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Chapter II Must There Be a Proletariat? Marshall’s Patron Saint

The horseman serves the horse,

The neat-herd serves the neat,

The merchant serves the purse,

The eater serves his meat;

’Tis the day of the chattel,

Web to weave, and corn to grind;

Things are in the saddle,

And ride mankind.

—Ralph Waldo Emerson, from “Ode, Inscribed to William H. Channing”¹

The desire to put mankind into the saddle is the mainspring of most economic study.

—Alfred Marshall²

During the severe winter of 1866–1867, as many as a thousand men congregated daily at one of several buildings in London’s East End. When the doors parted, the crowd surged forward, shoving and shouting, to fight for tickets. From the frenzied assault and the bitter expressions of those who were unsuccessful, a passerby might have assumed that a boxing match or dogfight was starting. But there was no brightly lit ring inside, only the muddy courtyard of a parish workhouse. The yard was divided into pens furnished with large paving stones. A ticket entitled the bearer to sit on one of these slabs, seize a heavy hammer, and break up the grime-encrusted granite. Five bushels of macadam earned him three pennies and a loaf of bread.³

The men who besieged the workhouses that January were not typical of the sickly, ragged clientele ordinarily associated with these despised institutions. They were sturdy fellows in good coats. Until a few months earlier, they had been earning a pound or two a week in the shipyards or railway tunnels and highways—more than enough to house a family of five, eat plenty of beef and butter, drink beer, and even accumulate a tiny nest egg.⁴ That was before Black Friday brought building on land and sea and underground to an eerie standstill and an avalanche of bankruptcies deprived thousands of their jobs; before a cholera epidemic, a freak freeze that shut down the docks for weeks, and a doubling of bread prices; before the savings of a lifetime were drained away, the last of the household objects pawned, and help from relatives exhausted.

The poorest parishes were turning away hundreds every day while hard-pressed taxpayers like Karl Marx worried that the rising poor rates would ruin them too. Despite an outpouring of donations, private charities were overwhelmed. “What that distress is no one knows,” wrote Florence Nightingale, the heiress and hospital reformer, to a friend in January 1867:

It is not only that there are 20,000 people out of employment at the East End, as it is paraded in every newspaper. It is that, in every parish, not less than twice and sometimes five times the usual number are on the Poor Law books. It is that all the workhouses are hospitals. It is that the ragged schools instead of being able to give one meal a day are in danger of being shut up. And this all over Marylebone, St. Pancras, the Strand, and the South of London.⁵

Bread riots broke out in Greenwich, and bakers and other small shopkeepers threatened to arm themselves against angry mobs.⁶ In May, thousands of East End residents battled mounted police in Hyde Park, ostensibly to show their support for the Second Reform Act and the workman’s right to vote, but mostly to vent their frustration and fury at the rich.⁷

Middle-class Londoners could hardly avoid knowing of the distress in their midst, for they were living in the new information age, bombarded by mail deliveries five times a day, newspapers, books, journals, lectures, and sermons. A new generation of reporters inspired by the examples of Henry Mayhew, Charles Dickens, and other journalists of the 1840s filled the pages of the Daily News, the Morning Star, the Pall Mall Gazette, the Westminster Review, Household Words, the Tory Daily Mail, and the liberal Times with sensational eyewitness accounts and firsthand investigations in the East End. Reporters disguised themselves as down-and-out workmen and spent nights in the poorhouse in order to describe its horrors. Robert Giffen, editor at the liberal Daily News, was becoming one of the foremost statisticians of his day. His first major academic article had celebrated the tripling of national wealth between 1845 and 1865, but his second, written in 1867, was markedly different in tone and point of view, an attack on harshly regressive tax proposals that fell on the “necessaries of the poor.” What upset Giffen about the 1866–67 depression, writes his biographer Roger Mason, is that its chief victims had mostly worked, had saved, and had obeyed the law while the more fortunate had donated generously to charity. But virtue had not sufficed to prevent widespread misery.⁸

The resurgence of hunger, homelessness, and disease in the midst of great wealth radicalized the generation that had grown up during the boom and had taken affluence and progress for granted. Playwrights wrote dramas with proletarian heroes. Poets published works of social criticism. Professors and ministers used their pulpits to denounce British society. Typical of such jeremiads was that of the blind Liberal reformer Henry Fawcett, who held a chair in political economy at the University of Cambridge:

We are told that our exports and imports are rapidly increasing; glowing descriptions are given of an Empire upon which the sun never sets, and of a commerce which extends over the world. Our mercantile marine is ever increasing; manufactories are augmenting in number and in magnitude. All the evidences of growing luxury are around us; there are more splendid equipages in the parks and the style of living is each year becoming more sumptuous . . . But let us look on another side of the picture; and what do we then observe? Side by side with this vast wealth, closely contiguous to all this sinful luxury there stalks the fearful specter of widespread poverty, and of growing pauperism! Visit the greatest centres of commerce and trade, and what will be observed? The direst poverty always accompanying the greatest wealth!⁹

Filled with Christian guilt and the desire to do good, university graduates who had earlier anticipated becoming missionaries in remote corners of the empire were discovering that a great deal of good needed to be done at home. William Henry Fremantle, the author of The World as the Subject of Redemption, became the vicar in one of London’s poorest parishes, St. Mary’s, that year. A walk through the East End during the cholera epidemic convinced Thomas Barnardo, a member of an evangelical sect, to build orphanages for pauper children instead of going to China to convert the Chinese. A similar experience inspired “General” William Booth, the author of In Darkest England and the Way Out, to organize a Salvation Army. Samuel Barnett, an Oxford scholar, founded the University Settlers Association to encourage university students to live among the poor running soup kitchens and evening classes.

Missionaries in their own land, these young men and women strove to be scientific rather than sentimental. Their vocation was not dispensing charity but converting the poor to middle-class values and habits. As Edward Denison, an Oxford graduate, remarked in 1867: “By giving alms you keep them permanently crooked. Build school-houses, pay teachers, give prizes, frame workmen’s clubs; help them to help themselves.”¹⁰

A young man with delicate features, silky blond hair, and shining blue eyes boarded the Glasgow-bound Great Northern Railway at London’s Euston Station. It was early June 1867. He was carrying only a walking stick and a rucksack crammed with books. His fellow passengers might have taken him for a curate or schoolmaster on a mountaineering holiday. But when the train reached Manchester, the young man put his rucksack on, jumped down onto the platform, and disappeared in the crowd.

Before resuming his journey north to the Scottish highlands, Alfred Marshall, a twenty-four-year-old mathematician and fellow of St. John’s College in Cambridge, spent hours walking through factory districts and the surrounding slums “looking into the faces of the poorest people.” He was debating whether to make German philosophy or Austrian psychology his life’s work. These were his first steps away from metaphysics and the beginning of a dogged pursuit of social reality. He later said that these walks forced him to consider the “justification of existing conditions of society.”¹¹

In Manchester, Marshall found the smoky brown sky, muddy brown streets, and long piles of warehouses, cavernous mills, and insalubrious tenements—all within a few hundred yards of glittering shops, gracious parks, and grand hotels—that novels such as Elizabeth Gaskell’s North and South had led him to expect. In the narrow backstreets he encountered sallow, undersized men and stunted, pale factory girls with thin shawls and hair flecked with wisps of cotton. The sight of “so much want” amid “so much wealth” prompted Marshall to ask whether the existence of a proletariat was indeed “a necessity of nature,” as he had been taught to believe. “Why not make every man a gentleman?” he asked himself.¹²

Marshall, who lacked the plummy accent and easy manners of other fellows of St. John’s College, sometimes compared his discovery of poverty to that of original sin and his ultimate embrace of economics to a religious conversion. But although poverty first occurred to him as a subject of study after the panic of 1866, the implication that he had had to wait until then to look into the faces of poor people was grossly misleading.¹³ His maternal grandfather was a butcher and his paternal grandfather a bankrupt. His father and uncles started life as penniless orphans. William Marshall had put down “gentleman” as his occupation on his marriage license, but he had never risen above the modest position of cashier at the Bank of England. His son Alfred was born not, as he later intimated, in an upscale suburb but in Bermondsey, one of London’s most notorious slums, in the shadow of a tannery. When the Marshalls moved to the lower-middle-class Clapham, they took a house opposite a gasworks.

Thanks to his precocious intelligence and his father’s efforts to convince a director of the bank to sponsor his education, Marshall was admitted to Merchant Taylors’, a private school in the City that catered to the sons of bankers and stockbrokers. From the age of eight, he commuted daily by omnibus, ferry, and foot through the most noxious manufacturing districts and slums bordering the Thames. Marshall had been looking into the faces of poor people all his life.

In Charles Dickens’s Great Expectations, published in 1861, the year Marshall graduated from Merchant Taylors’, the diminutive orphan hero, Pip, makes what he describes as a “lunatic confession.” After swearing his confidante to absolute secrecy three times over, he whispers, “I want to be a gentleman.”¹⁴ His playmate Biddy is as nonplussed as if Pip, on the verge of being apprenticed to a blacksmith, had expressed ambitions to become the Pope. Indeed, to make his hero’s mad dream come true, Dickens had to invent convicts on a foggy moor, a haughty heiress, a haunted mansion, a mysterious legacy, and a secret benefactor. Even in an age that celebrated the self-made man, the notion that a boy like Pip—never mind the whole mass of Pips—could join the middle class was understood to be the stuff of pure fantasy or eccentric utopian vision, as divorced from real life as Dickens’s phantasmagoric novel. As an editorialist for the Times observed dryly in 1859, “Ninety nine people in a hundred cannot ‘get on’ in life but are tied by birth, education or circumstances to a lower position, where they must stay.”¹⁵

Yet there were signs of motion and upheaval. The question of who could become a gentleman, and how, became one of the great recurring themes of Victorian fiction, observes Theodore Huppon. A gentleman was defined by birth and occupation and by a liberal, that is to say nonvocational, education. That excluded anyone who worked with his hands, including skilled artisans, actors, and artists, or engaged in trade (unless on a very grand scale). Miss Marrable in Anthony Trollope’s The Vicar of Bullhampton “had an idea that the son of a gentleman, if he intended to maintain his rank as a gentleman, should earn his income as a clergyman, or as a barrister, or as a soldier, or as a sailor.”¹⁶ The explosion of white-collar professions was blurring the old lines of demarcation. Why else would Miss Marrable have needed to lay down the law? Doctors, architects, journalists, teachers, engineers, and clerks were pushing themselves forward, demanding a right to the label.¹⁷

A working gentleman’s occupation had to allow him enough free time to think of something other than paying the bills, and his income had to suffice to provide his sons with educations and his daughters with gentlemen husbands. Yet exactly what such an amount might be was also a matter of much debate. The paupers in Trollope’s The Warden are convinced that £100 a year was enough to transform them all into gentlemen, but when the unworldly warden threatens to retire on £160 a year, his practical son-in-law chides him for imagining that he could live decently on such a mere pittance.¹⁸ Alfred Marshall’s father supported a wife and four children on £250 per annum,¹⁹ but Karl Marx, admittedly no great manager of money, couldn’t keep up middle-class appearances on twice that amount.²⁰ In 1867 gentlemanly incomes were few and far between. Only one in fourteen British households had incomes of £100 or more.²¹

Yet even Miss Marrable might have agreed that a fellow of a Cambridge college qualified. All fifty-six fellows of St. John’s College were entitled to an annual dividend from the college’s endowment that rose from about £210 in 1865 to £300 in 1872—as well as rooms and the services of a college servant.²² A daily living allowance covered dinner at “high table,” which usually consisted of two courses, including a joint and vegetables, pies and puddings, followed by a large cheese that traveled down the table on castors. Twice a week a third course of soup or fish was added. Most fellows supplemented their fellowship income with exam coaching fees or specific college jobs such as lecturer or bursar. For a single man with no wife and children—fellows were required to remain celibate—college duties still left many hours for research, writing, and stimulating conversation and an income that permitted regular travel, decent clothes, a personal library, and a few pictures or bibelots—the requisites, in short, of a gentleman’s life.

Alfred Marshall’s metamorphosis from a pale, anxious, underfed, badly dressed scholarship boy into a Cambridge don was nearly as remarkable as Pip’s transformation from village blacksmith’s apprentice into partner in a joint stock company. His father had gone to work in a City brokerage at sixteen. His brother Charles, just fourteen months his senior, was sent to India at seventeen to work for a silk manufacturer. His sister Agnes followed Charles to India, in order to find a husband but died instead.

Like many frustrated Victorian fathers, Marshall’s tried to live vicariously through his gifted son. Committed to educating Alfred for the ministry, William Marshall got his employer to foot the tuition at a good preparatory school. He was “cast in the mould of the strictest Evangelicals, bony neck, bristly projecting chin,”²³ a domestic tyrant who bullied his wife and children. A night owl, he often kept Alfred up until eleven, drilling him in Hebrew, Greek, and Latin.²⁴

Not surprisingly, the boy suffered from panic attacks and migraines. A classmate remembered that he was “small and pale, badly dressed, and looked overworked.” Shy and nearly friendless, Marshall revealed “a genius for mathematics, a subject that his father despised,” and acquired a lifelong distaste for classical languages. “Alfred would conceal Potts’s Euclid in his pocket as he walked to and from school. He read a proposition and then worked it out in his mind as he walked along.”²⁵

Merchant Taylors’ School was relatively cheap and heavily subsidized, but even with a salary of £250, William Marshall could barely afford the £20 per annum required to cover his son’s out-of-pocket expenses as a day student.²⁶ Yet the senior Marshall was willing to endure—and impose—the strictest economies to send Alfred there, because success at Merchant Taylors’ guaranteed a full scholarship to study classics at Oxford, no small prize at a time when a university education was a luxury that only one in five hundred young men of his son’s generation could afford. Even more important, under soon to be abolished statutes, the Oxford scholarship came with a virtual guarantee of a lifetime fellowship in classics at one of its colleges or entrée into the church, the civil service, or the faculty of the most prestigious preparatory schools.

When Marshall announced his intention of turning down the Oxford scholarship and studying mathematics at Cambridge instead, his father raged, threatened, and cajoled. Only a substantial loan from an uncle in Australia and a mathematics scholarship enabled Marshall to defy parental authority and pursue his dream. When the seventeen-year-old went up to take his scholarship exam, he walked along the river Cam shouting with joy at his impending liberation.

At the end of three years at St. John’s, there was another race to run, namely a grueling sporting event known as the Mathematical Tripos. Leslie Stephen, who was Marshall’s contemporary at Cambridge and the future father of Virginia Woolf, estimated that a second-place finish such as Marshall’s was worth as much as a £5,000 inheritance—one-half million dollars in today’s money—more than enough to get a leg up in life.²⁷ Marshall’s reward was immediate election to a lifetime fellowship at his college, which gave him the right to live at the college and to collect coaching and lecture fees (worth another £2,500 in Stephen’s reckoning). After a year of moonlighting at a preparatory school to repay his uncle’s loan, Marshall was, for the first time in his life, truly financially independent and free to do as he liked.

How to best use his freedom was the great question. Mathematics was beginning to bore him. As Marshall sat high up in the pure Highland air reading Immanuel Kant (“The only man I ever worshipped”²⁸), the world below was hidden in mist. Yet the faces of the poor and images of drudgery and privation continued to haunt him. Like Pip, Alfred Marshall had shot up but could not forget those left behind.

Marshall had returned to Cambridge from Scotland in October 1867, “brown and strong and upright.”²⁹ As an undergraduate he had been excluded from all the social clubs and private gatherings in dons’ rooms that constituted the most valuable parts of a Cambridge education. But now that he had achieved intellectual distinction, he was invited to join the Grote Club, a group of university radicals who met regularly to discuss political, scientific, and social questions. Their leader was Henry Sidgwick, a charismatic philosopher four years Marshall’s senior who quickly spotted Marshall’s talent and took him under his wing. “I was fashioned by him,” Marshall acknowledged. His own father had almost squeezed the life out of him, but Sidgwick “helped me to live.”³⁰

With Sidgwick as intellectual guide, Marshall plunged into German metaphysics, evolutionary biology, and psychology, rising at five to read every day. He spent some months in Dresden and Berlin, where, according to biographer Peter Groeneweger, he “fell under the spell of Hegel’s Philosophy of History.”³¹ Like the young Hegel and Marx, he found Hegel’s message that individuals should govern themselves according to their own conscience, not in blind obedience to authority, compelling. He absorbed an evolutionary view of society from Charles Darwin’s On the Origin of Species, which appeared in 1859, and Herbert Spencer’s Synthetic Philosophy, published in 1862. An interest in psychology was stimulated by the possibility of “the higher and more rapid development of human faculties.”³² The young man whose chances in life had turned on access to first-rate education was coming to the conclusion that the greatest obstacles to man’s mental and moral development were material.

He began to think of himself as a “Socialist.” In the 1860s, the term implied an interest in social reform or membership in a communal sect, while the equally expansive label of “Communist” encompassed everyone who thought that things couldn’t get better unless the whole system of private property and competition was torn down.³³ When Marshall questioned Sidgwick about overcoming class divisions, his mentor used to gently chide him, “Ah, if you understood political economy you would not say that.” Marshall took the hint. “It was my desire to know what was practical in social reform by State and other agencies that led me to read Adam Smith, Mill, Marx and LaSalle,” he later recalled. He began his education by reading John Stuart Mill’s Principles of Political Economy, then in its sixth edition, and “got much excited about it.”³⁴

His interest was intensified by the unexpected passage of the Reform Act of 1867, which, in a single stroke, turned England into a democracy. The act did more than double the size of the electorate by extending the franchise to some 888,000 adult men, mostly skilled craftsmen and shopkeepers, who paid at least £10 a year in rent or property tax. It brought the working classes into the political system and made democratic government the only acceptable form of government. Though it ignored the 3 million factory operatives, day laborers, and farm workers—and, of course, the entire female sex—twentieth-century historian Gertrude Himmelfarb emphasizes that the Reform Act nonetheless lent the notion of universal suffrage an aura of inevitability.³⁵ Marshall was troubled, though, by the contrast between the ideal of full citizenship and the reality of material squalor and deprivation that prevented most of his countrymen from taking full advantage of their civic freedoms.

“Shooting up,” as Marshall had done, can provoke feelings of guilt or a sense of obligation. Victorian fiction is populated by the “double” who shares the hero’s attributes and aspirations but is condemned to stay put while the other shoots up. When the American journalist and writer Henry James explored London on foot in 1869, Hyacinth Robinson, the protagonist of James’s 1886 novel about terrorists, seemed to jump “out of the London pavement.” James was watching the parade of brilliantly dressed figures, carriages, brilliantly lit mansions and theaters, the clubs and picture galleries emitting agreeable gusts of sound with a sense of doors that “opened into light and warmth and cheer, into good and charming relations,” when he conceived a young man very much like himself “watching the same public show . . . I had watched myself,” including “all the swarming facts” that spoke of “freedom and ease, knowledge and power, money, opportunity and satiety,” with only one difference: the bookbinder turned bomber in The Princess Casamassima would “be able to revolve around them but at the most respectful of distances and with every door of approach shut in his face.”³⁶

Having been admitted to the rarified world of freedom, opportunity, knowledge, and ease, if not power or great wealth, Marshall kept the face of his double where he could see it every day:

I saw in a shop-window a small oil painting [of a man’s face with a strikingly gaunt and wistful expression, as of one “down and out”] and bought it for a few shillings. I set it up above the chimney piece in my room in college and thenceforward called it my patron saint, and devoted myself to trying how to fit men like that for heaven.³⁷

As Marshall studied the works of the founders of political economy, “economics grew and grew in practical urgency, not so much in relation to the growth of wealth as to the quality of life; and I settled down to it.” The “settling” took a while. He found “the dry land of facts” intellectually unappetizing and socially unappealing. When he was asked to take over some lectures on political economy, Marshall agreed reluctantly. “I taught economics . . . but repelled with indignation the suggestion that I was an economist . . . ‘I am a philosopher straying in a foreign land.’ ”³⁸

When Marshall began to study economics seriously in 1867, his mentor Sidgwick was convinced that the “halcyon days of Political Economy had passed away.”³⁹ After the success of the 1846 Corn Law repeal, which was followed by a period of low food prices, political economy had a brief turn as “a true science on par with astronomy.”⁴⁰ But the economic crisis and political upheavals of the 1860s revived the old animus against the discipline among intellectuals. Going a step beyond Carlyle’s epithet “the dismal science,” John Ruskin, the art historian, dismissed political economics as “that bastard science” and, like Dickens, called for a new economics; “a real science of political economy.”⁴¹ The fundamental problem, observed Himmelfarb, was that “the science of riches” clashed with the evangelicalism of the late Victorian era.⁴² Victorians were repelled by the notion that greed was good or that the invisible hand of competition guaranteed the best of all possible outcomes for society as a whole.

With the advent of the franchise for working men, both political parties were courting the labor vote. But “political economy” was invoked to oppose every reform—whether higher pay for farm laborers or relief for the poor—on the grounds that it would slow down the growth of the nation’s wealth. While the founders of political economy had been radical reformers in their day, championing women’s rights, the abolition of slavery, and middle-class interests versus those of the aristocracy, their theories pitted their disciples against labor. As Virginia Woolf’s father, Leslie Stephen, remarked: “The doctrine . . . was used to crush all manner of socialist schemes. . . . Political economists were supposed to accept a fatalistic theory, announcing the utter impossibility of all schemes for social regeneration.”⁴³

For example, when Henry Fawcett, the reform-minded professor of political economy at Cambridge, addressed striking workers, he told them that they were cutting their own throats. Such advice outraged Ruskin, who said, after a builders’ strike in 1869, “The political economists are helpless—practically mute; no demonstrable solution of the difficulty can be given by them, such as may convince or calm the opposing parties.”⁴⁴ Mill was an even more dramatic example than Fawcett. Now a Radical member of parliament, Mill called himself a Socialist, and had championed the Second Reform Act and the right of workers to unionize and strike. Yet Mill’s view of the future of the working classes was scarcely less dour than that of Ricardo or Marx. J. E. Cairnes, a professor at University College London who published a famous indictment of slavery as an economic system, echoed Mill’s position a few years later:

The margin for the possible improvement of their lot is confined within narrow barriers which cannot be passed and the problem of their elevation is hopeless. As a body, they will not rise at all. A few, more energetic or more fortunate than the rest, will from time to time escape . . . but the great majority will remain substantially where they are. The remuneration of labor, as such, skilled or unskilled, can never rise much above its present level.⁴⁵

At the heart of Mill’s pessimism lay the so-called wages fund theory. According to this theory, ultimately disowned by Mill but never replaced by him, only a finite amount of resources was available to pay wages. Once the fund was exhausted, there was no way to increase the aggregate amount of pay. In effect, the demand for labor was fixed, so that only the supply of labor had any effect on wages. Thus, one group of workers could obtain higher wages only at the expense of lower wages for others. If unions succeeded in winning a wage rate in excess of the rate of the wages fund, unemployment would result. If the government intervened by taxing the affluent to subsidize wages, the working population would increase, causing more unemployment and even higher taxation. Moreover, the use of taxes to subsidize pay would reduce efficiency by removing competition and the fear of unemployment. Eventually, Mill warned, “taxation for the support of the poor would engross the whole income of the country.”⁴⁶ Unless the working classes acquired prudential habits of thrift and birth control, the author of a popular American textbook claimed, “they will people down to their old scale of living.”⁴⁷ In her political economy primer, Millicent Fawcett cited the Corn Law repeal as proof that wages were tethered to a physiological minimum. Referring to the worker, she wrote:

Cheap food enabled him, not to live in greater comfort, but to support an increased number of children. These facts lead to the conclusion that no material improvement in the condition of the working classes can be permanent, unless it is accompanied by circumstances that will prevent a counter-balancing increase of population.⁴⁸

By the time the Second Reform Act passed however, the theory that wages could not rise in the long run no longer looked tenable, and not only because of the dramatic increase in average pay. The conquest of nature by the railway, steamship, and power loom suggested that society was not yet close to natural limits to growth. The fact that emigrants were prospering abroad and that a middle class of skilled artisans and white-collar workers was shooting up at home contradicted the notion that a mass escape from poverty was ruled out by the biological laws. Poverty that had once appeared to be a natural and near-universal feature of the social landscape began to look more and more like a blemish.

Was there an ingenious mechanism that could lift wages until the average wage sufficed for a middle-class life? Mill acknowledged that the wages fund theory was flawed, but neither he nor his critics could propose a satisfactory alternative. An extraordinary number of Victorian intellectuals—from Charles Dickens, Henry Mayhew, and Karl Marx to John Ruskin and Henry Sidgwick—attempted to fashion one. Since none had so far succeeded, no one could say whether hopes for social betterment really could be reconciled with economic reality, or whether the palpable gains of the 1850s and 1860s were doomed to be reversed. Tories such as Ruskin and Carlyle, an anti-Abolitionist, predicted disaster if the old feudal bonds were not restored. Socialists argued that without sweeping societal changes, the condition of workers was “un-improvable and their wrongs irremediable.”⁴⁹ The standard-of-living debate, as it became known, boiled down to one question: How much improvement was possible under existing social arrangements?

As he stood before “70 to 80 ladies” in a borrowed Cambridge college lecture hall on a spring evening in 1873, Alfred Marshall’s handsome face was lit with an inner flame, and he spoke with great force and fluency without notes. He addressed the women in plain, direct, homely terms as if he were speaking to his sister, urging them to stop “tatting their tatting and twirling their thumbs” and counseled them to resist the demands of their families. Instead he wanted them to get jobs as social workers and teachers like “Miss Octavia Hill.” Most of all, he insisted that they learn “what difficulties there are to be overcome, and . . . how to overcome them.”⁵⁰

Like his mentor Henry Sidgwick and other university radicals of the 1860s and 1870s, Marshall came to see education as a weapon in the struggle against social injustice, and like other admirers of Mill’s The Subjection of Women, published in 1869, he considered the educated woman society’s principal change agent. For Marshall, the existential problem for women and for the working classes was essentially the same: both lacked the opportunity to lead independent and fulfilling lives. Workers were condemned by low wages to lives of drudgery that prevented all but the most exceptional from fully developing their moral and creative faculties. Middle-class women were condemned by custom to ignorance and drudgery of a different sort. Inspired by the novels of contemporaries such as George Eliot and Charlotte Brontë, Marshall was particularly sensitive to the plight of women who were prevented from developing their intellects and regretted society’s loss of their talents. He was convinced that the task of liberating the working classes required the energies of middle-class women as well as a more scientific economics. On the topic of “the intimate connection between the free play of the full and strong pulse of women’s thought and the amelioration of the working classes,” Marshall was “a great preacher.” In an age that celebrated “the angel of the hearth,” Marshall taught extension courses for women, acted as an unpaid examiner, and personally financed an essay-writing prize in economics for female students, as well as, later on, contributing a substantial £60 to the construction fund for Newnham Hall, the nucleus of one of Cambridge’s first women’s colleges. In 1873, Marshall joined Sidgwick, other members of the Grote Club, and Millicent Fawcett—whose sister Elizabeth Garrett was attempting to study medicine—to found the General Committee of Management of the Lectures for Women.⁵¹

Marshall’s lectures focused on the central paradox of modern society: poverty amid plenty. He taught by posing a series of questions: Why hadn’t the Industrial Revolution freed the working class “from misery and vice?” How much improvement is possible under current social arrangements based on private property and competition? His answers reflected how far he had distanced himself from the specific assumptions and conclusions of his predecessors. He told the women that philanthropy and political economy were not, as Malthus had supposed and latter-day Malthusians continued to believe, irreconcilable.

Even as he contradicted the conclusions of the founders of political economy, Marshall insisted that the science itself was indispensible. The problem of poverty was far more complicated than most reformers admitted. Economic science, like the physical sciences, was nothing more or less than a tool for breaking down complex problems into simpler parts that could be analyzed one at a time. Intervention based on faulty theories of causes could easily make the problem worse. Marshall cited Adam Smith, David Ricardo, Thomas Malthus, and John Stuart Mill to demonstrate the power of the “engine of analysis” they had constructed, as well as to show how it had to be improved. Without such a tool, he told them, discovering truths would always be a matter of accident and the accumulation of knowledge with time wholly impossible.

Marshall agreed with Mill that the industrial revolution hadn’t liberated him from the tyranny of economic necessity or supplied the material requisites for a “higher life.” “Our rapid progress in science and arts of production might have been expected to have prevented to a great extent the sacrifice of the interests of the laborer to the interests of production . . . It has not done so.”⁵² What he strenuously disputed was the assertion by political economists that it could not do so, that the remuneration of labor as such, skilled or unskilled, could never rise much above its present level.⁵³

He did not doubt that the chief cause of poverty was low wages, but what caused wages to be low? Radicals claimed that it was the rapacity of employers, while Malthusians argued that it was the moral failings of the poor. Marshall proposed a different answer: low productivity. He cited as evidence the fact that, contrary to Marx’s claim that competition would cause the wages of skilled and unskilled workers to converge near subsistence level, skilled workers were earning “two, three, four times” as much as unskilled laborers. The fact that employers were willing to pay more for specialized training or skill implied that wages depended on workers’ contribution to current output. Or, put another way, that the demand for labor, not only the supply, helped to determine pay. If that was the case, the average wage wouldn’t be stationary. As technology, education, and improvements in organization increased productivity over time, the income of the workers would rise in tandem. The fruits of better organization, knowledge, and technology would, over time, eliminate the chief cause of poverty. Activity and initiative, not resignation, were called for.

Arnold Toynbee the historian later described the significance of Marshall’s insight: “Here is the first great hope which the latest analysis of the wages question opens out to the laborer. It shows him that there is another mode of raising his wages besides limiting his numbers.”⁵⁴ Workers themselves could influence their own and their children’s ability to earn better wages. “The chief remedy, then, for low wages is better education,” Marshall told his audience.

He took great pains to demolish Socialists’ claim that but for oppression by the rich, the poor could live in “absolute luxury.” England’s annual income totaled about £900 million, he told the women. The wages paid to manual workers amounted to a total of £400 million. Most of the remaining £500 million, Marshall pointed out, represented the wages of workers who did not belong to the so-called working classes: semiskilled and skilled workers, government officials and military, professionals, and managers. In fact, an absolutely equal division of Britain’s annual income would provide less than £37 per capita. Reducing poverty required expanding output and increasing efficiency; in other words, economic growth.

The chief error of the older economists, in Marshall’s view, was to not see that man was a creature of circumstances and that as circumstances changed, man was liable to change as well. The chief error of their critics—but, ironically, one that the founders of political economy shared—was a failure to understand the cumulative power of incremental change and the compounding effects of time.

There are I believe in the world few things with greater capability of poetry in it than the multiplication table . . . If you can get mental and moral capital to grow at some rate per annum there is no limit to the advance that may be made; if you can give it the vital force which will make the multiplication table applicable to it, it becomes a little seed that will grow up to a tree of boundless size.⁵⁵

Ideas mattered when the past was not simply being reproduced but something new was being created. “An organon” or instrument for discovering truths—truths that depended, like all scientific truths, on circumstances—would be an independent force. “The world is moving on,” Marshall said, “but the pace at which it moves, depends upon how much we think for ourselves.”⁵⁶

A year later, Marshall was deep in conversation with Henry Sidgwick in Anne Clough’s sitting room on Regent Street, discussing “high subjects” when he felt someone staring at him.⁵⁷ The young woman who sat with her sewing untouched in her lap looking toward them had a “brilliant complexion,” “deep set large eyes,” and masses of mahogany hair “which goes back in a great wave and is very loosely pinned up behind.”⁵⁸ Later, someone said of the twenty-year-old Mary Paley, “She is Princess Ida.” The eponymous heroine of the Gilbert and Sullivan opera had “forsworn the world, / And, with a band of women, shut herself / Within a lonely country house, and there / Devotes herself to stern philosophies!” Mary had just broken off her engagement to a handsome but stupid army officer to join a handful of female pioneers seeking a Cambridge education. Her part in this “outrageous proceeding” was not a rejection of men, or of the usual terms of marriage. “He who desires to gain their favor must / Be qualified to strike their teeming brains, / And not their hearts! / They’re safety matches, sir. / And they light only on the knowledge box.”⁵⁹

Mary went to one of Marshall’s lectures at the coach house at Grovedodge and listened, enchanted, as he rhapsodized over Kant, Bentham, and Mill. “I then thought I had never seen such an attractive face,” she confessed, captivated by his “brilliant eyes.” She went to a dance at Marshall’s college, and, emboldened by his “melancholy” look, she asked him to dance “the Lancers.” Ignoring his protestations that he didn’t know how, she led him through the complex steps only to be “shocked at my own boldness.”⁶⁰ Before long she was among the regular guests at his “Sunday evening parties” in his rooms at St. John’s, where he served her tea, crumpets, sandwiches, and oranges and showed her his “large collection of portraits arranged in groups of Philosophers, Poets, Artists . . .”

Possibly Mary reminded Marshall of Maggie Tulliver, the intelligent but math-phobic heroine of George Eliot’s The Mill on the Floss, who wanted to learn “the Euclid” like her brother, Tom.⁶¹ At the time, Eliot’s novel was Marshall’s favorite. Meeting Mary Paley and her best friend, Mary Kennedy, in the street one day, Marshall proposed—not marriage, but something more outrageous. The young professor wanted his two best students to take the Moral Sciences Tripos, the final examination in political economy, politics, and philosophy that male undergraduates had to take to get a degree. This was a far more ambitious project than acquiring “general cultivation” by attending lectures in literature, history, and logic, Mary’s original object in coming to Cambridge.

The suggestion was also bolder than anything proposed by other education reformers whose main interest lay in raising the level of secondary-school teaching. “Remember, so far you have been competing with cart horses,” Marshall warned, “but for the Tripos it will be with racehorses.” He promised that he and Sidgwick would coach her. According to Mary Kennedy, “He explained that this would mean at least three years’ study, specializing in one or two subjects. We accepted the challenge lightly, not realizing what we were undertaking.”

Like Marshall, the young woman who would accept the challenge came from a strict evangelical household. Mary Paley’s great-grandfather was William Paley, the archdeacon of Carlisle and author of The Principles of Moral and Political Philosophy. Mary’s father was the rector of Ufford, near Stamford, about forty miles northwest of Cambridge. A “staunch Radical” who opposed fox hunting, horse racing, and High Church ritual, he refused to talk to neighboring clergymen and forbade his daughters Dickens and dolls. Mary recalled, “My sister and I were allowed dolls until one tragic day when our father burnt them as he said we were making them into idols and we never had any more.”

Mary’s father was nonetheless a more tolerant, better-educated, and more affluent man than William Marshall. Mary grew up in a “rambling old house, its front covered with red and white roses and looking out on a lawn with forest trees as a background, and a garden with long herbaceous borders and green terraces.” The Paley household was a hive of activity: rounders, archery, croquet, excursions to London, summer holidays in Hunstanton and Scarborough. “We had a father who took part in work and play and who was interested in electricity and photography,” Mary recalled. Her mother “was full of initiative and always bright and amusing.” In 1862 Mary was taken to London to tour the Second Great Exhibition. Although Charles Dickens was taboo, Mary read Arabian Nights, Gulliver’s Travels, the Iliad and the Odyssey, Greek and Shakespearean plays, and the novels of Sir Walter Scott, also favorites of Marshall’s.

When the Cambridge Higher Local Examination for Women over Eighteen was established in 1869, Tom Paley encouraged Mary to take it over the objections of her mother. After she succeeded brilliantly and broke off her engagement to the army officer, her father allowed her to go to Cambridge to live “when such a thing had never been done before.” Anne Jemima Clough, a friend of Sidgwick’s and one of the leaders of the women’s education movement, was opening a residence for a handful of female students. Mary later wrote, “My father was proud and pleased and his admiration for Miss Clough overcame his objections to sending his daughter to Cambridge (in those days an outrageous proceeding).”⁶²

In October 1871, Mary joined Miss Clough and four other young women at 74 Regent Street. The Cambridge community was wholly unprepared for coeducation. Since mixed classes were “improper,” sympathetic dons had to be recruited to repeat their regular lectures separately for the women, and Miss Clough, as chaperone, had to sit through them all. The “strong impulse towards liberty among the young women attracted by the movement” and the “unfortunate appearance” of the pretty ones were chronic sources of anxiety. Mary, who was just entering her “pre-Raphaelite period” and had papered her rooms in William Morris designs, was especially troublesome. She dressed as if she were a figure in an Edward Burne-Jones painting, in sandals, capes, and flowing gowns. An amateur watercolorist, she favored jewel tones and once covered her tennis dress with Virginia creeper and pomegranates.

Mary began to go regularly. Earnest as well as artistic, with a quick facility for “curves,” the graphs that Marshall employed to illustrate the interactions of supply and demand, Mary surprised herself by winning the essay prize. She was thrilled by Marshall’s bold proposal that she take the Tripos, and the long comments he wrote on her weekly papers in red ink became “a great event.”

Mary Paley took the Moral Sciences Tripos in December 1874. Until the eve of the examination, it was unclear whether the university examiners would be willing to let her sit for it. One was considered “very obdurate.” Although they grudgingly agreed to grade her examination, they refused to grant her the highest mark. “At the Examiners’ Meeting there was at that time no chairman to give a casting vote, and as two voted me first class and two second class I was left hanging, as Mr. Sidgwick said, ‘between heaven and hell,’ ” she later recalled. Still, her triumph turned Paley into a local celebrity.

Her time at Cambridge seemingly having run out, Mary returned to the family home in Ufford. There she promptly organized a series of extension lectures for women—“off my own bat!”—in nearby Stamford. She also agreed, at the suggestion of a Professor Stuart at Cambridge, to write a textbook on political economy for use in the extension courses. Then she got a letter from Sidgwick asking whether she could take over Marshall’s economics lectures at Newnham, where Miss Clough had assembled about twenty students.

At thirty-two, Marshall was one of the “advanced liberals” at Cambridge University. He wore his hair fashionably long, sported a handlebar mustache, and no longer dressed like a buttoned-up young minister. He had joined the recently founded Cambridge Reform Club and read the Bee Hive, a radical labor magazine.

In the spring of 1874, a farmworkers’ strike provoked a bitter quarrel between radicals and conservatives at Cambridge. Trade unions were then relatively novel, having only just been legalized. The National Agricultural Laborers’ Union, a radical new organization under the leadership of Joseph Arch, had sprung up in dozens of East Anglian villages the previous fall. The laborers demanded higher wages and shorter hours as well as the franchise and reform of the land laws.⁶³ Strikes erupted all around Cambridge. Determined to “crush the rebellion,” farmers banded together in “Defense Committees,” firing and evicting men with union cards and importing scab labor from as far away as Ireland. The Tory Cambridge Chronicle suggested that the farmers “do not make a stand so much against an increase of wage as against the cunning tactics and insufferable dictation of the union through demagogue delegates.”⁶⁴ By mid-May, the lockout was two and a half months old and had become the subject of national controversy.

At the university, where a large subscription had just been undertaken for famine victims in Bengal, opinion was sharply divided. Middle-class sympathies for the plight of the laborers had been awakened by a number of inquiries, most notably a Royal Commission report by the bishop of Manchester, who had exposed the long hours, low wages, horrific accidents, and diets of “tea kettle broth, dried bread and a little cheese” endured by agricultural workers.⁶⁵ During the lockout, the Times of London ran stories calculated to horrify Victorian readers, including one description of a cottage whose single bedroom was shared by “the laborer, and his wife, a daughter aged 24, and a son aged 21, another son of 19, and a boy of 14, and a girl of 7.”⁶⁶ Novelists seized on the subject as well. In George Eliot’s Middlemarch, which had appeared three years earlier, Dorothea Brooke tells her uncle, a well-to-do landlord, that she cannot bear the “simpering pictures in the drawing-room . . . Think of Kit Downes, uncle, who lives with his wife and seven children in a house with one sitting-room and one bedroom hardly larger than this table!—and those poor Dagleys, in their tumble-down farmhouse, where they live in the back-kitchen and leave the other rooms to the rats! That is one reason why I did not like the pictures here, dear uncle.”⁶⁷

Among conservatives, however, the unrest raised the specter of the Bread Riots of 1816–17 and the burning of hayricks in the 1830s. Most opposed the idea of unionization on principle. In the spring a leading member of the university community, who was of “recognized social position . . . occupying an influential position in one of [Cambridge’s] . . . colleges,” wrote several lengthy “Notes of Alarm” in the Cambridge Chronicle urging the farmers to stand fast. He labeled the union leaders “professional mob orators” and their liberal sympathizers “sentimental busybodies.” The writer—possibly a Cambridge don named William Whewell—signed himself only “CSM,” an acronym probably chosen to provoke his liberal opponents because it stood for Common Sense Morality. On the matter of wages and unionization, CSM invoked the laws of political economy, claiming, “It is simply a question of supply and demand, and ought to have been allowed to settle itself on ordinary principles without the interference of paid agitators and demagogues.”⁶⁸

The overflowing crowd of union supporters that squeezed into the Barnwell Workingmen’s Hall on Cambridge’s scruffy north side on Tuesday, May 11, 1874, was thus somewhat bemused to find an unlikely set of allies standing on the stage clad in caps and gowns. One of the leaders, the fiery George Mitchell, confessed, amid much laughter, that “when he saw all those gentlemen with their wide-awake hats and tippets he thought he was going to have some put on him.”⁶⁹ Sedley Taylor, a former Trinity College fellow and prominent reformer, spoke first, proposing a resolution condemning the farmers’ efforts to break the union as “prejudicial to the general interests of the country,” delivering a broadside at his fellow collegian CSM in the process.

Then it was Marshall’s turn. Seconding a motion put forward by a dissident farmer supporting the locked-out laborers, he called for donations: “Let us sympathize with our hearts and with our purses.”

Addressing the farmworkers, Marshall denied that political economy could “direct decisions of moral principle,” which it must instead “leave to her sister, the Science of Ethics.” Writing in the Bee Hive, he argued that “political economy is abused when any one claims for it that it is itself a guide in life. The more we study it the more we find cases in which man’s own direct material interest does not lie in the same direction as the general well being. In such cases we must fall back on duty.”⁷⁰

The following Saturday, the Cambridge Chronicle dismissed Marshall’s speech as “ingenious sophistry.” In fact, he had successfully demonstrated why labor markets do not always produce fair wages, and why unions can lead to greater efficiency as well as equity. He’d “been asked to speak of the laws of supply and demand,” Marshall began. He poured scorn on the union’s opponents who held wages were at their “natural level” because, if they weren’t, other employers would have offered the workers more, and if a worker’s “wages be raised artificially they will come down again.” This was Ricardo’s iron law of wages, accepted even by many who sympathized with the plight of the workers. The argument was “excellent,” Marshall admitted, but the assumptions false. No farmer would offer a neighbor’s hired hands more to come and work for him. What’s more, higher wages would make the workers more productive by allowing them to be better fed. Admitting that “unions have their faults,” Marshall said that “a union gives men interests and sympathies beyond the boundaries of their parish; it will cause them to feel their need of knowledge, and to vow that their sons shall be educated . . . Wages will rise . . . poor rates will dwindle . . . England will prosper.”⁷¹

Despite the support of the university and much of the media, the strike ultimately failed. The farmers held out by acquiring more machinery and employing more boys and girls. When the strike fund ran out in early June, the union called on the workers to return to the fields. Marshall took from the episode that new ideas would prevail over old doctrines only after a carefully plotted, patient campaign to win the hearts and minds of practical men.

Five weeks out of New York City and bound for San Francisco, Marshall stared down on the Horseshoe Falls with a frown. From the Goat Island suspension bridge where he stood, the cataract looked nowhere near as mighty as his Baedeker guide had promised. As a mathematician, he knew that perspective was to blame and engaged in some mental calculations to reassure himself that the falls were truly as colossal as advertised. But the numerical exercise did little to dispel his feeling of having been badly let down. “Niagara is a great humbug,” he wrote to his mother on July 10, 1875. “It takes longer for a man to discover how much greater Niagara is than it seems than it does to discover that an Alpine Valley which appears to be only a mile broad is really six miles broad.”⁷²

Marshall had come to America to study its social and economic landscape. He had left Manhattan on a paddle steamer headed for Albany. In a letter, he recalled how “disgusted and savage” Alexis de Tocqueville had been forty years earlier when he discovered that the finest of the “villas built in Greek style of marble, shining from the banks of the Hudson” were actually made of wood. He, by contrast, “did not find anything like as much sham as I expected.”⁷³

Indeed, everywhere Marshall looked, he seemed to discover more, not less, than met the eye: American architects displayed “daring & strength,” their buildings being of “uniform thoroughness & solidity.”⁷⁴ An “American drink called ‘mint-julep’ ” was “luxurious.” American preachers gave sermons that were “way out of sight ahead of us,” having achieved “startling improvements” on Anglican liturgy.⁷⁵ American workers were full of “go.”⁷⁶ As he reported to the Moral Sciences Club on his return to Cambridge in the fall, “I met no man or woman in America whose appearance indicated an utterly dull or insipid life.”⁷⁷ By the time Marshall reached Cleveland in mid-July, he was convinced that “nine Englishmen out of ten would be themselves more happy & contented in Canada than in the U.S.; though I myself if I had to emigrate should go to the U.S.”⁷⁸

Marshall’s magnum opus, Principles of Economics, would not appear for another fifteen years, but he had already worked out the chief tenets of his “new economics”—an alternative to both the old laissez-faire doctrines of Smith, Ricardo, and Mill and the newly ascendant Socialist gospels of Marx. He had spent a decade “laying the foundations of his subject but publishing nothing.”⁷⁹ His travels in America gave him confidence that he was on the right track.

Marshall’s relations had scoffed at his plan to use a £250 legacy from the same uncle who had financed his university education to tour the United States. He justified himself by saying that he was gathering material for a treatise on foreign trade. While this was perfectly true, the economic historian John Whitaker observes that his actual purpose was broader, part of a growing, “almost obsessive attempt to apprehend in all its aspects an ever-changing economic reality.”⁸⁰ Like other European observers, including Tocqueville, Marshall thought of the United States as a great social laboratory. Dickens, William Makepeace Thackeray, and Trollope had been occupied by old questions, now settled, of democracy, slavery, and the survival of the union. Marshall wanted to know where the rise of industry, the growth of global commerce, and the decline of traditional morality were leading. These were advancing more rapidly in America than anywhere else. “I wanted to see the history of the future in America,” he told an audience when he returned to Cambridge.⁸¹

Marshall sailed to America during the biggest transatlantic tourism boom in history. Sales of the most popular North American guide were climbing toward the half-million mark. The North Atlantic was now a virtual highway of the sea. No fewer than ten steamship companies offered weekly departures from Liverpool to New York, and English travelers were advised to book berths as much as a year in advance.⁸² Marshall’s trip aboard the SS Spain, one of the fastest and most luxurious of the big liners, took a mere ten days, in contrast to the miserable three-week crossing Dickens had endured in 1842. Travel in America was expensive, owing to the immense distances. Marshall had to budget £60 a month versus £15 a month when he spent summers climbing in the Alps. But afterward, according to Mary, he felt that “he had never spent money so well. It was not so much what he learnt there as that he got to know what things he wanted to learn.”⁸³

His experiences convinced him that “economic influences play a larger part in determining the higher life of men and women than was once considered.” In particular, he believed, “there are no thoughts or actions, or feelings, which occupy a man and which thus have the opportunity of forming the man . . . as those thoughts and actions and feelings which make up his daily occupation.”⁸⁴ He spent some of his time in churches and drawing rooms, especially in Boston, where he met leading American intellectuals, including the poet Ralph Waldo Emerson and the art historian Charles Eliot Norton. He lingered for several days at communes run by Shakers and disciples of Robert Owen in New England. But mostly he toured factories, filling notebooks with interviews with businessmen and workers and drawings of machinery. At Chickering and Sons piano factory near Boston, he observed that “care & judgment were required from many of the workers in a very high degree” and that the workers there had “able, almost powerful & artistic faces.” On a visit to an organ factory, he wondered whether “the work of each individual being confined to a very small portion of the whole operation” did not “prevent the growth of intelligence?”⁸⁵ He found that it did not.

The business traveler of that time was always something of a tourist. Marshall was no exception. He could not resist the lure of the recently completed transcontinental railroad. In his hotel in Niagara, he plotted his westward route on an advertising map provided by the Union Pacific, marking it with pinpricks so that his mother back home in London could follow his progress toward San Francisco by holding the map up to a light.

Chicago was the best place to catch a train for the Pacific coast. The new railway system was like a giant hand whose palm lay atop the Great Lakes and whose fingers stretched all the way to Seattle, Portland, San Francisco, and, in the case of the two southernmost routes, Los Angeles. Most travelers took the North Western from Chicago due west across Illinois and Iowa to Council Bluffs. Marshall took the Great Northern line to St. Paul and then sailed back down on a Mississippi riverboat, the kind “more famous for their propensity to blow up than for the magnificence of their fittings.”⁸⁶ He met up with the North Western at the Iowa border and was in Council Bluffs a day later. From there he crossed the river to Omaha and transferred to the Union Pacific train. From Omaha it was a straight shot west to Cheyenne and Granger, in Wyoming, where the line dipped down toward Ogden, Utah; Reno; and Sacramento before making the final 125-mile jog south to San Francisco. In Cheyenne, Marshall boarded a stagecoach for a twenty-four-hour side trip to Denver. In Ogden, he stopped to explore the Mormon capital, Salt Lake City. On the return trip, he got off in Reno for a look at “the wild population of Virginia City.” He was conscious throughout of witnessing something extraordinary and unprecedented. From his railway car he was seeing what another young Briton had earlier described as “the unrolling of a new map, a revelation of a new empire, the creation of a new civilization.”⁸⁷

Marshall was bowled over by the constant motion he witnessed. “Many things have changed since [Tocqueville’s] time . . . many things which were nearly stationary then are not stationary now,” he wrote in a letter home.⁸⁸ The first thing to catch his eye after he checked in at the Fifth Avenue Hotel was “a steam lift which without ever stopping from 7 a.m. until midnight goes up & down [emphasis his].” He was captivated by the lobby’s unmanned telegraph machine spewing paper ribbons of stock quotations. Business travelers staying uptown “are as well posted as if they were on the Exchange itself,” he wrote.⁸⁹

Mobility was the preeminent fact of American life, Marshall decided. It wasn’t just the railway and telegraph, the successive waves of new immigrants, or the movement of the population from the manufacturing centers of the Northeast to the “mushroom towns” of the West, sprouting so fast that one “can only suppose that, the soil being so fruitful, buildings grow spontaneously.”⁹⁰ The most interesting freedom of motion was economic, social, and psychological. Marshall was astonished by ordinary Americans’ readiness to leave family and friends for new towns, to switch occupations and businesses, to adopt new beliefs and ways of doing things. He reported, “If a man starts in the boot trade and does not make money so fast as he thinks he ought to do, he tries, perhaps, grocery for a few years and then he tries books or watches or dry goods.” He was delighted by the independence of young people: “American lads . . . abhor apprenticeships . . . The mere fact of his being bound down to a particular occupation is sufficient in general to create in the mind of an American youth that he will do something else as soon as he has the power.”⁹¹

Americans’ welcoming attitude toward growing urbanization also struck him powerfully: “The Englishman Mill bursts into unwonted enthusiasm when speaking . . . of the pleasures of wandering alone in beautiful scenery,” he noted dryly, adding that “many American writers give fervid descriptions of the growing richness of human life as the backwoodsman finds neighbors settling around him, as the backwoods settlement develops into a village, the village into a town, and the town into a vast city.”⁹²

Like his favorite novelists, Marshall was less interested in the material and technological advances, impressive as these were, than in their consequences for how people thought and behaved. What guarantee was there that individual choices added up to social good? Would all the up and down movement of individuals and the attendant loosening of traditional ties lead, as pessimists such as Marx and Carlyle predicted, to social chaos? Or did mobility imply a “movement towards that state of things to which modern Utopians generally look forward.” That was the question.⁹³

Marshall’s visceral reactions put him squarely on the other, optimistic side. In Norwich, Connecticut, he went on an evening drive with a Miss Nunn, who told him she was prepared to take the reins and wound up steering. Marshall found the experience “very delicious.” He observed that young American women are “mistresses of themselves . . . [with] thorough freedom in the management of their own concerns.” Such freedom, he admitted, “would be regarded as dangerous license by the average Englishman,” but he found it “right and wholesome.”⁹⁴

The absence of rigid class distinctions delighted him. When a clerk in a hat shop removed the bowler Marshall was wearing and tried it on his own head in order to gauge the correct size, Marshall noted approvingly, “My friend was such a perfect democrat that it did not occur to him that there was any reason why he should not wear my hat: his manner was absolutely free from insolence. May the habit become general!”⁹⁵ When he reached California, he was pleased to report that the farther west he traveled, the more American society resembled its egalitarian ideal. “I returned on the whole more sanguine with regard to the future of the world than when I set out,” he noted.

Striking a prophetic note, he envisioned a new type of society:

In America, mobility was creating an equality of condition . . . Where nearly all receive the same school education, where the incomparably more important education which is derived from the business of life, however various in form it be, yet is for every one nearly equally thorough, nearly equally effective in developing the faculties of men, there cannot but be true democracy. There will of course be great inequalities of wealth; at least there will be some very wealthy men. But there will be no clearly marked gradation of classes. There will be nothing like what Mill calls so strongly marked line of demarcation between the different grades of laborers as to be almost equivalent to the hereditary distinction of caste.

Explaining how individual choices might add up to social good—the very thing that Carlyle denied was possible—Marshall defined two types of moral education. One was characteristic of England, where, he claimed, “the peaceful molding of character into harmony with the conditions by which it is surrounded, so that a man . . . will without conscious moral effort be impelled on that course which is in union with the actions, the sympathies and the interests of the society amid which he spends his life.” In America, by contrast, mobility had opened up a second route to moral evolution, namely, “the education of a firm will by the overcoming of difficulties, a will which submits every particular action to the judgment of reason.”⁹⁶

Most Victorian social commentators, including Karl Marx, feared that the industrial system was not merely destroying traditional social relations and livelihoods but deforming human nature through “ignorance, brutalization, and moral degradation.”⁹⁷ In America, Marshall saw another possibility: “It appears to me that on the average an American has the habit of using his own individual judgment more consciously and deliberately, more freely and intrepidly, with regards to questions of Ethics than an Englishman uses his.”

Marshall seemed to be talking about mankind in general, but he was also talking about himself. He had developed a firm will by overcoming all sorts of difficulties—a tyrant of a father, genteel poverty, and the oppressive strictures of class. He had broken with authority—by losing his religious belief and defying his father’s wishes that he enter the ministry. Now he felt that his own independence would lead not to his downfall but to great things. What he witnessed in America filled him with hope. “Such a society may degenerate into licentiousness and thence into depravity. But in its higher forms it will develop a mighty system of law, and it will obey law . . . Such a society will be an empire of energy.”⁹⁸

“I have been rather spoilt” when it comes to “go” and a “strong character” in women,” Marshall had written in a letter from America. In another, he described his “riveting evening” with Miss Nunn, confessing that he found her naïveté “mingled with enterprise” charming. But he added that “for steady support I would have the strength that has been formed by daring and success.”⁹⁹ Apparently he was thinking of Mary Paley, who had triumphed over the Tripos in his absence.

When they got engaged on his return to Cambridge, Marshall was thirty-four and Mary twenty-six. He was a rising star of the “New Economics.” She was a college lecturer. Marshall’s view of marriage was inspired by intellectual partnerships such as those of George Eliot and George Lewes and Thomas and Jane Carlyle. “The ideal of married life is often said to be that husband and wife should live for each other. If this means that they should live for each other’s gratification it seems to me intensely immoral,” Marshall wrote in an essay. “Man and wife should live, not for each other but with each other for some end.”¹⁰⁰ For Mary, who had entered her first engagement “out of boredom,” this was a thrilling vision. Like the other unusual, idiosyncratic Victorian marriages Phyllis Rose describes in Parallel Lives: Five Victorian Marriages, the secret of Alfred Marshall and Mary Paley’s alliance lay in their “telling the same story.”¹⁰¹ The couple immediately decided to make Mary’s textbook a joint project and spent most of their engagement working on it.

They were married at the Parish Church in Ufford, next to the “rambling old house, its front covered with red and white roses,” where Mary had grown up. Mary wore no veil, only jasmine in her hair. In a gesture that proclaimed their untraditional views and high expectations, bride and groom contracted themselves out of the “obey clause.”¹⁰²

By marrying, Marshall forfeited his fellowship at St. John’s. He and Mary flirted briefly with the notion of teaching at a boarding school, but when the principalship of a newly founded redbrick college in Bristol—the first experiment in coeducation in Britain—suddenly became vacant, they leapt at the opportunity. When they moved to Bristol in 1877, Mary had a tennis court installed and most of the rooms papered with Morris while Marshall chose the secondhand furniture and piano. But she was soon back in the classroom, lecturing on economics and tutoring women students.

Underwritten by Bristol’s business community, University College was to provide “middle and working class men and women with a liberal education.”¹⁰³ Though strapped for funds, the college managed, during the Marshall’s tenure, to offer day and evening classes to some five hundred students, sponsor public lectures in working-class neighborhoods, provide technical instruction to textile workers, and run a work-study program jointly with local businesses for engineering students. Marshall’s administrative duties were heavy and so was his teaching load. His regular classes, attended by a mix of small businessmen, trade unionists, and women, were “less academic than those at Cambridge . . . a mixture of hard reasoning and practical problems illuminated by interesting sidelights on all sorts of subjects,” a student recalled.¹⁰⁴ Marshall “spoke without notes and his face caught the light from the window while all else was in shadow. The lecture seemed to me the most wonderful I had ever heard. He told of his faith that economic science had a great future in furthering the progress of social improvement and his enthusiasm was infectious.”¹⁰⁵ The couple continued to work on The Economics of Industry most afternoons, took long walks, and played many games of lawn tennis. One friend referred to “their perfect happiness.”¹⁰⁶

Marshall later said that reading Marx convinced him that “economists should investigate history; the history of the past and the more accessible history of the present.”¹⁰⁷ But it was Dickens and Mayhew who inspired him to go into factories and industrial towns to interview businessmen, managers, trade union leaders, and workers. “I am greedy for facts,” he used to say.¹⁰⁸ He wanted to write for men and women engaged in the “ordinary business of life.”¹⁰⁹

He was convinced that he would have to blend theory, history, and statistics, as Marx had done in Das Kapital. But he was instinctively aware that his audience would require useful practical conclusions and a generous sprinkling of direct observation. He was too much of a scientist to theorize without verifying facts, or to rely on secondhand descriptions.

Marshall made a commitment to study the particulars of every major industry. He gathered data on wage rates by occupation and skill level. He paid a great deal of attention to Mill’s “arts of production”¹¹⁰—manufacturing techniques, product design, management—although he admitted that the constant effort of business owners to improve their products, production methods, and suppliers was hard to capture in formal theories. He was particularly interested in how the family-owned, privately held firm functioned versus the increasingly important joint stock company or corporation. Marshall participated in commissions and learned societies and sat on the board of a London charity, carried on a huge scientific correspondence, and, with Mary as an active partner, devoted several weeks each summer to fieldwork.

On one such quest, Mary’s notes refer to “14 different towns, mines, iron and steel works, textile plants, and [the] Salvation Army.”¹¹¹ The itinerary was extraordinarily ambitious: Coniston copper mines, Kirby slate quarries, Barrow docks, iron and steel works, Millom iron mines, Whitehaven coal mines close to the sea, Lancaster, and Sheffield. Marshall invented a device for organizing and retrieving information from his personal database. His “Red Book” was a homemade notebook sewn together with thread. Each page contained data on a variety of topics, ranging from music to technology to wage rates, arranged in chronological order. Marshall had only to stick a pin through one of the points on a page to see what other developments had occurred simultaneously.

In contrast to the majority of Victorian intellectuals, Marshall admired the entrepreneur and the worker. Carlyle, Marx, and Mill considered modern production to be an unpleasant necessity, labor to be degrading and debilitating, businessmen to be predatory and philistine, and urban life to be vile. Mill considered Communism superior to competition in every respect but two (motivation and tolerance for eccentricity) and looked forward to a stationary, Socialistic state in the not very distant future. But none of these intellectuals could claim the familiarity with business and industry that Marshall was acquiring. Of course, as Burke’s phrase “drudging through life” implied, much of human labor had and was having such effects. But, once again, Marshall’s reliance on firsthand observation suggested that at least some work in modern firms expanded horizons, taught new skills, promoted mobility, and encouraged foresight and ethical behavior, not to mention provided the savings to go to school or into business. What was more, he observed, that sort of work was growing while the other was becoming less common. In short, the business enterprise could be and often was a step toward controlling one’s destiny.

Although Dickens is often thought of as a chronicler of the industrial revolution, almost the only factory scene in Dickens is phantasmagorical. The Coketown factory in Hard Times is a Frankenstein, seen only from a distance, that turns men into machines and re-creates the natural and social environment in its own monstrous image; noisy, dirty, monotonous, its air and water poisoned.

It was a town of red brick, or of brick that would have been red if the smoke and ashes had allowed it; but, as matters stood it was a town of unnatural red and black like the painted face of a savage. It was a town of machinery and tall chimneys, out of which interminable serpents of smoke trailed themselves for ever and ever, and never got uncoiled. It had a black canal in it, and a river that ran purple with an ill-smelling dye, and vast piles of building full of windows where there was a rattling and a trembling all day long, and where the piston of the steam-engine worked monotonously up and down, like the head of an elephant in a state of melancholy madness.¹¹²

Coketown is inhabited by an army of “people equally like one another, who all went in and out at the same hours, with the same sound upon the same pavements, to do the same work.” Significantly, Dickens imagines that inside the factory they “do the same work” and that “every day was the same as yesterday and to-morrow, and every year the counterpart of the last and the next.” Production, in other words, involves never creating anything new.

Marx’s description of the factory in Das Kapital stresses the same features as Dickens’s but lacks all detail, not surprising given that Marx had never been inside even a single one. Again, men are transformed into a “mere living appendage” of the machine, work becomes “mindless repetition,” and automation “deprives the work of all interest.”¹¹³

Marshall’s descriptions of factories and factory life are more specific, nuanced, and varied. He spends hours observing. He records manufacturing techniques and pay scales and layouts. He questions everyone, from the owner to the foremen to the men on the shop floor. When he encounters the same problematic phenomenon as Dickens or Marx—the effects of the assembly line on workers—he doesn’t necessarily draw the same inferences.

The characteristic of the firm is the way in which every operation is broken up into a great number of portions, the work of each individual being confined to a very small portion of the whole operation. Does this prevent the growth of intelligence? I think not . . . If a man has no brains we get rid of him: There is plenty of opportunity for this in consequence of the fluctuations of the market. If a man has some brains, he stays on at his work; but if he has any ambition, he must get to know all that goes on in the shop in which he is working: otherwise he has no chance of becoming foreman of that shop . . . Most improvements in detail are made by the foremen of the several shops: & improvements on a very large scale are made by a man who does nothing else . . . Their improvements were in small details as regards manufacture e.g. numerous contrivances for securing that certain parts should be airtight, that certain others should work easily. The Englishman had invented the harp stop.¹¹⁴

For Dickens and Marx, firms existed to control or exploit the worker. For Mill they existed solely to enrich their owners. For Marshall, the business firm was not a prison. Management wasn’t just about keeping the prisoners in line. Competing for customers (or workers) required more than mindless repetition. Marshall’s business enterprises were forced to evolve in order to survive. Of course, Marshall did not deny that businessmen pursued profits. His point was that to make profits competitive, firms had to generate enough revenue to still have something left over after paying workers, managers, suppliers, landlords, taxes, and so on. To do that, managers had to constantly seek out ways to do a little more with the same or fewer resources. In other words, higher productivity, the long-run determinant of wages, was a by-product of competition.

The British publisher Macmillan & Co. brought out The Economics of Industry in 1879. A slim volume purporting to contain nothing new and written in simple and direct prose suitable for a primer, it contained the essentials of Marshall’s New Economics. Its message was summarized in the following passage:

The chief fault in English economists at the beginning of the century was not that they ignored history and statistics . . . They regarded man as so to speak a constant quantity and gave themselves little trouble to study his variations. They therefore attributed to the forces of supply and demand a much more mechanical and regular action than they actually have; But their most vital fault was that they did not see how liable to change are the habits and institutions of industry.¹¹⁵

Marshall’s obsessive effort to understand how businesses worked led to his most important discovery. The economic function of the business firm in a competitive market was not only or even primarily to produce profits for owners. It was to produce higher living standards for consumers and workers. How did it do this? By producing and distributing more goods and services of better quality and at lower cost with fewer resources. Why? Competition forced owners and managers to constantly make small changes to improve their products, manufacturing techniques, distribution, and marketing. The constant search to find efficiency gains, economize on resources, and do more with less resulted over time in doing more with the same or fewer resources. Multiplied over hundreds of thousands of enterprises throughout the economy, the accumulation of incremental improvements over time raised average productivity and wages. In other words, competition forced businesses to raise productivity in order to stay profitable. Competition forced owners to share the fruits of these efforts with managers and employees, in the form of higher pay, and with customers, in the form of higher quality or lower prices.

The implication that business was the engine that drove wages and living standards higher ran counter to the general condemnation of business by intellectuals. Even Adam Smith, who famously described the benefits of competition in terms of an invisible hand that led producers to serve consumers without their intending to do so, had not suggested that the role of butchers, bakers, and giant joint stock companies was to raise living standards. Although Karl Marx had recognized that business enterprises were engines of technological change and productivity gains, he could not imagine that they might also provide the means by which humanity could escape poverty and take control of its material condition.

A serious crisis followed the publication of the Marshalls’ book. Marshall was diagnosed with a kidney stone in the spring of 1879. Surgery and drugs were not options at that time. His doctor said, “There must be no more long walks, no more games at tennis, and that complete rest offered the only chance of cure,” Mary recalled later. “This advice came as a great shock to one who delighted so in active exercise.”¹¹⁶ The painful, debilitating condition revived Marshall’s old fears of impending annihilation, still lurking from childhood. Only a few weeks earlier, he had spent a vacation hiking alone on the Dartmouth moors. Now he had become a housebound invalid who took up knitting to pass the time. A Bristol acquaintance recalled seeing Marshall and thinking that he must be seventy or so:

He . . . looked to me very old and ill. I was told he had one foot in the grave and I quite believed it. I can see him now, creeping along Apsley Road . . . in a great-coat and soft black hat . . . The next time I saw him was . . . in 1890 . . . I was astonished to find him apparently thirty or forty years younger than I remembered him a dozen years before.¹¹⁷

It made him more dependent on Mary and caused him to cast her ever more into the role of nurse rather than intellectual companion. Illness concentrated his mind. Marshall always had a tendency toward writer’s block. Now he realized he had to focus his energies and get on with his book. His hopes for writing a work that would eclipse Mill’s (and perhaps also Marx’s)—a synthesis of new theory and freshly distilled reports from the real world—were matched by fears that he was not up to the task. As his vision grew in scope and complexity, he grew proportionately less satisfied with what he had written. He had decided to drop plans to publish his volume on trade well before his illness flared. “I have come to the conclusion that it will never make a comfortable book in its present shape,” he wrote in the summer of 1878.¹¹⁸ And he quickly grew to dislike the book he had written with Mary. But in 1881, on a rooftop in Palermo, Sicily, he began to compose Principles of Economics.

Of all the panaceas advanced during the Great Depression of the early 1880s, the American journalist Henry George’s land tax attracted by far the most popular attention and support. George’s best seller, Progress & Poverty, had made him an instant celebrity, and his lectures drew huge crowds. George’s premise was that poverty was growing faster than wealth and that landlords were to blame. He claimed that landlords were collecting fabulous incomes not for rendering a service to the community but merely because they were lucky enough to own real estate. What was more, rising rents were depressing profits and real wages by depriving businessmen of needed investment funds. Having identified rental income as the cause of poverty, he proposed a massive tax on land as a cure. The land tax would not only eliminate the need for all other taxes, he claimed. It would also “raise wages, increase the earnings of capital, extirpate pauperism, abolish poverty, give remunerative employment to whoever wishes it, afford free scope to human powers, lessen crime, elevate morals and taste and intelligence, purify government, and carry civilization to yet nobler heights.”¹¹⁹

Marshall was still working on Principles when he was drawn once again into the long-simmering standard-of-living controversy. The early 1880s, a period of financial and economic crisis, witnessed a resurgence of radicalism and demands for social reform, as well as growing skepticism about the extent to which economic growth was benefiting the majority of citizens. The term unemployment was coined during the recession that followed the Panic of 1893 during a heated debate over whether real wages were rising or falling in the long run.

At issue in the debate was the dominant effect of competition. Did competition result in a race to the bottom in which employers matched one another’s wage cuts? Or was it the case, as optimists insisted, that competition put pressure on companies to make constant efforts to increase efficiency and push up the average level of productivity and wages while reducing the number of poor?

The first formal confrontation between Marshall and Henry George took place at the Clarendon Hotel in Oxford in 1884.¹²⁰ Catcalls, clapping, and hissing repeatedly drowned out the debaters. At one point, an undergraduate felt it necessary to primly remind the chairman that “ladies were present.” By eleven o’clock, the uproar was so deafening that George declared the meeting to be “the most disorderly he had ever addressed” and refused to answer any more questions. Amid “great noise” and groans of “Land Nationalization” and “Land Robbery,” the meeting “was brought to a rather abrupt conclusion.”

If Marshall’s support for the agricultural lockout in 1874 signaled his rejection of the “dogmas” of classical economy, his confrontation with George a decade later showed that he also objected to trendy new dogmas.

On other occasions when he had criticized George’s proposal to cure poverty with a tax on land, Marshall had called George a “poet” and praised “the freshness and earnestness of his view of life.” But at the Clarendon, Marshall was decidedly less polite, accusing George of using his “singular and almost unexampled power of catching the ear of the people” to “instill poison into their minds.” By “poison,” he meant George’s cure-all for poverty.

In his Bristol lectures, Marshall stuck to his stated intention to “avoid talking very much about George: but to discuss his subject,” “George’s subtitle includes an inquiry into” the increase of want with the increase of wealth,” Marshall said. “But are we sure that with the increase of wealth want has actually increased? . . . Let us then enquire what the facts are of the case.”¹²¹

Citing statistical evidence—much of it collected in the Red Book that he and Mary had compiled—Marshall argued that only the “lowest stratum” of the working classes were being pushed downward and that that stratum was far smaller—less than half the size, in proportion to the population—than it had been earlier in the century. As for the working classes as a whole, their purchasing power had tripled. “Nearly one half of the whole income of England goes to the working classes . . . [So] a very large part of all the benefit that comes from the progress of invention must fall to their share.”¹²²

Marshall drew on his growing command of economic history. He was confident that, whatever the vices of the current age, they paled in comparison to the past. “The working classes are in no part of the world, except new countries, nearly as well off as they are in England.” What makes Marshall’s optimism all the more noteworthy is that he was speaking during what historians would later call the Great Depression.

In his second lecture, Marshall challenged George’s contention that employers who paid low wages were to blame for poverty. For one thing, employers could not set the price of labor any more than they could dictate the price of cotton or machinery. They paid the market rate, which could be high if a worker was very productive and low if he was not. “Many of the English working classes have not been properly fed, and scarcely any of them have been properly educated.” Low productivity was the cause of “low wages of a large part of the English people and of the actual pauperism of no inconsiderable number.” And although Marshall did not deny that “there is any form of land nationalization which, on the whole, would benefit,” he argued that “there is none that contains a magic and sudden remedy for poverty. We must be content to look for a less sensational cure.”¹²³

That cure, Marshall said, was to raise productivity. One way was to:

educate (in the broadest sense) the unskilled and inefficient workers out of existence. On the other hand—and this sentence is the kernel of all I have to say about poverty—if the numbers of unskilled laborers were to diminish sufficiently, then those who did unskilled work would have to be paid good wages. If total production has not increased, these extra wages would have to be paid out of the shares of capital and of higher kinds of labor . . . But if the diminution of unskilled labor is brought about by the increasing efficiency of labor, it will increase production, and there will be a larger fund to be divided up.

He did not object to unions or even to some fairly radical proposals for land reform or progressive taxation. He merely noted that none of these could produce “more bread and butter.” This required “competition,” time, and the cooperation of all parts of society, government, and the poor themselves.¹²⁴

He accused George of promoting a quack cure. The problem wasn’t just that “Mr. George said, ‘If you want to get rich, take land,’” but that it would divert from education and training, hard work, and thrift. George’s scheme would yield “less than a penny in the shilling on their income . . . For the sake of this, Mr. George is willing to pour contempt on all the plans by which workingmen have striven to benefit themselves.”¹²⁵

When Marshall’s Principles of Economics finally appeared in 1890, it breathed new life into a faltering discipline. It established him as its intellectual leader and the authority to whom governments turned for advice.

Principles embodied Marshall’s rejection of Socialism, embrace of the system of private property and competition, and optimism about the improvability of man and his circumstances. The book portrayed economics not as a dogma but as “an apparatus of the mind.” As Dickens hoped, Marshall had managed, while placing the discipline on a more sound scientific footing, to humanize economics by injecting “a little human bloom . . . and a little human warmth.”

But the chief insight reflected the lesson he learned in America. Under a system of private property and competition, business firms are under constant pressure to achieve more with the same or fewer resources. From society’s standpoint, the corporation’s function is to raise productivity and, hence, living standards.

Of all social institutions, the business firm was more central, enjoyed a higher status, and did more to shape the American mind and civilization than elsewhere. The company was not only the principal creator of wealth in America but also the most important agent of social change and the biggest magnet for talented individuals. It made Dickens’s depictions of businessmen as cretins or predators, workers as zombies, and successful manufacture as rigid repetition look ridiculous. The undisputed fact that American productive power was growing at an unimaginably rapid rate meant that businesses must be doing more, at least in the aggregate, than exploiting Peter to line Paul’s pockets or merely repeating the same operations from one year to the next. On his visits to factories, Marshall was especially struck by managers’ constant search for small improvements and workers’ equally constant search for better opportunities and useful skills. Both seemed obsessed with making the most of the resources at their command.

Naturally, Marshall recognized that companies also exist to generate profits for owners, managerial salaries for executives, and wages for workers. Adam Smith had pointed out that to maximize their own income in the face of competition, firms had to benefit consumers by producing as much and as cheaply as possible. But Marshall introduced the element of time into his analysis. Over time, firms could remain profitable and continue to exist only if they became more and more productive. Survival in the face of competition not only implied incessant adaptation. Competition for the most productive workers meant that, over time, firms had to share gains from productivity improvements.

This is precisely what Mill and the other founders of political economy had denied. They had maintained that advances in productivity were of little or no benefit to the working classes. In their imaginary firms, productivity might grow by leaps and bounds, but wages never rose for long above some physiological maximum. Working conditions, if anything, worsened over time. Marshall saw not only that this was not so in fact, but also that it could not be so. Competition for labor forced owners to share the benefits of efficiency and quality improvements with workers, first as wage earners, then as consumers. The evidence confirmed that Marshall was right. The share of wages in the gross domestic product—the nation’s annual income from wages, profits, interest, and proprietors’ income—was rising, not falling, and so were the levels of wages and working-class consumption—as they had been in most years since 1848, when The Communist Manifesto and Mill’s Principles of Political Economy appeared.