Arthur Cecil Pigou 101: Who is the Famous British Economist? In this article on Zatrun.com, we will cover in detail everything you need to know about Arthur Cecil Pigou, the famous British economist that our readers are curious about.
Who is Arthur Cecil Pigou?
Arthur Cecil Pigou was an important economist from England, known for his contributions to the field of welfare economics. He was a part owner of Newlands House and became the first modern principal of the school. The school’s economics society was named The Pigou Society in his honour. In 1896, Pigou entered King’s College, Cambridge as a historical scholar and studied history under Oscar Browning.
During his time there, he won several prestigious awards, including the Chancellor’s Gold Medal in 1899, the Cobden and Burney Awards in 1901, and the Adam Smith Award in 1903. He also served as President of the Cambridge Union Society in 1900. His interest in economics was sparked by his philosophical and ethical studies within the scope of the Moral Science Tripos. He studied economics under Alfred Marshall and succeeded him as professor of political economy. Arthur Cecil Pigou’s first attempt at a fellowship at King’s, with a dissertation on “Browning as a Teacher of Religion”, was unsuccessful.
He was instrumental in the establishment and development of the School of Economics at the University of Cambridge, where he trained a generation of influential economists who would later go on to hold the chair of economics worldwide. Pigou’s wide-ranging work covered various topics such as conjuncture theory, unemployment, and public finances. Despite his enormous influence, his reputation was unfairly marred by the misrepresentation of his ideas by other economists who used his work to support their own opposing views. Although reluctant, he served on several important public committees, including the Cunliffe Committee and the 1919 Royal Commission on Income Tax.
His Academic Life
Arthur Cecil Pigou began teaching economics in 1901, and the advanced economics course for second-year students at the University of Cambridge became the basis of education for many future economists. he became a Fellow of King’s College on his second attempt in 1902 and was appointed Girdler’s Lecturer in 1904. Pigou’s extensive research into economic doctrines resulted in several influential publications that established his worldwide reputation.
Under the tutelage of Alfred Marshall, he focused on normative economics and developed a special interest in welfare economics. This field examines how social decisions, which cover individual decisions related to buying, selling, working and production and employment decisions made by firms, affect the overall social benefit.
His first article, Principles and Methods of Industrial Peace, expanded on the article that won him the Adam Smith Prize in 1903 and was by nature more philosophical than his later works. In 1908 Pigou was elected to succeed Marshall as Professor of Political Economy at the University of Cambridge, a position he held until 1943. He expressed his support for Land Value Taxation in a 1909 article by Lloyd George, which was in line with the People’s Budget and influenced by Marshall’s views. It has also inspired his views on the taxation of negative externalities.
The legacy of Arthur Cecil Pigou is his book The Economics of Welfare (1920), which introduced the concept of externalities and proposed the use of Pigov taxes to correct market failures caused by externalities. Pigou developed Marshall’s concept of externality, which is a cost imposed on others or given to others that is not explained by the person who created the benefits and costs. Pigou argued that negative externalities (costs imposed on others) should be offset by a tax, while positive externalities should be offset by a subsidy.
However, his analysis was later criticised by Ronald Coase, who argued that taxes and subsidies are unnecessary if the trading partners can negotiate over the transaction. Despite this, the concept of externality remains central to modern welfare economics and environmental economics. The Pigou Club, named in his honour, is considered to be the association of modern economists who support the idea of a carbon tax to solve the problems of climate change.
Arthur Cecil Pigou’s analysis of labour market phenomena, including sticky wages and unemployment, has been overshadowed despite later economists studying them. Sticky wages can slow down an economy’s recovery from a recession. Pigou’s book, “The Theory of Unemployment”, explains factors contributing to unemployment, including unwillingness to work at market prices. Although Keynes objected to some of Pigou’s points, they maintained a respectful personal friendship, with Pigou criticising Keynesian macroeconomics and proposing the Pigou effect on real money balances as a more self-stabilising solution.