Marginal theory of value

The essential idea is that to have value an object must be both useful and scarce to a consumer.

This theory was first broached in the 1870s, and it revolutionised economics. 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 during the Neoclassical Revolution. 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.