The Sanguine Science: The Historical Contexts of A. C. Pigou’s Welfare Economics Norikazu Takami1
Abstract This essay identifies A.C. Pigou’s welfare economics as an attempt to bring order to the political debate in the context of the emergence of a more inclusive democracy in the United Kingdom associated in particular with the success of the Labour Party in the 1906 general election. To establish this identification the essay discusses Pigou’s contacts, both direct and indirect, with contemporary political movements and argues that his academic work was intertwined with his participation in policy debate. First, as a prologue, his disagreement with the historical economists ran parallel with his involvement in the tariff controversy. Second, Pigou became embroiled in a quarrel with a MP who was a representative critic of liberal social legislation and cooperated with an anti‐socialist organization. Third, I look at a students’ socialist movement and Pigou’s various indirect contacts with it. I conclude that Pigou’s welfare economics should be situated as a part of a widespread and simultaneous movement toward broader democracy.
1. Introduction The aim of this essay is to situate A.C. Pigou’s (1877‐1959) welfare economics within the political context of the early twentieth century. Pigou’s welfare economics, embodied in Wealth and Welfare (1912) and The Economics of Welfare (1920, 1st ed.),2 consists of a collection of policy discussions cut through by a single set of explicit normative welfare statements. Thus, Pigou’s version of welfare economics was quite different from later versions of welfare economics, which are more specifically concerned with welfare or utility itself than with practical policy matters. The two books just mentioned were thus much closer to the public sphere in which economics was discussed in various political contexts and, as contemporary reviewers in fact suggested,3 these books occupied – or at least, were 1
[email protected]. My thanks are due to the people at the Center for the History of Political Economy at Duke University, and also to the archivists of the Modern Archives Centre, King’s College, Cambridge. This research was supported by the Japanese Society for the Promotion of Sciences. 2 In 1915, Pigou told Macmillan publishers that he was revising his Wealth and Welfare, published three years before: “it ought to have a new title, e.g. The Economics of Welfare. . . I imagine there would be no object in doing anything with it till some time after the war, and also until more copies of the original Wealth and Welfare have been sold” (letter dated Nov 9, 1915 in the Macmillan Archive). 3 Writing a review on Wealth and Welfare in The Manchester Guardian (Jan 21, 1913), Edwin Cannan stated: “it may be said that Professor Pigou comes down on the Progressive side of the fence”. Cunningham called Pigou’s welfare economics the ‘sanguine science’ in The Times, May 16, 1914, p. 13. An anonymous reviewer
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seen to occupy – a specific point on the contemporary political spectrum, that is, a liberal, pro‐redistribution, position. Indeed, the phrase I have chosen for the title of this essay, the ‘sanguine science,’ was coined by one of Pigou’s contemporaries, the economic historian William Cunningham, who contrasted Pigou’s positive attitude toward income redistribution with the much more cautious precepts of classical political economy, which would of course have evoked the opposite phrase Thomas Carlyle coined in 1849, the ‘dismal science.’4 Current historians of economics confirm the above contemporary view about Pigou’s position in the political spectrum, especially in comparison with the earlier generations of economists. First, in his essay on Henry Sidgwick, a Cambridge moral philosopher who wrote on political economy and taught Pigou, Roger Backhouse (2006) contrasted his attitudes on income redistributive measures with Pigou’s, stating “Pigou was more radical [than Sidgwick].” Backhouse notes Pigou’s disagreement with Sidgwick in the following two respects: first, that Pigou did not share Sidgwick’s caveat that redistributive measures would involve strong adverse effects on incentives, and second, that Pigou investigated the implications of state intervention in much more detail. Second, in his biography of Alfred Marshall, Peter Groenewegen described Marshall’s attitudes on income distribution as the ones that emphasize self‐help and mutual voluntary assistance over government action (Groenewegen 1995, 598). Groenewegen did not compare it with Pigou’s attitudes on the same issue; however, it is safe to suppose this characterization of Marshall’s views as suggesting that Marshall and Pigou, his student 35 years junior, did not share the same opinion on government action in economic fields. Furthermore, James Thompson’s (2007) study of the Edwardian discussion on the minimum wage situated Pigou in the progressive side of the debate. Thompson also noted that, although Pigou’s support for the minimum wages was not unconditional, his investigation of how and when minimum wages could increase workers’ earnings provided the footholds to “those wishing to challenge market idolatry and to defend redistribution.” It thus appears that the existing literature of the history of economics points towards the view that Pigou’s welfare economics contained progressive political implications that the above Cantabrigian professors, Sidgwick and Marshall, had been reluctant to embrace. This study will inquire how this ‘sanguine’ doctrine came about by examining Pigou’s intellectual environment. Here a brief account of the general political background of early twentieth‐century Great Britain is in order. In the years immediately before the First World War, parliament passed legislation enacting a series of social reforms, such as old age pensions and mandatory unemployment insurance. The major force behind these reforms was the emergence of the Labour Party in the 1906 general election, and the Liberal Party, for the Cambridge Review, May 13, 1921, also emphasized the positive attitude to state intervention embodied in The Economics of Welfare. 4 Unlike what I may appear to imply in the text, this phrase is now considered to have a very peculiar origin. Carlyle used it to criticize John Stuart Mill for supporting the emancipation of slaves, not for believing the impossibility of raising wages of unskilled laborers. See Levy and Peart (2001).
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while it gained a large parliamentary majority in that election, nevertheless tried to court Labour in order to ensure the stable running of their administration (Cox 1906). This period is thus noted for its progressive political atmosphere, which opened up new conversational opportunities for political and economic writers. This essay’s task, then, is to connect Pigou’s scholarly work with the above general trend towards more direct representation of the working class in the British national politics. I will focus primarily upon Pigou’s two major interactions with contemporary politics after 1906: his direct debate with a Member of Parliament who firmly opposed the politics and policy measures of the Labour Party; and his university activities at Cambridge, which included lecture courses on contemporary practical issues but also involved engagement with the student socialist movement, itself inspired by the result of the general election in 1906. By tracing these various strands, the study will point to the existence of hitherto unseen connections between academic knowledge production and social order; specifically, it will be argued that Pigou’s welfare economics formed part of a general and widespread social change toward broader democracy.
2. Career Building in Cambridge, 1897‐1908 Even before the 1906 election, Pigou’s academic work was closely interconnected with his participation in policy debate. This is particularly evident in his involvement with the so‐ called ‘Great Tariff Controversy,’ which started in 1903. But first, this section will discuss how Pigou developed his academic skills and reputation (and hostility) among fellow economists to see what went in parallel with Pigou’s active involvement with the tariff controversy. Pigou entered the University of Cambridge on a scholarship to King’s College to study history and modern languages. Historical teaching in Cambridge in those days still reflected the influence of John Seeley (1834‐1895), who had founded the independent History Tripos in 1873,5 and had emphasized current politics above interest in history for and of itself (Kadish 1989, 134‐141). Thus the Tripos offered not only straightforward historical subjects, but also papers in economics and politics. This helps explain how it was that, on completion of the Historical Tripos three years later, Pigou was already attracted to Marshall’s Principles of Economics. In letters in these years to his history teacher, Oscar Browning (1837‐1923), Pigou wrote that he found Marshall’s work interesting and that he was spending time studying economics.6 Thus it was that Pigou moved on to Part II of the Moral Sciences Tripos, 5
In 1873, the History Tripos became an independent Tripos while the subjects related to history had been a part of History and Law Tripos before. 6 Pigou’s letters dated 1897‐1899 in the Oscar Browning Papers (OB/1/1281/A). In a letter dated Thursday, September 23, written in 1897, his second year at Cambridge, Pigou wrote “of books that are dull & improving I’ve read Hallam’s Constitutional History & Marshall’s Political Economy / not nearly as bad as Hallam.” In another letter dated simply “Sunday” and with a marginalia, 1897‐1899, apparently written by someone else, we read (after an illegible phrase), “so I’m going to do Pol. Econ. & Economic History here.”
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in which a course on advanced economics was offered, and in which, among the range of subjects offered, he concentrated on “ethics, political philosophy, and advanced political economy”. He took a first class in moral science in 1900. As an undergraduate, Pigou established his reputation as an orator in the Cambridge Union Society, a long‐standing student debating club, which brought him great honor when it elected him President. His speeches at the Union provide some indication of the intellectual proclivities of the young Pigou. Regarding the conflict in South Africa, he criticized the British government, insisting that its failure in the negotiation with the Boers had brought about the military conflict. Among the motions he himself moved included renouncement of Puritan beliefs and censure of American expansionism. The speech accompanying the former motion testifies to Pigou’s liberal religious views, which also gained him a favorable write up from the Cambridge Review.7 Despite his general liberal views, however, he was not necessarily attached to the Liberal Party. When Oscar Browning, a long‐time treasurer of the Union, proposed that the only hope of efficient social reform lay in the Liberal Party, Pigou first took him to task for the vagueness of the proposition and then responded that the Conservative Party was less liable to radical sentiments and hence more reliable on some matters. Thus, it would seem, the young Pigou was leaning towards liberal views but tended to arrive at balanced and cautious judgments.8 Cautiousness and sobriety were also major characteristics in the young Pigou’s scholarly attitude. In the older entry on Pigou in the Dictionary of National Biography, Austen Robinson (1971, 815) describes the young Pigou’s method as that of a philosopher (a logician might be the more accurate designation). According to McLure (2010), just such a characteristic method is to be found in the fellowship dissertations that Pigou submitted to King’s College. On his first attempt to win a fellowship, he submitted the essay that, the previous year, had won the Burney Prize for theological essays: “Robert Browning as a Religious Teacher.” The essay described the poet’s religious and ethical views as expressed in his literary works. The reviewers, Brook F. Westcott (1825‐1901), the Bishop of Durham, and Walter Raleigh (1861‐1922), the Regius Professor of English Language and Literature at the University of Glasgow, praised Pigou’s broad knowledge of Browning’s work but expressed bewilderment as to Pigou’s intention. To their eyes, the dissertation was too scholarly and analytical to pass for literary criticism or theological study, and they accused Pigou of imposing an unduly strict analytical framework upon Browning’s literary works. Consequently, Pigou was not elected a fellow on this attempt. McLure suggests that the
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Cambridge Review, Feb 14, 1899. Pigou contributed a chapter on charity to a book published in 1901 (Masterman 1901), with other young progressive Cambridge scholars such as Charles Masterman (1874‐1927) and G.M. Trevelyan (1876‐1962). I will briefly return to this essay in the concluding section.
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realization of his analytical inclinations thus forced upon him played some part in his subsequent decision to specialize in economics.9 In 1902, a year later, Pigou submitted a second fellowship dissertation, this time an economic essay. On obtaining sufficiently favorable reports from the two referees, Alfred Marshall (1842‐1924) and H.S. Foxwell (1849‐1936), Pigou was elected a fellow. However, Foxwell’s praise was tempered by serious criticism of Pigou’s method. In particular, Foxwell expressed dissatisfaction with Pigou’s exclusive dependence on theoretical analysis and with what he took to be a tendency of ignoring those cases that did not support the predictions of economic theory.10 We do know, however, that Foxwell had personal reasons for his hostility to Pigou. When in 1901 Marshall had tried to arrange for Pigou to lecture on introductory economics, Foxwell had opposed the attempt for fear that fewer students would take his own course.11 Furthermore, Foxwell’s distrust of Marshall was projected onto his own relationship with Pigou: in a letter to J.N. Keynes, Foxwell asserts of Pigou that he is “a man, of all I have known, least qualified to deal with a general class, as he is such a prig!"12 Despite this disagreement over teaching, however, Foxwell’s report commended Pigou’s high caliber when it came to lucid logical analysis, and, along with Marshall’s unconditional praise, the end result was that Pigou was elected a fellow of King’s College and gained a first foothold with regard to an academic career in Cambridge. Foxwell’s opposition to hiring Pigou as a lecturer ultimately came to nothing, and Pigou began teaching economics in the year 1901/2. In his first year he taught introductory economics and so helped to lighten Marshall’s teaching load, while in his second year he lectured on the history of industrial combinations and labor movements, which was also his research subject at the time. In 1903, his thesis on industrial relations won the Adam Smith Prize, the triennial prize financed from Marshall’s own pocket for the promotion of economics research in Cambridge. According to the preface of the later published work, The Principles and Methods of Industrial Peace (1905), Marshall had suggested the topic to Pigou. Marshall had served on the Royal Commission on Labour in 1891‐1894, where he had opportunities for discussion with experts on labor issues such as Ben Tillett (1860‐1943) and Sidney Webb (1859‐1947).13 He returned with a strong impression of the interest and 9
However, Pigou afterwards maintained his interest in ethics and theology, at least until he succeeded Marshall in the Chair of Political Economy. The Problem of Theism and Other Essays (1908) is one of its products. In this work, he calls for a scientific method for theology that takes as its datum the states of consciousness of people who have undergone religious experiences. Dalton (1953, 57) reports Pigou’s participation in Lowes Dickinson’s personal seminars on philosophy when Dalton was an undergraduate in Cambridge. 10 Foxwell’s report on Pigou’s dissertation, King’s College, Cambridge. See also Coase (1972); Kadish (1989, 194‐195); McLure (2010). 11 According to a letter that Marshall wrote to J.N. Keynes, Foxwell tried to undermine Pigou by changing the content of his own course so that it duplicated that which Pigou would give. Foxwell “instantly cuts in before Pigou & duplicates in anticipation a part of the course … wh[ich] Pigou has been preparing himself to give.” J.N. Keynes 1/195, also quoted in Coase 1972, 477. 12 J.N. Keynes 1/48, also quoted in Coase 1972, 476. 13 Groenewegen 1995, 360‐371.
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importance of labor issues and encouraged his other students as well as Pigou to study such issues.14 The 1905 book that developed from this prize essay brought Pigou’s theoretical inclination into sharp relief among contemporary economists. A review appeared in the Economic Journal by L.L. Price (1862‐1950), fellow at Oxford and Marshall’s former student during his brief Oxford sojourn in 1883‐4. Price complained that the economic theory wielded by Pigou was hard to understand for economists not theoretically trained as well as for general readers and that, furthermore, such theoretical apparatus oversimplified the actual situations surrounding industrial bargaining. Indeed, in this work, Pigou treated normal wages (or long‐run competitive wages) as if such wages could be easily known in actual wage bargaining and worked out a sophisticated bargaining model based on Edgeworth’s theory. Price’s criticism of Pigou’s theoretical treatment ought to be seen in the light of the condition of economics at a time in which the discipline was not yet clearly distinguished from history. What Marshall tried to achieve with the creation of a separate Economics Tripos in 1903 was the establishment of economics as an independent discipline upon its own theoretical foundations (Maloney 1985). As Marshall’s loyal disciple, Pigou did not shy away from applying advanced economic theory to industrial relations. Price, in turn, detected implicit disregard for the historical method in Pigou’s book and expressed his frustration, no doubt assuming the tacit agreement of most of his fellow economists. Although Pigou’s research in economics met with opposition from historically trained economists, apparently this did not hamper his career advancement. This is largely because he gained a high reputation among the more influential economists such as Marshall and Marshall’s many students who were teaching all over Britain (such as A.L. Bowley at the London School of Economics (LSE), C.P. Sanger at University College London, Sydney Chapman at Manchester) as well as F.Y. Edgeworth (1845‐1926), who was then the Drummond Professor of Political Economy at Oxford. When Marshall retired from his Chair in 1908, he publicly supported Pigou as his successor, and Edgeworth, who as just stated held Pigou in high regard,15 served on the election committee.16 Pigou was elected the Professor of Political Economy in preference to the rival candidate, Foxwell, who had long taught economic history and history of economic thought in Cambridge.
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For instance, Sydney Chapman won the Adam Smith Prize in 1900 with an essay on the cotton industry that set out an advanced bargaining system between workers and firms. C.R. Fay dealt with labor conditions in Britain and Germany (Pigou 1925, 74‐75). 15 Edgeworth had written a highly appreciative review of Pigou’s The Riddle of the Tariff (Edgeworth 1904). 16 According to Coase (1972, 478), the other members were J.N. Keynes, lecturer in logic, W.R. Sorley, Professor of Moral Science, V.H. Stanton, Professor of Theology, R.H. Inglis Palgrave, former editor of The Economist, J.S. Nicholson, Professor of Political Economy at the University of Edinburgh, Lord Courtney, former MP, and Arthur Balfour, former Prime Minister, who was not present at the meeting.
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3. The Great Tariff Controversy, 1903‐1906 Running in parallel with the purely academic conflict between Pigou and the economic historians was the ongoing political debate over free trade in which many academic economists participated. Triggered by the speech of the Colonial Secretary Joseph Chamberlain (1836‐1914) on May 15, 1903, calling for the introduction of a protective tariff, the controversy ultimately led to the resignation of both Chamberlain and a number of pro‐ free trade cabinet members17 and generated heated debates in periodicals, newspapers, pamphlets, and platform speeches (Howe 1997). Before moving into the Unionist camp in opposition to Gladstone’s 1886 Home Rule Bill (which proposed self‐government for Ireland), Chamberlain had been a Birmingham business manager turned radical Liberal politician and, subsequently, Colonial Secretary in charge of administering the development of underdeveloped colonies—he is said to have been among the first high‐level officials in Britain to use the word ‘development’ in the modern, interventionist sense (Storey 2004, 117). The tariff reform campaign that he spearheaded was thus projected as a radical political reform to remedy the many problems troubling Britain. Chamberlain now claimed that unemployment and poverty among the laboring classes were attributable to free trade, thereby making an electoral appeal to those classes. Over the course of the subsequent heated debate, many economists became embroiled in the controversy, being asked for their professional opinions by politicians or feeling compelled to counter the public proclamations of other economists. The most well‐known public episode involving economists was the letter to The Times of August 1903, which came to be known as the fourteen economists’ manifesto. This episode has been narrated by Bob Coats (1964, 99‐103; 1968) and Peter Groenewegen (1995, 376‐388), but a brief summary would be in order. A series of letters with the signature ‘An Economist’ had been appearing in The Times since June in support of Chamberlain’s proposed tariff reform, and pro‐free trade economists felt compelled to counter these letters. Initially organized by Edgeworth, a letter arguing against Chamberlain’s ideas was eventually signed by fourteen economists, including Marshall and Pigou, and appeared in The Times on August 15. While professors and lecturers in economics from a number of prestigious universities signed the letter and noted their affiliations, the influence of the letter was weakened by the response from pro‐tariff reform economists. Printed directly beneath the manifesto was L.L. Price’s letter to Edgeworth, in which Price confessed that he had refused to sign the manifesto when asked. Five days later, The Times again printed pro‐tariff letters, this time signed by Foxwell and the director of the LSE William Hewins (1865‐1931; now known to be the author of those earlier letters signed simply ‘An Economist’). Thus the well‐known
17
Chamberlain agreed to step down from the cabinet on the condition that his son, Austen, be promoted to the Chancellor of Exchequer. In order to do so, the Prime Minister Balfour forced the resignation of pro‐free trade Chancellor Charles Ritchie.
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fourteen economists’ manifesto was quickly countered by equally high‐positioned professional economists.18 In addition to these three pro‐tariff economists – Price, Foxwell, and Hewins– William Ashley (1860‐1927), then director of the Faculty of Commerce at the University of Birmingham, also publicly supported the introduction of a tariff. Thus the professional economists avowedly in support of tariff reform were almost all economic historians. Foxwell himself noted in his letter to The Times that, with few exceptions, the economists adopting historical methods supported the tariff; and he interpreted this fact in relation to the deep rivalry between the two different schools of economists: “The fact goes far to justify the position they [i.e., historical economists] hold as to the importance of historical study in economics.”19 As young college lecturer, Pigou was not in a position to exercise any great influence on the general debate. Nevertheless, he placed himself in the public sphere as a free trader by writing pro‐free trade arguments to newspapers and publishing a pamphlet in support of free trade even before he signed the Times manifesto with the other thirteen economists.20 After signing the manifesto, he began to send letters to the editor of The Times and put forward his opinions there. Pigou had received advice from Marshall regarding intervention in the public sphere in a letter dated 1902: “When I write it is always because I think some general principle, which belongs to the sphere in which I work, is being misquoted, or misunderstood” (Pigou 1925, 432). Marshall thus instructed him to join such debate only for the purpose of correcting others’ arguments in light of (properly understood) economic principles. However, Pigou’s intervention in the general debate was hardly as reticent as Marshall’s words seemed to counsel. Indeed, his public interventions were laced with bitter wit, reminiscent of his opposition speeches at the Union Society. 18
Sydney Chapman, Professor at the University of Manchester, sent letters in support of free trade to the Daily Mail newspaper before the manifesto was printed in the Times. Being abroad, he did not sign the manifesto, but he sent a letter to the Times a month later in defense of the manifesto that claimed that it was not fair to criticize that the authors of the manifesto were authoritatively imposing their specific view upon the general public. Alfred Marshall was asked for an opinion by the pro‐free trade Chancellor of Exchequer Ritchie and accordingly wrote a memorandum. The memorandum was not published because of the cabinet crisis in September, but eventually in 1908 the then Chancellor Lloyd George discovered and published it with Marshall’s permission. Foxwell was asked for comments on his economic notes by Balfour. 19 The Times, Aug 20, 1903. According to Koot (1987, 99, 117‐118), these economic historians became convinced of the necessity of tariff for similar reasons. The watershed event to them was the recent Second Boer War, which had severely challenged any claims of British supremacy. Koot labels these economic historians neomercantilists. The fundamental gap between these historical economists and the theoretical economists such Marshall and Pigou was the former’s strong interest, and the latter’s relative indifference, to imperial issues. See also Green (1995, Ch 5). 20 See the preface of Pigou (1903). Pigou wrote articles in the newspaper Pilot and a pamphlet Great Inquest in 1903. Given the high public interest in the tariff issue, publishers would have readily accepted pieces on the issue regardless of author. When he published a book on the tariff issue with Macmillan in 1906, Pigou accepted publication with full risk on the author (a letter dated July 30, 1906 in the Macmillan Archive); but he could expect a certain number of copies to sell.
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Pigou provided the earliest response among economists to Prime Minister Balfour’s Economic Notes on Insular Free Trade (1903) in the Times. Balfour proposed making the tariff more flexible in order to gain leverage in tariff negotiations with the United States and Germany. Pigou answered that everyone was already aware of this argument and insisted that it was its feasibility that needed to be examined with well‐grounded evidence.21 Rebutting Leo Amery of The Times, who played an active role as a field combatant for the tariff reform camp, Pigou highlighted his ignorance of economic theory. When Amery responded to Pigou’s criticism, Pigou submitted an article longer than the original, in which he assaulted the inconsistencies within Amery’s response.22 In his book The Riddle of Tariff, published at the end of the same year, Pigou also dealt critically with William Ashley’s point that imperial preference would enable manufacturing industries to draw on economies of scale by securing the colonial market for their products. Pigou simply denied this case by arguing that a small increase in the output enabled by the colonial market would not lead to much improvement in manufacturing efficiency (Pigou 1903, 80). Pigou thus forcefully and squarely debated with various opponents, ranging from politicians to historical economists. However, as the tariff controversy continued, his argument against the tariff assumed a more methodical and systematic appearance. His 1903 book adopted the method of dealing with one opposing argument after another in order to press home the point that the original proposal was riddled with problems – a rhetorical technique that had its roots in his debating style at the Union Society, while the later article published in the Edinburgh Review in January 1906 set out an ethical framework in order to normatively assess the tariff proposal. The normative criterion presented here was ‘national dividend’ (practically the same thing as the national income or the national product that came to be officially measured in many countries after WWII), which Pigou took from Marshall’s Principles of Economics and upon which he built his own Wealth and Welfare and The Economics of Welfare. In addition to this writing, Pigou attempted to influence public opinion by other means. To counter the pro‐tariff open lectures given by Cunningham in Michaelmas Term 1903, three lecturers – Pigou, H.O. Meredith, J.E. McTaggart, (the latter two also Marshall’s former students at Cambridge) – jointly held a series of lectures on free trade in the following term. Pigou also gave free‐of‐charge lectures on trade in the year 1904‐05, open to students who were not studying for the Economics Tripos. When the pro‐free trade organization ‘Cambridge University Free Trade Association’ was formed in May 1904, Pigou served as secretary and administered many meetings. The president of the Association was Arthur Elliot (1846‐1923), who had resigned from the cabinet together with the pro‐free trade Chancellor of the Exchequer Charles Ritchie (1838‐1906) and others. Elliot was the editor of The Edinburgh Review, to which Pigou contributed two articles on the tariff issue, and Elliot 21 22
The Times, Sep 18, 1903, p. 4. The Times, Nov 11, 1903, p. 3, and Nov 14, 1903, p. 14.
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also advised Pigou to publish those articles separately as a book.23 Among the committee members of the organization were a number of celebrated Cambridge dons such as the botanist A.C. Seward and the Professor of Law John Westlake, but the then sitting Professor of Political Economy, namely Alfred Marshall, did not join the Association. In December 1905, shortly before the upcoming election, Pigou gave a public speech in front of a general audience at the Cambridge Guildhall.24 The subject of the speech was similar to the above‐mentioned Edinburgh Review essay, “Protection and the Unemployed.” According to the summary that appeared in the Cambridge Review, Pigou in this speech attributed the large part of unemployment to the fact that labor is not perfectly mobile or responsive to the fluctuations of industry. He quoted Marshall’s words and claimed that free trade is more likely to stabilize industry. Finally, at the end of his speech, he aimed the following scornful remark at Joseph Chamberlain: As to the emotional appeal, which accuses Free Traders of standing by unmoved while the workless families are starving in the streets, the lecturer [i.e., Pigou] styled it as the reasoning, or want of reasoning, on the strength of which every quack or charlatan, whether in medicine or politics, maintains his career. Mr Chamberlain’s remedy would make things worse than they are;25 the fact that Free Traders were unable to make them better was, indeed, a mournful, but a wholly irrelevant, circumstance. (Cambridge Review, Dec 7, 1905)
In the general election one month later, the Unionist Party suffered a landslide loss, but the tariff reform campaign did not thereafter entirely disappear from the political debate. Thus far I have discussed Pigou’s research and political activities up to around 1906. He was given much credit as an economic theoretician by Marshall and Edgeworth on the one hand, but was fiercely opposed by economic historians on the other hand. This polarity widened even further with the ongoing tariff controversy. Pigou engaged in intense political debate, employing his own confrontational style of dissecting opponents’ argument, but he was not content to simply make use of an aggressive debating style. When he reviewed the fifth edition of Marshall’s Principles in 1907, he made it clear that he considered the notion of the national dividend as “a practical instrument of great power designed for service in the concrete solution of social problems” (Pigou 1907, 534), and he further contended that the policy implications of the notion were generally more important than what this notion inevitably fails to consider, such as the moral or cultural dimensions of people’s lives, and that it should become the central pillar of policy guidance. The fact that he actually did use this notion as the center of his policy guidance in his 1906 article clearly indicates how much he appreciated it. Put another way, Pigou could connect political and scientific discourses by using this concept. 23
A letter dated 29 Aug 1906 in the Macmillan Archive. Dalton (1953, 59) notes that Pigou made another speech at an election for Philip Noel‐Baker’s father, the Liberal MP for Finsbury. 25 Pigou spoke at the March 1906 Union debate and attacked Chamberlain again: “Mr. Chamberlain was an ignorant and a blatant demagogue” (Cambridge Review, Mar 15, 1906). 24
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The concept of the national dividend, however, is not the only important building block of Pigou’s welfare economics; so too is his comprehensive treatment of social welfare policies and income redistribution. To contextualize the latter, we must turn to a slightly later period in which Pigou discussed those issues in public and in Cambridge University.
4. Anti‐Socialism in the Public Sphere, 1906‐1914 The issues of poverty and unemployment among the laboring classes had been of great social importance since the end of the nineteenth century, as their prominence in the tariff reform controversy testified. Socialist organizations such as the Social Democratic Federation organized many demonstrations around these issues, including one in November 1887 that culminated in rioting and led to many casualties. In one notable episode in 1889, a large sum was raised in support of the striking London dockers. At the same time, social investigations led by Charles Booth and others emphasized the urgency of dealing with the problem of poverty by exposing the shocking living conditions of the urban laboring classes. After the 1906 election, the emergence of the Labour Party as a political force was widely publicized in the general media. This political success was made possible by the electoral cooperation between the Liberal Party and the Labour Representation Committee (the predecessor of the Labour Party). Under the umbrella of this cooperation, the decline in Unionist support ensured that, alongside the Liberals, many Labour representatives were elected to Parliament. After 1906, increasing interest generated by this political development gave further encouragement to socialist writers and sympathizers, such as Sidney and Beatrice Webb, J.A. Hobson, L.T. Hobhouse, and H.G. Wells. To take only the years between 1906 and 1914, Sidney Webb wrote twenty books and pamphlets and Hobson twelve.26 They also found an outlet for their opinions in such progressive newspapers as The Daily News and The Nation. In addition, these socialist writers traveled restlessly around the country giving speeches and talks (see the next section for their visit to Cambridge). 27 On the other hand, some politicians and journalists who opposed this political trend launched a campaign to counteract what they saw as the unwholesome influence of socialism. Harold Cox (1859‐1936) was one such writer who expressed strong opposition to socialism after 1906. After completing the Mathematical Tripos at Cambridge in 1882, Cox lectured on economics in Yorkshire through the University Extension Society. In these years and subsequently he was something of a socialist and even coauthored The Eight Hours Day with Sidney Webb in 1891. Nevertheless, after 1903 he became an ever more strident free
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These figures were the numbers of publications in the online catalogue of the British Library (www.bl.uk). I excluded new prints and editions and prefaces written for others’ books. 27 See the chapters on J.A. Hobson and H.G. Wells included in Backhouse and Nishizawa (2010) for these writers’ views.
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trader;28 earning a reputation that led to election as a Liberal Member of Parliament in 1906. Cox now became even more vehement in his opposition to the socialist creed with which he had once aligned himself. In his article “Socialism in the House of Commons,” published in The Edinburgh Review in October 1906, he denounced social welfare policies.29 In this 1906 article, Cox examined three proposed items of social legislation – free meals in schools, old age pensions, and unemployment remedies – which he regarded as socialist, and emphasized the inefficiency and moral degradation that he claimed would accompany the enacting of such policies. Along with his lectures and other political activities, this article earned him the reputation of a core anti‐socialist spokesman within British politics.30 Shortly afterwards a more organized anti‐socialist campaign with which Cox would later cooperate was launched by the London Municipal Society, an organization affiliated with the opposition Unionist Party. The organization worked to oppose socialism on the level of local London politics but coordinated with similar regional organizations throughout the country, thereby in 1908 creating the umbrella society, the Anti‐Socialist Union.31 The titular president of the Anti‐Socialist Union was the former cabinet member the Duke of Devonshire, the vice president was Walter Long, an influential Unionist MP, and many other Unionist MPs served on the committee of the organization. The well‐funded Union ran a school to train speakers, hired able speakers with good salaries (which in part compensated for the occupational hazard of being attacked by members of their audiences) and published the periodical the Anti‐Socialist (after 1910, Liberty, but ceasing publication in 1912).32 Harold Cox published his The Taxation of Land Values (1909) from the publication department of the Anti‐Socialist Union. After the tariff controversy, Pigou contributed letters to The Times on economic issues, albeit written in a more detached tone than his letters on tariff issues had been. Here he insisted upon his neutrality with regard to any specific policies, but in reality he constantly presented favorable arguments concerning the welfare policies proposed by the Liberal government. In October 1907 Pigou intervened in the debate over old age pensions by offering a modern economic argument. Participants in the debate tended to take it for granted that if aged workers receiving pensions are allowed to continue to work other workers’ wages will decline, but Pigou contended that this view was rooted in the obsolete 28
Between 1903 and 1905, he published five books and pamphlets on the tariff and contributed numerous articles to newspapers and periodicals. 29 Since The Edinburgh Review adopted anonymity of authorship until 1912, this article is not signed. However, a pamphlet authored by Cox with the same title and description suggests appeared the following year, suggesting that this was a reprint and that the author of the original was certainly Cox. 30 For instance, a review of a book on unemployment contains the phrase, “Individualists like Mr. Harold Cox” (Fabian News, Sep 1906, p. 40); and a French journalist and former cabinet member Yves Guyot (1843‐1928) wrote a book, Economic Prejudice (1910), in which Harold Cox was one of the few real figures who appear in the dialogue besides Keir Hardie and Lloyd George. 31 This paragraph draws on Brown (1974). 32 The publication of Anti‐Socialist Union Speakers’ Handbook (1911) was a direct result of the Union’s training school.
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wage fund doctrine and that, at least in the long run, real wages tend to increase as the number of employed workers rises. Again, in The Times in the following year, he suggested an economically more rational pension system that would not harm labor incentive. When Lloyd George’s infamous budget speech of April 1909 brought Parliament to a state of frenzy, Pigou wrote a pamphlet The Policy of Land Taxation, based on his earlier pieces on taxation published in the liberal Westminster Gazette and Edinburgh Review,33 and also sent letters to the editor of the Times. By this date he had been elected the Professor of Political Economy at Cambridge. In one of his Times letters, he defined an increment of land value not attributable to the owner’s effort as a windfall and argued that taxation upon such an increment was economically rational. This letter by the Professor of Political Economy at Cambridge was “hailed with acclamation by the supporters of those taxes, from the Prime Minister downwards.”34 Harold Cox swiftly responded to Pigou’s letter and tried to neutralize its political influence. First, Cox drew attention to Pigou’s concession with regard to various institutional difficulties and – somewhat tongue in cheek – described his letter as an opposition to the land taxes that proceeded by way of argument by contradiction. Cox then added that an important item was missing from Pigou’s list of institutional difficulties, namely that an increment of land value due to the increased present value of land caused by the decline in interest rates also should be exempted from taxation.35 Writing in the next day’s newspaper, Pigou accepted this last point and repeated that his intention was merely that of sorting out the theoretical issues involved in the land taxes and that he was in fact indifferent to the policy in question. Cox took this as Pigou withdrawing from his original argument, and made much political capital when he said as much in a speech to Parliament. The exchange of letters in The Times between Pigou and Cox demonstrates the former’s naivety in what was a highly political debate; but it also points to Pigou’s implicit presumption that the governing party’s policies enjoyed the general approval of the public. As noted above, Pigou stated his neutrality with regard to specific policies and yet offered favorable arguments with regard to those same policies. This seemingly paradoxical course of action could be explained by the ongoing sea change of public opinions. Cox’s classical liberalism, based as it was on strict principles of self‐help, failed to win wide support within the governing Liberal Party; although he was considered an able speaker.36 Many Liberal 33
Pigou published a short essay in the Westminster Gazette on May 15, 1907 and an article in the Edinburgh Review in July 1907. A clipping of the former is included in the Keynes papers at the Modern Archives, King’s College, Cambridge (JMK L/07/1). 34 The Times, July 7, 1909. “Professor Pigou on windfalls” by H. Cox. 35 Strangely enough, right above Cox’s letter appeared Pigou’s letter, where he discussed a difficulty in land taxation in relation to a change in present value due to a change of interest rates. 36 Cox’s obituary by Mallet (1936). See also “The government and the country,” The Edinburgh Review, July 1909, p. 254, and “Mr. Harold Cox on Socialism,” in The Times, Feb 2, 1909. The second of the three pieces states: “Almost alone Mr. Harold Cox protested against the principle on which this legislation [i.e., old age pensions] was based. Almost alone he argued that the measure was corrupting to that spirit of independence and self‐support which used to characterise the British working man. Almost alone he refused to approve the taxation of the workers and the provident in order to endow almost indiscriminately the most improvident section of the community. There was no real fight in the House of Commons against the Ministerial proposals,
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MPs were publicly committed to land taxation; and as for old age pensions, there was no party division since this measure had been originally advocated by Joseph Chamberlain. Therefore, though faced with direct criticism by an able writer well versed in economics, Pigou’s progressive views were far from radical when set against the contemporary political spectrum. In these Times letters, he was not as much putting forth his original agenda as more simply he was responding to the ongoing public debate. Yet it is also true that Pigou’s views were clearly more reformist than those of earlier generations of mainstream economists, such as J.S. Mill, Henry Sidgwick, and Alfred Marshall. Economics, at least as exemplified by Pigou, certainly took a progressive turn in the early twentieth century.
5. The Socialist Movement in Cambridge, 1906‐1914 Founded in 1884 in order to influence middle class opinion, the Fabian Society formed affiliated societies in universities in order to spread its brand of reformist socialism among students. In the years after 1906, such university societies suddenly expanded, together with an expansion of membership in the London parent society – from 730 in 1904 to 2462 in 1909 (Pease 1963, 185). In addition to already existing student societies in Oxford (founded in 1895) and Glasgow, a Cambridge University branch was launched in February 1906, a month after the general election. The founding group of Cambridge students included some whose parents had a close relationship with the Fabians.37 Haden Guest (1877‐1960) was dispatched by the London society and gave a speech at the first meeting. Just as women played an active role in the parent society so, out of the twenty founding members of the Cambridge Society, six were from the all‐women colleges of Newnham and Girton. At this date, the Cambridge Fabian Society was one of the few student clubs open to women. Socialism was by this date very much ‘in the air’; something that students were aware of, whether or not they approved or opposed it. When a group of students ran amok in November 1905, injuring passersby in the street and vandalizing stores, the president of the Union Society made direct mention of socialism in the apology that he had printed on The Cambridge Review. The point was not that these miscreant students were branded as socialists, but rather that a riotous act by privileged Cambridge students would strengthen the rhetoric that socialists directed against the wealthy; the apology thus demanded that students recognize their social responsibility. Nevertheless, and as we have seen, some students at least were attracted to socialism. According to Edward Pease (1857‐1955), who served as secretary to the London Fabian Society, university societies were “fashionable organization[s]”, and membership tended to expand, “when an undergraduate of force of and the first installment of an Old Age Pensions scheme became law without having met any serious opposition in either House of Parliament.” 37 R.W. “Dicky” Coit, “the real father of the C.U.F.S.,” (Townsend 1918, 9) was the son of Stanton Coit, a moral reformer who had founded a socialist journal in the 1890s. Amber Reeves was a daughter of William and Maud Pember‐Reeves, both of whom were well acquainted with left‐wing intellectuals, and William became the Director of the LSE in 1908‐1919.
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character and high social position, the heir to a peerage for example, [became] for the moment an ardent Socialist” (Pease 1963, 194).38 In his biography of Keynes, Skidelsky (1983,239‐240) described the Cambridge University Fabian Society as a community centered on Rupert Brooke, a Kings undergraduate whose poetry and personal beauty were well known and much remarked. The Society must have been an attractive, ‘fashionable organization’ for the Cambridge students. The main activity of the Cambridge University Fabian Society was to organize meetings. In its first full year 1906/7, high profile speakers such as H.G. Wells, James Keir Hardie, and Beatrice Webb visited and spoke at Cambridge. H.G. Wells, popular writer and then in his Fabian period (he would later leave somewhat acrimoniously) presided at a discussion meeting at Newnham College and answered questions from students. Wells stressed that socialism does not necessarily mean Marx’s doctrines and that the work of Fabian socialists such as Sidney Webb and Sidney Olivier should be held as high as that of Marx in its constructive vision of socialism. Keir Hardie’s visit to Cambridge in February 1907 generated a scandal that attracted the attention of the national newspapers.39 An avowed opponent of both the Boer War and Indian colonial policy, Keir Hardie was already a controversial figure in his own right; but growing hostility towards the Labour Party must also have fueled the fire. At the dinner held before the meeting, some students screwed the door of the room shut intending to detain the socialist speaker. But this Keir Hardie was a decoy – a student in disguise – and the real Keir Hardie proceeded to appear on the stage of the Cambridge Guildhall where he was supposed to give a speech. Seeing him, the students who had tried to keep him prisoner were reportedly “hugely astonished” (The Cambridge Review, February 21, 1907); nevertheless, they made so much noise and uproar at his speech that the meeting had to be cancelled. Members of the University Fabian Society forced their way into the agitated crowd and guided Keir Hardie from the Guildhall to King’s College. As with the student mayhem mentioned above, The Union Society again posted an apology in the Cambridge Review (the president of the Union when this incident occurred, E.G. Selwyn, was a member of the University Fabian Society40). The following month, Beatrice Webb gave a lecture on “The Faith We Hold.” Webb at this time was a member of the Royal Commission on the Poor Laws, and the meeting attracted a large audience. Since the Fabian News (May 1907) reported that several well‐known orthodox economists attended the lecture, it is likely that Marshall, Pigou, and others listened to Webb’s speech – allegedly they “preserved a discreet silence”, and so it seems 38
However, many of the students who became members of the society seem to have lost interest in social problems and did not participate in the activities of the society after they graduated from university: “On the whole it is true that Socialists are born and not made” (Pease 1963, 194). 39 Townsend (1918, 11‐12); Dalton (1953, 45‐46); Benn (1992, 223). 40 Fabian News, Dec. 1907. Selwyn became an official member of the University Society after Keir Hardie’s incident. Dalton (1953, 51‐52) remarked that no socialist had been elected president of the Union until 1925.
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that they did not engage Webb in discussion at the meeting. A disregard or even disdain for academic economists by the Fabians can be detected in their report of the meeting. The Fabian Society proposed radical measures to allay distress among the laboring classes, advocated by able writers and social investigators and supported by the active publications of pamphlets; from their perspective academic economists tended to defend the status quo with abstruse theories.41 When George Barnard Shaw gave a lecture at Cambridge in the following year (1907/8), an undergraduate criticized him in a letter sent to the editor of the Cambridge Review, and the subsequent exchange demonstrates that economics was playing a key role in the Cambridge students’ socialist movement.42 The student was Charles Webster (1886‐1961), history student at King’s College, and he complained in the letter that Shaw was contradicting himself when he called for increased taxes for the wealthy while noting the danger of capital flight (Shaw was a pro‐tariff socialist).43 Frederick Keeling (1886‐1916), one of the founding members of the university’s Fabian Society, and Dudley Ward (1885‐1957), member of the Society and economics student, responded to Webster in their letters to the same periodical by repeating Shaw’s remark that taxes upon incomes from foreign investment would prevent foreign transfer of capital. Keeling further insisted that the greater good of socialism justifies certain sacrifices and that capital flight could never in itself be a sufficient reason to reject socialism. Webster submitted a reply to the periodical, arguing that it is practically impossible to enforce such taxes and also noted that taxes upon the wealthy would discourage saving and hence bring down investment. Finally Shaw sent a letter to the
41
This tendency is noticeable in the book review section of the Fabian News. In his review of Suthers’s My Right to Work, Edward Pease criticized economic theory in general. “The abstractions of political economy are as useless for dealing with unemployment as the abstractions of ethics for settling a Belfast riot. . . When politicians have reduced unemployment by common sense remedies, the economists will come along and explain how the new facts are really in accord with the old abstractions, as properly interpreted. And that is about all that abstract economics is good for” (Fabian News, Sep 1906). Again, Pease’s review of Skelton’s Socialism: Critical Analysis contains the following remark: “Being a professor, Dr. Skelton naturally adopts the typical professorial attitude in one respect. Every true professor of Economic Science deems himself to be born into a world which has just entered on the culminating period of its existence. The past is to him a dreary record of mistakes: the future a dangerous jungle of experiments. The present is the acme of perfection. So Dr. Skelton explains that governmental sick insurance, as in Germany at the time he wrote, of labor bureaus, of workmen’s compensation, is proper and right; but non‐contributory old age pensions is ‘regrettable,’ if justified by ‘concrete difficulties.’ If he had started his essay a year or two later, old age pensions would have passed into the golden present, on which the professorial eye would have glanced glad approbation” (Fabian News, Oct 1912). 42 Articles cited in this paragraph are found respectively in Cambridge Review, Oct 31, Nov 7, Nov 14, and Nov 28, 1907. 43 According to Green (1995), the Fabians shared pro‐tariff views with the Chamberlainite imperialists. The Fabians saw a tariff as a way to remedy problems arising from economic laissez faire and free trade, which were also the main target of criticism from the imperialists (the historical economists among them). The above two camps jointly formed the Co‐Efficients Club in 1902 although two years later, the imperialist camp broke away and founded a new club.
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periodical two weeks after Webster’s last letter, but Shaw’s response was cryptic and would not have satisfied Webster.44 In the following academic year (1908/9), Sidney Webb visited Cambridge in the middle of his national lecture tour, in which he was promoting the Minority Report of the Poor Law Commission. In 1910/11, the activities of the Cambridge University Fabian Society grew more intense, with lectures by high profile speakers such as J.A. Hobson, Henry Hyndman, and Philip Snowden held almost on a weekly basis. Such active political movement naturally generated a strong response. The Cambridge Review devoted more than one page to report on Snowden’s speech (the standard report was but one paragraph); and a reader who called himself a ‘Radical’ complained that, despite the low intellectual level of Snowden’s speech (allegedly not up to the Cambridge standard), it demonstrated political bias to report it at such length while not saying a word about meetings of the University Liberal Club or the Unionist Carlton Club.45 In October 1911 the Anti‐Socialist Union discussed above also founded a university organization at Cambridge, and a fierce, though not intellectually productive, debate with the Cambridge University Fabian Society ensued.46 A course on socialism was provided by an economist at Cambridge in this period. The course was not offered in the Economics Tripos, but it was sponsored by the Local Lecture Syndicate held in the evening, it could be attended on payment of a fee by people other than regular Cambridge students. The lecturer was Sydney Chapman (1871‐1951), Marshall’s former student who had taken Part II of the Moral Sciences Tripos two years before Pigou and was now Professor of Political Economy at University of Manchester. Consisting of six lectures in the Lent (spring) term of 1910, Chapman’s course focused on the intellectual and economic origins of socialism, the history of socialist doctrines, the theories of Marx and later socialists, contemporary socialist movements in Europe, and the lessons of British economic policy. In good old Marshallian fashion, Chapman called for the development of the capacity of young people in order to influence the forces that determine income distribution. More concretely, he suggested that the money spent on old age pensions could be diverted to education and training.47 By 1910 socialism had thus not only arrived at the University of Cambridge but also caused something of a stir. Economics lecturers also had various contacts – both direct and indirect – with this surge of political movement in the University. First of all, many of the students engrossed in socialism took courses on economics. One of the founders of the University Society, Frederick Keeling, attended Marshall’s lectures in the year 1907/8, after obtaining a 44
Sweezy (1949) noted that Shaw’s understanding of economics was grounded on the Henry George‐style labor theory of value. Sweezy concluded that the Fabians’ lack of understanding of modern economics was to blame for the disregard for distribution in Fabian socialism (and for the Labour Party’s policy reputedly based upon Fabian ideas). 45 Cambridge Review, May 25, 1911. 46 Fabian News, May 1911. 47 Cambridge Review, Jan 27, Feb 10, Feb 17, Feb 24, Mar 3, and Mar 10, 1910.
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First in Part II of the History Tripos (Townsend 1918, 21). Dudley Ward, the Society member who defended Shaw, studied economics and was elected a fellow of St. John’s College in 1909.48 Hugh Dalton (1887‐1962), who completed Part II of the Economics Tripos with a second in 1910, and Gerald Shove (1887‐1947), who completed it with a first the following year,49 were in the circle of Rupert Brooke and served in the executive positions of the Society.50 Having taken a first in the History Tripos in 1906, C.R. Fay (1884‐1961) became a colleague of Marshall and Pigou and a lecturer in economic history from 1907, but he also became a member of the Cambridge University Fabian Society the same year. It is likely that he had already had some relationship with the Fabian Society because he had won a Shaw studentship and worked at the LSE in the previous year. Fay’s research reflected this political inclination. He wrote a book and an article on agricultural cooperation, respectively, in 1908 and in 1910, and sent an essay on Chartism to Keynes in 1911.51 After serving in the army, he also participated in the same Society – although it had by then changed its name to Cambridge University Labour Club – until he became the Professor of Economic History at the University of Toronto in 1921. Other economists and related lecturers participated in the activities of the Fabian Society without becoming official members. Walter Layton (1884‐1966), who started teaching economics in the academic year 1908/9 after taking a First in the Economics Tripos of 1907, and historian and philosopher G. Lowes Dickinson (1862‐1932), who lectured on politics in the Economics Tripos, took part in the Society’s activities by serving as the chair and giving speeches at the meetings. Layton was a friend of Keeling at Trinity College, and Dickinson was close to Dalton and Brooke, his students at King’s College.52 Because of their personal relationships and shared support for non‐economic issues such as women’s suffrage and pacifism, they would have been readily available to cooperate with the Fabian Society. Afterwards Layton played an influential role in the Liberal Party and became the editor of 48
There is no lecture given by Dudley Ward on the list of lectures in the Cambridge University Reporter of 1909. In 1910, rather than continue socialist agitation, Ward began working for The Economist; he subsequently served in the Treasury during the war and became a banker after the war. See Edwards 1995, 495‐6. 49 Geoffrey Toulmin (1888‐1953), who finished the Economics Tripos with a first in 1911, was also a King’s man and a member of the CUFS. But his name does not appear either in Dalton (1953) or Hale (1998). 50 Dalton (1953, 46) recollected how he had been deeply impressed to see KeirHardie unmoved by the crowd at his lecture and at this point he became a committed socialist. Later Dalton became an influential Labour politician. Shove, on the other hand, told Keynes that he despised Keeling’s dogmatic attitude,50 but he remained in the Society at the time of his completion of the Tripos in 1911. Later Shove ran a journal titled War and Peace for Norman Angell, journalist and later Labour MP, and worked on farms as a conscientious objector during the war. 51 In a letter to Keynes (Fay 1/20, Marshall Library, Cambridge, http://www.econ.cam.ac.uk/marshlib/archives/fay.pdf). 52 “I [Keeling] attended the last meeting of that body in October, 1904, along with another freshman, W. T. Layton, whom I persuaded to come with me, although he protested his fidelity to sound economic truth” (Townsend 1918, 9). “I [Dalton] knew him [J.M. Keynes] better than Pigou, less well than Dickinson” (Dalton 1953, 60). See also pp. 56‐57 in the latter book.
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The Economist, while Dickinson helped launch a campaign for the League of Nations during the First World War. J.M. Keynes, who left the India Office and returned to Cambridge in 1908, enjoyed a close relationship with the Fabian Society members at King’s College, such as Brooke, Dalton, and Shove. Biographers of Keynes agree that Keynes harbored sympathies with socialism in this period (Clarke 1978, 132; Skidelsky 1983, 241). In the Union debate in February 1911, he spoke in support of the motion “That the progressive reorganisation of society along the lines of Collectivist Socialism is both inevitable and desirable” (Skidelsky 1983, 241); and he described a 1913 lunch with Beatrice Webb as a “deep spiritual experience.” Later, in his essays, “Short views on Russia” and “Liberalism and Labour,” written after the First World War, he made favorable comments on socialism. Unlike many of his colleagues whom I have discussed above, there is no record that Pigou took part in the activities of the Cambridge University Fabian Society; he thus seems to have distanced himself from the organization. This is in sharp contrast with his active involvement in the political campaign for free trade. Even so, it is very unlikely that Pigou remain undisturbed by such an active movement occurring in such proximity, and there is at least indirect evidence to show that he was trying to respond to this intramural political group. In these years he initiated various lecture courses in the Economics Tripos that appeared perfectly suited to the general atmosphere at Cambridge that has been described in this section. For example, Pigou offered a course on ‘wages and conditions of employment’ in the years 1908/9 and 1909/10; and another on ‘economic principles in relation to some practical problems’ in the years from 1911/2 through 1914/5. The Cambridge Review reported on the latter course in 1912/3: following an introductory lecture, the course consisted of six lectures, each dealing with a separate topic: “employers and economic chivalry,” “the principle of the minimum wage,” “the principle of laissez‐faire in practice,” “the housing problem,” “advantages and disadvantages of international trade,” and “the uses and abuses of statistical reasoning.” It was announced that these lectures did not require prior knowledge from economics, and were thus intended to attract a wide audience. The content of some of these lectures can be estimated from works published by Pigou in the same period with a similar title. The essay “Employers and economic chivalry”, for example, was written in 1913 and included in his 1923 collection of essays. This essay started from where Marshall’s famous 1907 essay left off and discussed in a morally charged tone what employers could do for their employees. Pigou observed that employers were in a situation to set the standard and tone of the working environment, in which workers spent most of their lives, and as such their position and responsibility was more crucial than that of charity organizations in terms of improving employees’ lives. Pigou asserted that
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employers could follow their more enlightened competitors, who treated their employees as active partners and created safe, hygienic, and cultural working environment.53 Again, Pigou’s lecture on the housing problem can be gauged by the lecture given on a different occasion in this same period: a lecture on housing delivered at the University of Manchester in January 1914, which was published together with one by Seebohm Rowntree that had been delivered on a different occasion. Pigou’s lecture presented his general views on welfare policy in relation to minimum wages, state medical and unemployment insurance, and the principle of laissez‐faire.54 Pigou first stated that it is the state’s duty to set the minimum standard for housing conditions such as area per resident and appearance of buildings, and also insisted that the effect of housing upon children makes it a more urgent issue than the regulation of the working environment. He partly admitted the argument that attributed the housing problems of the poor to their ignorance and idleness and he acknowledged that moral persuasion by landlords and municipal workers could have significant effects. However, he stressed that some low‐waged workers who lived in sub‐standard housing simply could not afford proper housing, and he argued for some form of public subsidy. Pigou noted that in popular discussion state subsidies in any form were still associated with the discredited Speenhamland system, in which a sum inversely proportional to one’s income was given, and that such proposals tended to be rejected as encouraging idleness. But this latter criticism, he argued, was not applicable to housing subsidies; indeed, Pigou saw housing as somewhat akin to education, medical and unemployment insurance, for which public funds had already been dedicated by 1914. How, then, should one address this issue? Pigou rephrased what he had offered in Wealth and Welfare as follows: I myself approach this question with a major premise that some would dispute. I believe it to be right that the well‐to‐do should be summoned by the State to help their poorer neighbours whenever that summons can be enforced without evoking gravely injurious reactions upon the production of wealth, therewith, ultimately upon the fortunes of the poor themselves. (Rowntree and Pigou 1914, 62‐63)
Although he mentioned potential institutional problems, such as the possible discouragement of the private supply of houses, Pigou concluded that housing subsidies were worth serious consideration. These two lectures reveal the general drift of the lectures that Pigou gave at Cambridge during the crucial years of our narrative. His views, at least as presented in the last few paragraphs, might have appeared inadequate and overly restrained in the eyes of those students leaning towards socialism. Even so, the lectures would have left a strong 53
Pigou mainly relied on the book by the chocolate manufacturer manager Edward Cadbury, Experiments in Industrial Organization (1912). The Cadbury family were Quakers and subsidized the Liberal leaning Daily News. The Cadburys may be compared with the Rowntree family, of whom Seebohm Rowntree was a member, who were also Quakers and who subsidized the Nation. See Clarke (2004: 42‐43). 54 Flatau (1997) highlights Pigou’s take on a national minimum living standard in this essay.
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impression upon the minds of those young socialists with its clear normative position and sincere attitude towards poverty‐related issues. Pigou’s 1912 Wealth and Welfare similarly started with ethical discussion, and by way of Marshall’s concept of national dividend, he was able to discuss various proposals of state intervention both normatively and systematically. Hugh Dalton, who had left Cambridge in 1910 and was a research student at the LSE when this book was published, recalled being greatly inspired by Wealth and Welfare. His Wealth and Welfare, published in 1912 . . . changed old confusions into new clarity. It laid down sharper criteria for economic policy than I had found before. It brought out new conclusions, significant for practical action, from old generalities. It was a book that helped me, more than any other, to formulate my own approach from ethics, through politics, to economics. He was splendidly free from party or class prejudice, but he believed, as Marshall did before him, that great inequalities of wealth and opportunity are both unjust and wasteful of welfare. (Dalton 1953, 58)
Dalton thus viewed Pigou’s work as a set of old ideas rearranged to satisfy the need of the day (and his own).
6. Conclusions The essay has thus far attempted to show that Pigou’s academic activities in the early twentieth century were firmly embedded in the political atmosphere of both British society at large and also of his own university. Pigou deeply engaged in the tariff controversy, lecturing on this topic and writing articles on it from the perspective of an academic economist; he went on to publicly give professional views on the welfare legislation proposed by the government; and finally he was surrounded by active socialist students and colleagues like Keynes and Layton who supported them by participating in their activities, and gave lecture courses that reflected and in many ways clearly responded to the university atmosphere of those days. It is interesting to note that these activities commenced at the very beginning of Pigou’s career (he was twenty‐five when the economists’ manifesto was printed in the Times); and thus he needed to build up anew his own academic contribution that matched his position, the Professor of Political Economy in Cambridge University, while also engaging in policy questions in highly publicized settings. Furthermore, he did not act in the above junctions entirely on his own but he was joined by other academic economists. It is thus safe to conclude that Pigou’s involvement in policy debates, in and out of Cambridge University, was closely and seamlessly interconnected with the more academic side of his work. It is not my intention, however, to claim that Pigou’s political standpoint was altered by the above episodes. On the contrary, he would have been inclined toward liberal political views even had it not been for those events. In his very early days at Cambridge, we have seen that he expressed a liberal religious view in his speeches at the Cambridge Union Society, and moreover, there is a reason to believe that he was part of an intellectual community consisting of young progressive Cambridge scholars such as Charles Masterman, (1874‐ 21
1927) who engaged in social work among the London poor and would later become a Liberal member of Parliament, and G.M. Trevelyan (1876‐1962), a staunch Liberal historian.55 Therefore, it is reasonable to suppose that he had already held political perspectives not wholly incompatible with those manifested by the members of the Cambridge University Fabian Society a few years later.56 In any case, Pigou was never so strongly influenced by them as to take up socialist views, now were his writings regarded as socialist ones. What, then, is the relevance of the events discussed in this essay to Pigou’s eventual formulation of welfare economics? Three points can be suggested, each of them related respectively to the normative aspect of welfare economics, the issues it treated, and the evaluation of contemporary reviewers. First, we have seen Pigou using the welfare criterion involving the national dividend as the basis of his normative judgment in his 1906 article. This criterion, which would serve as the basic framework of Wealth and Welfare and the first edition of The Economics of Welfare, was first incorporated in this polemical piece of writing. Pigou himself stressed the importance of the national dividend in terms of solving social problems rather than for the sake of measurement alone; and it is evident here that he was searching for a method had normative problems to be solved. 57 This fact certainly lends itself to our claim for the link between his involvement in policy issues and his welfare economics. Second, certain commonality can be found between the subjects treated in the two fields of his activities, namely participation in the public policy debate and the publication of academic writings. For instance, land taxation was discussed in the first edition of Economics of Welfare (Part IV, Chapter IV), and the minimum wage elsewhere in the same work (Part III, Chapters XI‐XVII).58 Apart from the correspondence of the issues, however, there is another reason to claim that the events after 1906 were relevant to Pigou’s academic writing, which is concerning how these books were perceived by contemporary reviewers. As was discussed in the introductory section, these reviewers had no difficulty with placing Pigou’s works in the political spectrum of the day (and this was so even though the books were written in a scholarly and dispassionate style typical of Pigou). Pigou’s 55
Pigou wrote a chapter “Some aspects of the problem of charity” for The Heart of the Empire: Discussions of Problems of Modern City Life in England. With an Essay on Imperialism. Pigou’s friendship with Trevelyan lasted as long as he drove an ambulance on the Italian front during WWI under the unit headed by Trevelyan. 56 Some historians see the Labour Party, for which the Fabian Society provided an intellectual basis, as a continuing tradition of the Liberal Party (Green and Tanner 2007b). Describing the Fabian Society as liberal is justified to a certain extent. 57 O’Donnell (1979) points to apparent similarities between Henry Sidgwick’s normative approach to economics in his The Principles of Political Economy and Pigou’s in Economics of Welfare, thus suggesting the former’s influence upon the latter. Indeed, Sidgwick’s attempt to link ethics and economics would have supplied Pigou with a broad model in light of which he developed his own. However, concrete components of Pigou’s welfare economics such as national dividend were discussed and incorporated in different contexts, which this paper has highlighted. 58 Pigou investigated income redistribution in general (Wealth and Welfare, Part III) and unemployment remedies (Wealth and Welfare Part IV, Ch IX; Economics of Welfare Part VI, Ch XI).
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welfare economics thus seems to have been acknowledged as a sincere attempt to address such urgent issues as poverty and income inequality. It would be more reasonable to consider the various contacts with contemporary politics as a necessary condition of producing such engaging works than to suppose that those contacts were irrelevant altogether.59 To sum up, Pigou’s welfare economics was shaped by many contemporary social and political influences. Primarily for this reason, it was considered to represent a clear departure from more individualistic and less interventionist views of Pigou’s predecessors, most notably Sidgwick and Marshall. It was indeed a ‘sanguine science’ that Pigou had developed, with a modern spirit and pointing at new tasks for economists, and it was not merely an internal disciplinary development of economics but also formed part of the wider social movement toward broader democracy that was taking place in the United Kingdom in the early twentieth century.
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This interpretation would be somewhat analogous to Steven Shapin and Simon Schaffer’s (1985) treatment of Thomas Hobbes’s criticisms to Robert Boyle’s experimental physics, namely that a socio‐political transformation reveals the crucial impact of knowledge production upon social order. Schaffer and Shapin argue that Hobbes criticized Robert Boyle’s experimental method because he supposed that such methods of producing knowledge would undermine the authority of accepted knowledge and hence disrupt social order.
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