The Neoclassical Theory of Production and Distribution

Abstract

In the last third of the nineteenth century and first decades of the twentieth century, Western economists worked on the creation of a new theory of production and distribution to replace the old, so-called classical theory. The Englishmen William Stanley Jevons and Alfred Marshall, the Austrians Karl Menger and Eugen Bohm-Bawerk, the Frenchman Leon Walras, the Italian Vilfredo Pareto, and many others set forth the principles that comprise the foundation of modern Western economic science. While the ideological content of the neoclassical principles was justly criticized, there is also another side of neoclassical theory that is associated with the analysis of patterns of a general economic character, especially the problem of rational economic action. Examination of these questions is complicated by the fact that neoclassical theory in its modern form has gone far beyond the initial formulations in its analytical constructs as well as in its interpretations of ideas. The development of neoclassical theor...