Theoretical Contributions
Marshall is considered to be one of the most influential economists of his time, largely shaping mainstream economic thought for the next fifty years, and being one of the founders of the school of neoclassical economics. Although his economics was advertised as extensions and refinements of the work of Adam Smith, David Ricardo, Thomas Robert Malthus and John Stuart Mill, he extended economics away from its classical focus on the market economy and instead popularized it as a study of human behavior. He downplayed the contributions of certain other economists to his work, such as Léon Walras, Vilfredo Pareto and Jules Dupuit, and only grudgingly acknowledged the influence of Stanley Jevons himself.
Marshall's influence on codifying economic thought is difficult to deny. He popularized the use of supply and demand functions as tools of price determination (previously discovered independently by Cournot); modern economists owe the linkage between price shifts and curve shifts to Marshall. Marshall was an important part of the "marginalist revolution;" the idea that consumers attempt to adjust consumption until marginal utility equals the price was another of his contributions. The price elasticity of demand was presented by Marshall as an extension of these ideas. Economic welfare, divided into producer surplus and consumer surplus, was contributed by Marshall, and indeed, the two are sometimes described eponymously as 'Marshallian surplus.' He used this idea of surplus to rigorously analyze the effect of taxes and price shifts on market welfare. Marshall also identified quasi-rents.
Marshall's brief references to the social and cultural relations in the "industrial districts" of England were used as a starting point for late twentieth-century work in economic geography and institutional economics on clustering and learning organizations.
Gary Becker (b. 1930), the 1992 Nobel prize winner in economics, has mentioned that Milton Friedman and Alfred Marshall were the two greatest influences on his work.
Another contribution that Marshall made was differentiating concepts of internal and external economies of scale. That is that when costs of input factors of production go down, it's a positive externality for all the firms in the market place, outside the control of any of the firms.
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