utility which can bring a buyer this commodity. The utility of commodity depends on the system of necessities and already present supply of commodity. The system of necessities is ranged on the criterion of necessety of the commodities to the different families (for example, food is more necessary than clothes). At the same time, every next commodity of this kind possesses for user all by a less and less utility. Accordingly the cost of commodity will fall as far as growth of stock-in-trade and users saturations.

Marginalisn is a main economic school. The large number of economists took part in its development. It is hard to value a part of each researcher, but all their developments were important for the right theory forming.