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David Ricardo Karl Marx |
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As the prize student and successor 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, 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 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. Pigou was also 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 Neoclassical macroeconomics. 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.
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Story of Arthur Cecil Piquo (1877-1959)