marginalism
MAR-ji-nuh-liz-um
/ˈmɑːrdʒɪnəlɪzəm/
An economic theory asserting that economic decisions and values are driven by incremental (marginal) changes rather than total values.
Focuses specifically on the additional unit gained or lost (e.g., marginal cost, marginal utility) rather than total aggregate volume.
The story behind the word. Derived from the Latin 'margo' meaning 'edge' or 'border'. Economists William Stanley Jevons, Carl Menger, and Léon Walras independently formulated the 'Marginal Revolution' in the 1870s, shifting economics from labor theory of value to decision-making at the 'margin' (the final additional unit).
Word relationships
- incremental analysis: A broader management accounting term for evaluating additional costs and benefits.
- holism: An approach examining entire systems as integrated wholes rather than incremental components.
Commonly confused with
- marginalization: Marginalization is the social process of pushing groups to the edge of society; marginalism is an economic theory of incremental value.
Word family
- marginal (adjective): Relating to or situated at the edge or margin; incremental.
- marginalist (noun): An economist who adheres to the principles of marginalism.
Collocations
- marginalism revolution
- principles of marginalism
- neoclassical marginalism
Example sentences
- "The nineteenth-century revolution in marginalism helped explain why diamonds cost more than essential water." Economic Theory
- "By applying principles of marginalism, the factory manager decided to produce one additional unit only if its revenue exceeded its direct cost." Firm Decision-Making
Memory hook
MARGIN-alism happens at the 'margin' or edge — adding one final unit to the stack. Evaluating the very next unit at the edge.
When not to use
Do not confuse with 'marginalization', which refers to social exclusion.
Fun facts
- Marginalism solved the famous 'Diamond-Water Paradox' that stumped Adam Smith: water is essential but plentiful (low marginal utility), while diamonds are non-essential but scarce (high marginal utility).
Related words
Explore more words
Marginal, marginalization, utilitarianism, incremental, Rationality
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