Alfred Marshall and Keynes

contribution to the Keynesian argument. These contributions are �

related primarily to the concept of expectations and to monetary �

theory. Expectations, as they are perceived in economic theory, �

are attitudes, beliefs, or states of mind about the nature �

of future events. Expectations affect economic behavior and are �

thus a part of the psychology of economic behavior. Expectations �

pose difficulties for economists because they cannot be directly �

observed. In economics, expectations may apply to virtually �

anything--prices, interest rates, demand, profits, and so forth. �

Expectations are held by investors, producers, and consumers. �

Thus, they are capable of affecting most economic decisions. �

Alfred Marshall was active in the development of economic �

theory from the 1870s until well past his retirement, which �

occurred in 1908. Marshall was in the long tradition of the �

English classical school of economics, which was founded by Adam �

Smith and David Ricardo, and his work provided the basis for �

neoclassical economics. Among his greatest works was The �

Principles of Economics, which was first published in 1890. His �

theory of value, which incorporates the concept of utility, is �

possibly his greatest contribution to economic theory. �

. . .
� expectations are concerned with the price which a manufacturer � � can expect to get for finished output at the time when he or she � � commits himself or herself to starting the process which will � � produce it (Keynes, 1936, p. 46). The second type of expectation � � is long-term in nature. These expectations concern what an � � entrepreneur or investor can hope to earn in the shape of future � � returns if he or she purchases (or perhaps manufacturers) � � finished output as an addition to his or her capital equipment � � (Keynes, 1936, p. 47).�  ��� Within Keynes' conception of long-term and short-term � � expectations, the behavior of each individual firm in deciding � � its daily output will be determined by its short-term � � expectations (Keynes, 1936, p. 47). In the case of additions to � � capital equipment, however, these short-term expectations will � � largely depend on the long-term expectations of other parties � � (Keynes, 1936, p. 47).�  P
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 � ��� Keynes held that changes in expectations, whether long-term � � or short-term, will produce full effect on employment only over a � � considerable period of tim
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