Arthur Cecil Pigou

(1877-1959)

Arthur Cecil Pigou

As the prize student and designated heir of Alfred Marshall, Arthur Cecil Pigou personified the 'Cambridge Neoclassicals' - the heart of the Marshallian orthodoxy in the first third of the century. His main claim to fame is his Wealth and Welfare (1912, 1920), which brought social welfare into the scope of economic analysis. In particular, Arthur Pigou is responsible for the famous distinction between private and social marginal products and costs and the idea that governments can, via a mixture of taxes and subsidies, correct such market failures - or 'internalize the externalities'.

But Pigou was not a lucky man. His approach came immediately under severe attack from Robbins and Knight. The 'New Welfare Economics' that arose in the late 1930s dispensed with much of Pigou's analytical toolbox altogether. Later on, the Public Choice theorists assaulted Pigou's approach for its naive "benevolent despot" assumption and, finally, Coase demonstrated its irrelevance when property rights are properly assigned.

The other source of bad luck was that Pigou was used by John Maynard Keynes as the 'straight man'. In the General Theory, Keynes held up Pigou's Theory of Unemployment (1933) as the example of everything that was wrong with neo-classical macroeconomics. He never quite recovered from the shock of being betrayed by his old colleague and friend.

The rest of Pigou's life was spent occasionally counterattacking (e.g. with the Pigou Effect (1943 1947)) or submitting (e.g. 1945, 1951) to the Keynesian Revolution.

Major Works of Arthur C. Pigou

- Robert Browning as a Religious Teacher, 1901
- Tariffs, 1903
- Monopoly and Consumers' Surplus, 1904, EJ
- Industrial Peace, 1905
- Import Duties, 1906
- Review of the Fifth Edition of Marshall's Principles of Economics, 1907, EJ
- Producers' and Consumers' Surplus, 1910, EJ
- Wealth and Welfare, 1912
- Unemployment, 1914
- The Value of Money, 1917, QJE
- The Economics of Welfare, 1920
- Empty Economic Boxes: A reply, 1922, EJ
- The Political Economy of War, 1922
- Exchange Value of Legal Tender Money, 1922, Essays in Applied Economics
- Essays in Applied Economics, 1923
- Industrial Fluctuations, 1927
- The Law of Diminishing and Increasing Cost, 1927, EJ
- A Study in Public Finance, 1928
- An Analysis of Supply, 1928, EJ
- The Theory of Unemployment, 1933
- The Economics of Stationary States, 1935
- Mr. J.M. Keynes's General Theory, 1936, Economica
- Real and Money Wage Rates in Relation to Unemployment, 1937, EJ
- Money Wages in Relation to Unemployment, 1938, EJ
- Employment and Equilibrium, 1941
- The Classical Stationary State, 1943, EJ
- Lapses from Full Employment, 1944
- Economic Progress in a Stable Environment, 1947, Economica
- The Veil of Money, 1949
- Keynes's General Theory: A retrospective view, 1951
- Essays in Economics, 1952


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