COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1615R

Alfred Marshall's Cardinal Theory of Value: The Strong Law of Demand

Donald J. Brown and Caterina Calsamiglia

July 2007
Revised July 2013

We show that all the fundamental properties of competitive equilibrium in Marshall's cardinal theory of value, as presented in Note XXI of the mathematical appendix to his Principles of Economics (1890), derive from the Strong Law of Demand. That is, existence, uniqueness, optimality, and global stability of equilibrium prices with respect to tatonnement price adjustment follow from the cyclical monotonicity of the market demand function in the Marshallian general equilibrium model.

Keywords: Cardinal utility, Quasilinear utility, Cyclical monotonicity

JEL Classification: B13, D11, D51