SINCE its inception in the first edition of the Principles in 1890, Marshall's doctrine of the surpluses, particularly his concept of the consumers' surplus, has been a perennial source of controversy. The nature of this controversy cannot be fully appreciated unless it is kept in mind that Marshall's doctrine in its original form has two aspects. The first consists in his broader views on the nature of economic activity and its relation to the surpluses in general. The second consists in his practical applications of the surplus analysis in its partial form.

Marshall's broader views on the subject may be found in various passages scattered throughout the Principles and in a compact form in the Appendix K. To critics sensitive to methodological purity, these passages seem to contain overtones of a particular philosophical point of view. Thus the objections to the surplus doctrine put forward by such leading critics as Profs. Knight and Robbins have been, on the whole, of a severely methodological character. Having, as they thought, found the "fountainhead of errors" in Marshall's Utilitarian philosophy and the labour-theory outlook, they were inclined to dismiss the entire surplus theory as being tainted at the source (cf. Knight, Risk, Uncertainty and Profit, pp. 69-73).

From this, it is instructive to turn to the recent developments in the surplus analysis. These developments have no doubt been stimulated by the application of the Indifference Curve technique; but they are also partly due to a reversal in the direction of approach. The new champions of the surplus doctrine, notably Prof. Hicks, seem to have started from a study of Marshall's partial surplus analysis in action, in its actual applications to practical problems. Having thus found it to be a powerful instrument of analysis, designed to deal with those problems which are intractable to the ordinary marginal analysis, they have then proceeded to show us how it can be used without committing ourselves to Marshall's "philosophical preconceptions" real or imaginary ( J. R. Hicks, "Rehabilitation of Consumers' Surplus", Review of Economic Studies, Feb 1941, pp. 108-16).

In view of this it seems desirable to sort out Marshall's broader and more controversial opinions on the surpluses from his practical


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Theories of Welfare Economics


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