Arthur Cecil Pigou

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Arthur Cecil Pigou
A.C. Pigou.jpg
Born(1877-11-18)18 November 1877
Ryde, Isle of Wight, England
Died7 March 1959(1959-03-07) (aged 81)
NationalityBritain
Institution University of Cambridge
Field Welfare economics
School or
tradition
Neoclassical economics
Alma mater King's College, Cambridge
Influences Alfred Marshall
Contributions Externalities
Pigou effect
Pigovian tax
Awards1899 Chancellor's Gold Medal
1903 Adam Smith Prize

Arthur Cecil Pigou ( /ˈpɡ/ ; 18 November 1877 – 7 March 1959) was an English economist. As a teacher and builder of the School of Economics at the University of Cambridge, he trained and influenced many Cambridge economists who went on to take chairs of economics around the world. His work covered various fields of economics, particularly welfare economics, but also included Business cycle theory, unemployment, public finance, index numbers, and measurement of national output. [1] His reputation was affected adversely by influential economic writers who used his work as the basis on which to define their own opposing views. He reluctantly served on several public committees, including the Cunliffe Committee and the 1919 Royal Commission on Income tax.

Economist professional in the social science discipline of economics

An economist is a practitioner in the social science discipline of economics.

University of Cambridge university in Cambridge, United Kingdom

The University of Cambridge is a collegiate public research university in Cambridge, United Kingdom. Founded in 1209 and granted a royal charter by King Henry III in 1231, Cambridge is the second-oldest university in the English-speaking world and the world's fourth-oldest surviving university. The university grew out of an association of scholars who left the University of Oxford after a dispute with the townspeople. The two 'ancient universities' share many common features and are often referred to jointly as 'Oxbridge'. The academic standards, history, influence and wealth of the University of Cambridge has made it one of the most prestigious universities in the world.

Economics is the social science that studies the production, distribution, and consumption of goods and services.

Contents

Early life and education

Pigou was born at Ryde on the Isle of Wight, the son of Clarence George Scott Pigou, an army officer, and his wife Nora Biddel Frances Sophia Lees, daughter of Sir John Lees, 3rd Baronet. He won a scholarship to Harrow School where he was in Newlands House and became the first modern head of school. The school's economics society is named The Pigou Society in his honour. In 1896 he was admitted to King's College, Cambridge, [2] as a history scholar where he first read history under Oscar Browning. He won the Chancellor's Gold Medal for English Verse in 1899, and the Cobden (1901), Burney (1901), and Adam Smith prizes (1903), and made his mark in the Cambridge Union Society of which he became President in 1900. He came to economics through the study of philosophy and ethics under the Moral Science Tripos. He studied economics under Alfred Marshall, whom he later succeeded as professor of political economy. His first and unsuccessful attempt for a fellowship at King's was a thesis on "Browning as a Religious Teacher."

Ryde town and civil parish on the Isle of Wight

Ryde is an English seaside town and civil parish on the north-east coast of the Isle of Wight. It had a population of 32,072 at the time of the 2011 Census. Its growth as a seaside resort followed after the villages of Upper Ryde and Lower Ryde were merged in the 19th century. The influence of that period can be seen in the town's central and seafront architecture. As a resort, Ryde has expansive sands revealed at low tide. The wide beach necessitates the listed pier for a regular passenger ferry service to the mainland. The pier is the fourth longest in the United Kingdom and the oldest survivor.

Isle of Wight County and island of England

The Isle of Wight is a county and the largest and second-most populous island in England. It is in the English Channel, between 2 and 5 miles off the coast of Hampshire, separated by the Solent. The island has resorts that have been holiday destinations since Victorian times, and is known for its mild climate, coastal scenery, and verdant landscape of fields, downland and chines. The island is designated a UNESCO Biosphere Reserve.

Harrow School English independent school for boys

Harrow School is public school for boys in Harrow, London, England. The School was founded in 1572 by John Lyon under a Royal Charter of Elizabeth I, and is one of the original seven public schools that were regulated by the Public Schools Act 1868. Harrow charges up to £12,850 per term, with three terms per academic year (2017/18). Harrow is the fourth most expensive boarding school in the Headmasters' and Headmistresses' Conference.

Academic work

Pigou began lecturing on economics in 1901 and started giving the course on advanced economics to second year students on which was based the education of many Cambridge economists over the next thirty years. In his early days he lectured on a variety of subjects outside economics. He became a Fellow of King's College on his second attempt in March 1902, [3] and was made Girdler's lecturer in the summer of 1904. He devoted himself to exploring the various departments of economic doctrine, and as a result published the works on which his worldwide reputation rests. His first work was more philosophical than his later work as he expanded the essay which had won him the Adam Smith prize in 1903 into Principles and Methods of Industrial Peace.

In 1908 Pigou was elected Professor of Political Economy at the University of Cambridge in succession to Alfred Marshall. He held the post until 1943.

Pigou's most enduring contribution was The Economics of Welfare, 1920, in which he introduced the concept of externality and the idea that externality problems could be corrected by the imposition of a Pigovian tax (also spelled "Pigouvian tax"). The externality concept remains central to modern welfare economics and particularly to environmental economics. The Pigou Club, named in his honour is an association of modern economists who support the idea of a carbon tax to address the problem of climate change.

Externality an impact on any party not involved in a given economic transaction or act

In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit. Externalities often occur when a product or service's price equilibrium cannot reflect the true costs and benefits of that product or service. This causes the externality competitive equilibrium to not be a Pareto optimality.

A Pigovian tax is a tax on any market activity that generates negative externalities. The tax is intended to correct an undesirable or inefficient market outcome, and does so by being set equal to the social cost of the negative externalities. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. Often-cited examples of such externalities are environmental pollution, and increased public healthcare costs associated with tobacco and sugary drink consumption.

Environmental economics is a sub-field of economics concerned with environmental issues. It has become a widely studied topic due to growing environmental concerns in the twenty-first century. Environmental Economics "...undertakes theoretical or empirical studies of the economic effects of national or local environmental policies around the world .... Particular issues include the costs and benefits of alternative environmental policies to deal with air pollution, water quality, toxic substances, solid waste, and global warming."

A neglected aspect of Pigou's work is his analysis of a range of labour-market phenomena studied by subsequent economists, including collective bargaining, wage rigidity, internal labour markets, segmented labour market, and human capital. [1]

Collective bargaining negotiations between employers and a group of employees

Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The interests of the employees are commonly presented by representatives of a trade union to which the employees belong. The collective agreements reached by these negotiations usually set out wage scales, working hours, training, health and safety, overtime, grievance mechanisms, and rights to participate in workplace or company affairs.

Human capital is the stock of habits, knowledge, social and personality attributes embodied in the ability to perform labour so as to produce economic value.

One of his early acts was to provide private financial support for John Maynard Keynes to work on probability theory. [4] Pigou and Keynes had great affection and mutual regard for each other and their intellectual differences never put their personal friendship seriously in jeopardy.

Pigou was generally critical of Keynesian macroeconomics and developed the idea of the Pigou effect on real money balances to argue that the economy would be more self-stabilizing than Keynes proposed. In a couple of lectures delivered in 1949 he made a more favourable, though still critical evaluation of Keynes' work: "I should say... that in setting out and developing his fundamental conception, Keynes made a very important, original and valuable addition to the armoury of economic analysis". [5] He later said that he had come with the passage of time to feel that he had failed earlier to appreciate some of the important things that Keynes was trying to say. [5]

Keynes, in turn, was very critical of Pigou, mentioning Pigou at least 17 times in The General Theory of Employment, Interest and Money , usually disparagingly. [6]

Life outside academia

Pigou had strong principles, and these gave him some problems in World War I. He was a conscientious objector to military service when it required an obligation to destroy human life. He remained at Cambridge, but during the vacations was an ambulance driver at the front for the Friends' Ambulance Unit, and insisted on undertaking jobs of particular danger. Towards the end of the war he reluctantly accepted a post in the Board of Trade, but showed little aptitude for the work.

He was a reluctant member of the Cunliffe Committee on the Currency and Foreign Exchange (1918–1919), the Royal Commission on the Income Tax (1919–1920), and the Chamberlain Committee on the Currency and Bank of England Note Issues (1924–1925). The report of the last body was the prelude to the much criticised restoration of the gold standard at the old parity of exchange. Pigou was elected to the British Academy in 1925, but resigned in 1947. In later years he withdrew from national affairs and devoted himself to more academic economics and writing weighty letters to The Times on problems of the day. He was a foreign honorary member of the American Academy of Arts and Sciences, a foreign member of the Accademia dei Lincei, and an honorary resident of the International Economic Committee.

He loved mountains and climbing, and introduced climbing to many friends, such as Wilfrid Noyce and others, who became far greater climbers. An illness affecting his heart developed in the early 1930s, however, and this affected his vigour, curtailing his climbing and leaving him with phases of debility for the rest of his life. Pigou gave up his professor's chair in 1943, but remained a Fellow of King's College until his death. In his later years he gradually became more of a recluse, emerging occasionally from his rooms to give lectures or to take a walk.

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References

Notes

  1. 1 2 Nahid Aslanbeigui, 2008. "Pigou, Arthur Cecil (1877–1959)," The New Palgrave Dictionary of Economics , 2nd ed. Abstract.
  2. "Pigou, Arthur Cecil (PG896AC)". A Cambridge Alumni Database. University of Cambridge.
  3. "University intelligence". The Times (36717). London. 17 March 1902. p. 11.
  4. Keynes Timeline
  5. 1 2 Times Obituary, March 1959
  6. Keynes, John Maynard (1936). The General Theory of Employment, Interest and Money. Houndsmills: Palgrave Macmillan. ISBN   978-0230-00476-4.

Sources

Further reading