Smith and Marshall and Wealth and Poverty

by Don Boudreaux on September 28, 2006

in Standard of Living

Greg Mankiw’s recent post on the origins of supply-and-demand analysis — and his mention of Alfred Marshall‘s role in the history of making this valuable tool such a central part of economics — recalled to my mind another interesting feature of Marshall’s Principles of Economics.  I was going to blog on this other feature when I vaguely remembered doing so earlier.  Here’s that earlier post, from August 2004, which points out a telling difference in the great Alfred Marshall’s perspective on the world compared to the perspective of the great Adam Smith:

The Causes of Poverty?

1776 saw the publication of Adam Smith’s great book An Inquiry Into the Nature and Causes of the Wealth of Nations. [An on-line version is here.]

Note carefully the full title (as opposed to the more frequently used abbreviation The Wealth of Nations).
Written just as the booster rockets for humanity’s great wealth
explosion were being ignited, Smith inquired into the nature and the
causes of wealth. Smith understood that the phenomenon to be explained
is wealth. Wealth doesn’t just happen; it is not humanity’s default
mode. Wealth must be created; therefore, wealth has causes.

Writing a mere 114 years later, another illustrious economist, Alfred Marshall, wrote on page two of his justly celebrated Principles of Economics
of “the causes of poverty.” Marshall wrote these words as part of his
explanation of why the study of economics is useful. But writing after
the fruits of the wealth explosion began raining down widely, even as
astute a mind as Marshall missed the fact that poverty has no causes.
Poverty is humankind’s default mode. It’s what exists if we do nothing.
“Creating” poverty — causing poverty — is no challenge whatsoever.

Escaping poverty has causes – that is, wealth has causes.

This point bears repeating.  Poverty has no causes.  Wealth has causes.

But capitalism has been so enormously successful at producing
widespread material abundance that we today — like Alfred Marshall in
1890 — regard wealth as innate to our existence, as our default mode.
It is not. The set of institutions that will promote the creation of
widespread prosperity is minuscule in number compared to those that
prevent people from creating material prosperity.


Add a Comment    Share Share    Print    Email

Previous post:

Next post: