What Were the Key Innovations of the Marginalist School Compared to the Classical School?

Classical economics started of Adam Smith's the Wealth of Nations in 1776. The central idea of classical theories is on the ability of the market to be self-correcting as well as being the most superior institution in allocating resources. The central assumption of classical theories implied that if all individuals maximize their economic activity. On the other hand, marginal revolution that occurred in Europe in the 19th Century, led by Carl Menger, William Stanley Jevons, and Léon Walras, gave rise to what is known as neoclassical economics. This neoclassical formulation had also been formalized by Alfred Marshall. However, it was the general equilibrium of Walras that helped solidify the research in economic science as a mathematical and deductive enterprise, the essence of which is still neoclassical and makes up what is currently found in mainstream economics to this day. The classical school investigated two central economic questions that the causes of economic growth and the determinants of the income distribution such as the accumulation and allocation of surplus output, and therefore their emphasis was on production and on the factors that influence the supply of goods. Unlike its classical school, marginalist school focuses on individual choices, which unavoidably reflect subjective preferences and beliefs, and the allocation of given resources among alternative uses. In other words, Classical theory paid comparatively less attention to choices of individuals whereas marginalist presented more on human welfare. Indeed, the marginalist revolution is a shift in focus from capital accumulation and growth to utility maximization and production efficiency as the aims of economic policy. This shift from classical to neoclassical economics brought about numerous changes in the way people thought about wealth. Based on their different views on economic issues, their innovations towards economy are different as well. The first different innovation between them