Greetings.
I’m doing some research into the works of Alfred Marshall with a view to getting a manuscript out in 2010, the 120th anniversary of his book Principles of Economics, which I argue is the most important book ever written about economics because it laid the foundations for practically everything that followed.
I have a question that perhaps you might try to answer. Does economic theory distinguish in any way between how tangibles and intangibles (services) react to the market or are delivered by it? It seems to me that, after Marshall, people said that that if something has a price then its characteristics are, for the purposes of the way the market works on them, essentially indistinguishable (ie it doesn’t matter whether it’s a tangible or not).
By demonstrating that the market-clearing price synthesised objective and subjective factors in production and consumption, Marshall helped promote the massive increase in tangible output in the 20th century. People didn’t have to worry about value (objective or subjective). They simple compared prices and chose.
The perversity I’m seeking to address is that there was over the same period an even faster growth in intangibles (services) to more than 70 per cent of GDP in most advanced economies from, probably, less than 50 per cent in Marshall’s times.
Is the rise of in the relative share of service production in the past 120 years a coincidence? Or is it in some way the result of the workings of the idea market-clearing price Marshall so admirably distilled.
Hope you can help.
Eddie O’Sullivan
Dubai