Neoclassical Revolution - Definition and Overview

In economics, the Neoclassical Revolution was the emergence of marginal theory of value as the central explanation for explaining the origin of value.

The theory of marginal utility was about 1870 being independently developed on somewhat similar lines by William Stanley Jevons in England, Carl Menger in Austria and Leon Walras in Switzerland.

Earlier writers, notably HH Gossen had also discovered of the connection between value in exchange and final (or marginal) utility, but it was ultimately forced into notice by the three European economists.

Previously it had been believed that the value of an item was a reflection of the work and resources devoted to making it, the cost-of-production theory of value. This was widely believed by classical economists.

Neo-classical economists accepted the marginal utility explanation for value and grafted this insight on to classical economics. The Austrian School used marginal utility as a starting point in breaking away from the stress that other economic schools put on analysis of economic data.