The Marginalist Revolution and Its Rivals

In the early 1870s, three economists working independently of one another developed marginal utility theory almost simultaneously, an episode historians of economic thought call the "marginalist revolution." William Stanley Jevons published The Theory of Political Economy (1871) in England, Carl Menger published Principles of Economics (1871) in Austria, and Léon Walras published Elements of Pure Economics (1874) in Switzerland. Together, their work shifted the theory of value away from the classical, labor-based explanations of Smith, Ricardo, and Marx toward a subjective theory grounded in the marginal utility, or added satisfaction, that a consumer derives from one more unit of a good, resolving long-standing puzzles such as the "diamond-water paradox," in which an essential good like water commands a far lower price than a mere luxury like diamonds.