A.C. PIGOU AND THE ‘MARSHALLIAN’ THOUGHT STYLE A STUDY IN THE PHILOSOPHY AND MATHEMATICS UNDERLYING CAMBRIDGE ECONOMICS Karen Lovejoy Knight PALGRAVE STUDIES IN THE HISTORY OF ECONOMIC THOUGHT Palgrave Studies in the History of Economic Thought Series Editors Avi J. Cohen Department of Economics York University and University of Toronto Toronto, ON, Canada G.C. Harcourt School of Economics University of New South Wales Sydney, NSW, Australia Peter Kriesler School of Economics University of New South Wales Sydney, NSW, Australia Jan Toporowski Economics Department SOAS, University of London London, UK Palgrave Studies in the History of Economic Thought publishes contri- butions by leading scholars, illuminating key events, theories and indi- viduals that have had a lasting impact on the development of modern-day economics. The topics covered include the development of economies, institutions and theories. More information about this series at http://www.palgrave.com/gp/series/14585 Karen Lovejoy Knight A.C. Pigou and the ‘Marshallian’ Thought Style A Study in the Philosophy and Mathematics Underlying Cambridge Economics Karen Lovejoy Knight Independent Scholar Duncraig, WA, Australia Palgrave Studies in the History of Economic Thought ISBN 978-3-030-01017-1 ISBN 978-3-030-01018-8 (eBook) https://doi.org/10.1007/978-3-030-01018-8 Library of Congress Control Number: 2018959362 © The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and trans- mission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © Chronicle / Alamy Stock Photo This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland In loving memory of my father V.C. (Peter) Burton— Busy boy Burton who borrowed biros and buried himself in books Preface My interest in the economic thought of A.C. Pigou arose when studying welfare analysis and the challenges to Pigou’s method that emerged dur- ing the 1930s. This stimulated an interest in how economic ideas become accepted, both in a disciplinary sense and in the wider acceptance of economic “facts” as they are perceived by the general public. Reviewing how Pigou was perceived by historians over the course of time revealed, however, a general change in perspective as to his lineage as a Marshallian economist. I noticed that in more recent times Pigou’s discontinuity, rather than continuity, with Marshall’s style of economic thinking tended to be emphasised. Views of Pigou as overly mechanistic and deterministic seemed at odds with the general philosophical stance that he presented in his collected philosophical essays and with his interest in and contribu- tion to psychical research. As such, this study was motivated by a desire to understand these opposing conceptions of Pigou as a Marshallian economist by taking account of Pigou’s philosophical views and their relevance to his economic analyses. Duncraig, WA, Australia Karen Lovejoy Knight vii Acknowledgements I’d like to thank Michael McLure and Robin Ghosh at the University of Western Australia who provided invaluable guidance, support, advice, and scholarship during the completion of this project. A very special word of thanks is also due to Greg Moore for his valued support and comments. The book is in part a result of substantial archival research undertaken in the United Kingdom. I would like to acknowledge the kind assistance of: Patricia McGuire, the archivist at the King’s College Archive Centre in Cambridge; Rowland Thomas, the librarian at the Marshall Library Archive in 2012, and Simon Frost, deputy librarian at the Marshall Library in 2012; Angharad Meredith, Harrow School’s archivist; Alysoun Sanders, the archivist at Macmillan Publishers Limited; and Helen Cunningham, the archivist at the Cumbria County Council. I would like to thank Geoff Harcourt and Robert Leeson for providing helpful comments to Michael McLure in completing Karen Knight and Michael McLure’s (2016) “A.C. Pigou (1877–1959)”, in The Palgrave Companion to Cambridge Economics, edited by Robert Cord, Palgrave Macmillan, as some of this work has been included in Chap. 2, including two anecdotes that Geoff Harcourt provided on the behaviour of Pigou at Cambridge. I would also like to thank Jon Ffrench for his communica- tions regarding his grandfather’s letters, which shed some insight into the social life that Pigou was party to during the years before the First World ix x Acknowledgements War. Nahid Aslanbeigui, J.E. King, Harry Bloch, and Simon Cook and participants at conferences convened by History of Economic Thought societies in Australia, Europe, the United States of America, and Japan provided helpful comments on various aspects of this work as it developed. Many thanks also to Laura Pacey, Clara Heathcock, and editorial staff at Palgrave Macmillan, who have provided invaluable advice and assis- tance during the completion of the project. I would also like to thank Milly Main for editing services during the final stages of the project. R.F. Kahn’s unpublished correspondence has been reproduced with the kind permission of Professor David Papineau. Although every effort has been made to trace and contact copyright holders for the unpub- lished works of D. Robertson, A.L. Bowley, and W.M. Allen, it has not been possible to find their literary executors. Permission has been granted by the King’s College Archive Centre, the Cumbria Archive Service, and Roger Hiley to reproduce the photographs appearing in the book. Finally, thank you to James, Alana, Lassie, and Alfred as without your love and support this work would not have been completed. Contents 1 A.C. Pigou and the Cambridge Tradition 1 2 The Elusive A.C. Pigou 19 3 The ‘Prof’ and Marshallian Economics 79 4 The ‘Marshallian’ Thought Collective and Thought Style 115 5 Balancing the Material and the Ideal 151 6 Mathematics and Formalism in Economic Theory 205 7 Conclusion 257 Appendix A: Comparison of Sidgwick and Lotze 263 Appendix B: Moral Sciences Part II Syllabus and Recommend Texts 267 xi xii Contents Appendix C: Contents of Pigou’s Remaining Private Library 279 Appendix D: Letters on The Theory of Unemployment, Kahn 291 Appendix E: Letters on The Theory of Unemployment, Bowley 293 Appendix F: Letters on The Theory of Unemployment, Allen 299 Appendix G: Letters on The Theory of Unemployment, Robertson 305 Appendix H: Comparison, The Theory of Unemployment’s Corrigenda 307 Index 311 List of Figures Fig. 2.1 Pigou’s depiction of the aggregate labour supply curve. Citing: Aslanbeigui (1992a, p. 419) 41 Fig. 4.1 Thought styles and embedded theories. Citing: Wolniewicz’s (1986, p. 220) 123 xiii List of Photographs Photograph 2.1 A.C. Pigou (‘The Prof’) in 1952, courtesy of Peter Lofts 58 Photograph 2.2 Pigou in the Newlands House group photo in 1896. Source: Photograph courtesy of Cumbria Archive Service; reference DMar/10/2. Pigou is seated to the direct left of Caroline and Frank Marshall 59 Photograph 2.3 The climbing house, Lower Gatesgarth, courtesy of Roger Hiley 60 Photograph 2.4 1893 (Pigou standing directly behind Caroline and Frank Marshall). Source: All from this series courtesy of the Cumbria Archive Centre—Cumbria Archive Centre ref. number: DMar/10/2 61 Photograph 2.5 1895 (Pigou seated to the direct left of Caroline Marshall) 61 Photograph 2.6 1896 (Pigou seated to the direct left of Caroline Marshall) 62 xv List of Tables Table 4.1 The Marshallian thought collective 134 Table 4.2 The Marshallian thought style 138 xvii 1 A.C. Pigou and the Cambridge Tradition 1.1 Introduction The Cambridge tradition, through the largely partial equilibrium eco- nomics of Alfred Marshall and A.C. Pigou, and the Lausanne tradition, through the general equilibrium economics of Léon Walras and Vilfredo Pareto, are considered as constituting the two main schools of neoclassical economic thought. The subject matter of this book is the consideration of whether the economics of Arthur Cecil Pigou falls within the parameters of a ‘Marshallian’ thought style. Alfred Marshall established a genuine school of thought during his tenure as Professor of Political Economy at the University of Cambridge. Pigou was groomed and mentored in the Marshallian tradition of economic thinking. Indeed, Marshall was active in his support of both Pigou’s fellowship application at King’s College and Pigou’s later appointment as Marshall’s successor to the Cambridge Chair of Political Economy. Both scholars shared a similar liberal and utilitarian heritage, which had long coloured British political economy through the works of the masters, from David Ricardo to J.S. Mill. Nevertheless, there were also striking differences in Marshall’s and Pigou’s respective intellectual contexts.