Marginalist

A marginalist is an economist who applies marginal analysis to explain how value, prices, and choices arise from incremental changes. The central idea is that decisions are driven by the additional or marginal unit of a good or activity, and that prices adjust so that the marginal benefits equal the marginal costs.

Marginalism emerged in the 1870s as part of the marginal revolution, challenging the classical labor-theory framework. Key figures include William Stanley Jevons of Britain, Carl Menger of Austria, and Léon Walras of France, whose work laid the groundwork for neoclassical microeconomics. They argued that the value of a good is determined by the satisfaction (utility) the last unit provides to the consumer and by the costs of the last unit produced.

Core concepts associated with marginalism include diminishing marginal utility, the idea that the additional satisfaction from each extra unit falls as consumption increases, and marginal cost, the increase in total cost brought by an extra unit of output. In price theory, the equilibrium price is seen as the point where marginal benefit to consumers equals marginal cost of production. Firms maximize profits by setting output where marginal revenue equals marginal cost, and households allocate spending to maximize utility subject to a budget constraint.

Impact and reception: marginalism became foundational to neoclassical economics, shaping theories of demand, supply, price formation, and welfare analysis. It complements, and at times competes with, other value theories such as the labor theory of value. Critics have challenged assumptions about cardinal utility and the universality of marginal analysis, prompting refinements such as ordinal utility and general equilibrium frameworks.

Notable marginalists include Jevons, Menger, and Walras, whose ideas influenced subsequent microeconomic theory and economic methodology.