TAILIEUCHUNG - History of Economic Analysis part 93

History of Economic Analysis part 93. At the time of his death in 1950, Joseph Schumpeter-one of the major figures in economics during the first half of the 20th century-was working on his monumental History of Economic Analysis. A complete history of humankind's theoretical efforts to understand economic phenomena from ancient Greece to the present, this book is an important contribution to the history of ideas as well as to economics. | History of economic analysis 882 chapter. But we must notice at once that this was the way in which the Austrians rediscovered marginal productivity. Theirs was however a marginal productivity with a difference. In order to clarify this point let us recall the usual distinction between marginal physical productivity and marginal value productivity. Marginal physical productivity of a factor is the increment of product that results from an infinitesimal increment in the quantity of that factor. Marginal value productivity of a factor to a firm15 is this physical increment multiplied by the corresponding increment in this firm s total revenue or gross receipts. Both these concepts do enter into the Austrian theory. But they do not enter on its ground floor and they had been developed independently of Fundamentally the Austrian marginal productivity was indeed a value productivity but one that did not presuppose the price of the product it was not physical marginal productivity multiplied by any price but physical marginal productivity multiplied by some consumers marginal utility. It was on this basis that they worked out their theory that was at the same time a theory of production and of distribution the tools of their barter theory forged beforehand then came in to implement it and to show how this works out in a private-property economy. Now this conception of marginal value or utility productivity makes obvious common sense only in the case of a Crusoe economy. Crusoe may indeed be reasonably supposed to value his various scarce means of production according to the satisfactions he knows to be on the margin dependent upon their possession. To use Wieser s term he may indeed be supposed to impute these satisfactions to those means his own ability to work being just one of them and so for his own practical purposes to perform a subconscious process of imputation. But if we are to maintain that a similar process of imputation constitutes the innermost meaning

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