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The classical theory of value and the marginal revolution

In: Classical Economic Theory and the Modern Economy

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Abstract

The chapter discusses the classical theory of value, which has radically shifted from a supply-side theory based on production costs to a demand-side theory of utility. It has thus not just been the classical theory of the cycle that has been overturned, but the micro side of classical theory has completely disappeared as well. John Stuart Mill had a list of 17 elements in his theory of value, of which the first was that the important issue was relative prices and then, second, how prices are in the first instance determined by supply and demand. It was a straightforward theory that explained how value and relative prices were understood by classical economists, an approach that has been replaced by marginal analysis, with a major loss of precision in understanding how an economy adjusts.

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  • ., 2020. "The classical theory of value and the marginal revolution," Chapters, in: Classical Economic Theory and the Modern Economy, chapter 6, pages 113-130, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17468_6
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    Economics and Finance;

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