Arthur Pigou Summary
January 21st, 2008
Summary- Arthur Pigou
Arthur Pigou enjoyed a very decorated academic career, studying alongside great minds such as Winston Churchill. As a student he received awards in many fields including the Chancellor’s medal for English and the Cobden Prize for his study of agricultural prices over time. Once he began teaching in 1901, however, he stuck mostly to the field of economics. While his knowledge of the subject was vast, his main interests were in the history of the labor movement, tariff reform, and Marshallian economics (which he called advanced economic theory). His works in these fields included The Principles and Methods of Industrial Peace and The Riddle of the Tariff. In his advanced economic theory lectures, Pigou offered a very structured presentation of Alfred Marshall’s ideas which he did not change or alter to his preference throughout the years in respect to his mentor.
When Marshall resigned as the Professor of Political Economy at Cambridge in 1908, Pigou was not very high up on the list of potential predecessors. However, with the help of Marshall’s personal recommendation Pigou was offered the job, which he held for thirty-five years thereafter. It was around this time that Pigou was finishing up his most notable work. Originally titled Wealth and Welfare, it was later named The Economics of Welfare (1920) after he re-wrote it following the war. The book as so big two sections, Industrial Fluctuations (1927) and A Study in Public Finance (1928), were taken off and published as separate titles.
Pigou also developed a semi-feud with economist John Maynard Keynes, sparked by differing views of unemployment. The feud was not bitter, however, as the two were both colleagues and friends for over twenty-five years, sharing a great mutual respect. In 1913, Pigou produced The Theory of Unemployment which setup the classical marginal productivity theory and attributed unemployment to trade union intransigence and minimum wage laws. At the same time, Keynes was developing his work, General Theory, and needed a theory to dispute while establishing his new ideas of what really caused unemployment. The Theory of Unemployment served that purpose. In two later works, Employment and Equilibrium and A Retrospective View, Pigou admitted his judgment of Keyes may have been harsh, and conceded that short run equilibrium with a high level of unemployment was a possibility.
In the grand scheme of things, Arthur Pigou did not create or discover anything revolutionary. He did not change a school of thought or provide a great fundamental theory. However, he did provide solid work in field of economics for over fifty years. He presented ideas in a more systematic way than ever before, and shifted people to this more orderly thinking. The article was a decent read, but added a little too much fluff about his personal life that could have been omitted. It does, however, provide a nice overview of Pigou for anyone who needs a quick, condensed summary of the economist or his works.
January 21st, 2008 at 3:01 pm
I think the background of individual economists is very useful because oftentimes, we hear about economists and their works without really understanding from where they came or the economic conditions that surrounded them during their work. However, I do agree with you that sometimes the long background of an individual can distract somebody from the “meat” of the article, which in this case was to better understand the views of classical economics. As we learned in class today, much of the classical economic school of thought was focused around the idea of MV = PQ, wherein the velocity V and the aggregate output Q are relatively fixed in the short run because capital K is also fixed. This indicates that the labor market, on which Pigou presented work, affects GDP. From what I also gathered in today’s class, the differing views between Keynes and Pigou on unemployment stem from what factors affect it. Keynes viewed fiscal policy as a way to stimulate the economy, but classical economists, such as Pigou, gathered that changes in aggregated demand have no effect on real terms, only nominal ones (i.e. wages and price level). Thus, when the dust settles, the only thing that the economy has seen change is an increase in the money supply (due to changes in the real interest rate), and by that same factor as was seen in the change in the money supply, an increase in the aggregate price level–thus, inflation. To expand upon what Jon said in his posting, the connection between the presence of unemployment and labor unions is the fact that labor unions sometimes demand certain wages (as he attributed to with minimum wage laws), but in fact those minimum wage laws can be viewed as sticky wages that haven’t adapted to the changes in the aggregate price level. Thus, a way to deal with unemployment is to have the laborers take lower real wages (because unemployment, which is autonomous to the story, would have then caused a drop in real wages as demand for stuff has also decresaed).
February 20th, 2008 at 10:05 am
reaching this blog through Google I wonder which article you are referring to? I’m especially interested in the personal fluff about Prof. Pigou.