The Economics of Welfare [1920]
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The Online Library of Liberty A Project Of Liberty Fund, Inc. Arthur Cecil Pigou, The Economics of Welfare [1920] The Online Library Of Liberty This E-Book (PDF format) is published by Liberty Fund, Inc., a private, non-profit, educational foundation established in 1960 to encourage study of the ideal of a society of free and responsible individuals. 2010 was the 50th anniversary year of the founding of Liberty Fund. It is part of the Online Library of Liberty web site http://oll.libertyfund.org, which was established in 2004 in order to further the educational goals of Liberty Fund, Inc. To find out more about the author or title, to use the site's powerful search engine, to see other titles in other formats (HTML, facsimile PDF), or to make use of the hundreds of essays, educational aids, and study guides, please visit the OLL web site. 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Author: Arthur Cecil Pigou About This Title: Pigou develops the concept of externalities at some length and uses their existence as a justification for government intervention. PLL v6.0 (generated September, 2011) 2 http://oll.libertyfund.org/title/1410 Online Library of Liberty: The Economics of Welfare About Liberty Fund: Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals. Copyright Information: The text is in the public domain. Fair Use Statement: This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit. PLL v6.0 (generated September, 2011) 3 http://oll.libertyfund.org/title/1410 Online Library of Liberty: The Economics of Welfare Table Of Contents Preface to the Third Edition (1928) Note to the Fourth Edition (1932) Part I: Welfare and the National Dividend Chapter I: Welfare and Economic Welfare Chapter II: Desires and Satisfactions Chapter III: The National Dividend Chapter IV: What Is Meant By Maintaining Capital Intact Chapter V: Changes In the Size of the National Dividend Chapter VI: The Measurement of Changes In the Size of the National Dividend Chapter VII: Economic Welfare and Changes In the Size of the National Dividend Chapter VIII: Economic Welfare and Changes In the Distribution of the National Dividend Chapter IX: Reactions Through the Numbers of the Population Chapter X: The National Dividend and the Quality of the People Chapter XI: The Method of Discussion to Be Followed Part II: The Size of the National Dividend and the Distribution of Resources Among Different Uses Chapter I: Introductory Chapter II: The Definition of Marginal Social and Private Net Products Chapter III: The Values of Marginal Social Net Products and the Size of the National Dividend Chapter IV: Rates of Return and the Values of Marginal Private Net Products Chapter V: The Effects of Eliminating Obstacles to Movement Chapter VI: Hindrances to Equality of Returns Due to Imperfect Knowledge Chapter VII: Hindrances to Equality of Returns Due to Imperfect Divisibility of the Units In Terms of Which Transactions Are Conducted Chapter VIII: Hindrances to Equality of Returns Due to Relative Variations of Demand In Different Occupations and Places Chapter IX: Divergences Between Marginal Social Net Product and Marginal Private Net Product Chapter X: Marginal Private and Social Net Products In Relation to Industrial Forms Chapter XI: Increasing and Decreasing Supply Price Chapter XII: State Regulation of Competitive Prices Chapter XIII: State Regulation of Supplies Chapter XIV: The Conditions of Monopolisation Chapter XV: Monopolistic Competition Chapter XVI: Simple Monopoly Chapter XVII: Discriminating Monopoly Chapter XVIII: The Special Problem of Railway Rates Chapter XIX: Purchasers' Associations Chapter XX: Intervention By Public Authorities Chapter XXI: Public Control of Monopoly PLL v6.0 (generated September, 2011) 4 http://oll.libertyfund.org/title/1410 Online Library of Liberty: The Economics of Welfare Chapter XXII: Public Operation of Industries Part III: The National Dividend and Labour Chapter I: Industrial Peace Chapter II: The Classification of Industrial Differences Chapter III: Voluntary Arrangements For Conciliation and Arbitration Chapter IV: Mediation Chapter V: Coercive Intervention Chapter VI: An Analytical View of Industrial Peace Chapter VII: Hours of Labour Chapter VIII: The Methods of Industrial Remuneration Chapter IX: The Distribution of Labour Among Occupations and Places Chapter X: Employment Exchanges Chapter XI: Unemployment Versus Short Time Chapter XII: The Practicability of Interference to Raise Wages Chapter XIII: Methods of Engaging Labour Chapter XIV: Interference to Raise Wages In Places and Occupations Where They Are Unfair Chapter XV: Fair Wages Inside Particular Industries Chapter XVI: Fairness As a Variable Relation Chapter XVII: Interference to Raise Wages In Places and Occupations Where They Are Already Fair Chapter XVIII: Wage Rates and Capacity Chapter XIX: A National Minimum Time-wage Chapter XX: Fixed and Fluctuating Wage Rates In Particular Industries Part IV: The Distribution of the National Dividend Chapter I: The General Problem of Disharmony Chapter II: Pareto's Law Chapter III: The Supply of Capital and Labour Chapter IV: Inventions and Improvements Chapter V: The Manipulation of Wages Chapter VI: Rationing Chapter VII: Subsidies to Wages Chapter VIII: Direct Transferences From the Relatively Rich to the Relatively Poor Chapter IX: The Effect On the National Dividend of the Expectation of Transferences From the Relatively Rich Chapter X: The Effect On the National Dividend of the Expectation of Transferences to the Poor Chapter XI: Bounties On Things Purchased By the Poor Chapter XII: The Effect On the National Dividend of the Fact of Transference From the Relatively Rich to the Poor Chapter XIII: A National Minimum Standard of Real Income Appendix I Uncertainty-bearing As a Factor of Production Appendix Ii the Measurement of Elasticities of Demand Appendix Iii a Diagrammatic and Mathematical Treatment of Certain Problems of Competition and Monopoly PLL v6.0 (generated September, 2011) 5 http://oll.libertyfund.org/title/1410 Online Library of Liberty: The Economics of Welfare [Back to Table of Contents] PREFACE TO THE THIRD EDITION (1928) IN preparing this revised third edition, I have removed a number of minor errors and have made, I hope, some improvements in analysis and exposition. I have also tried, so far as possible, to bring my references to facts and laws up to date. The main changes in the structure of the book are as follows. A portion of what used to be Chapter VIII. of Part IV. and the Appendix entitled "Taxes on Windfalls" are omitted, as the matters there discussed are now dealt with in A Study of Public Finance. The following Chapters are new: Part I., Chapter IV.; Part II., Chapter VIII.; Part III., Chapter XVI.; Part IV., Chapter VII. Chapter XI. of Part II. replaces, under a new title, what used to be Chapter X. and has been entirely rewritten. The first five divisions of Appendix III., which are concerned with the subject-matter of that Chapter, are also new. In these divisions I have made free use of an article entitled. "An Analysis of Supply," which appeared in the Economic Journal in June 1928; and in the new Chapter VII. of Part IV. I have used part of an article on "Wage Policy and Unemployment," which appeared in the same journal in September 1927. The scheme of the book, which is displayed in more detail in the Analytical Table of Contents, is as follows. In Part I. it is argued, subject, of course, to a large number of qualifications, that the economic welfare of a community of given size is likely to be greater (1) the larger is the volume of the national dividend, and (2) the larger is the absolute share of that dividend that accrues to the poor. Part II. is devoted to a study of certain principal influences of a general kind by which the volume of the dividend is affected, and Part III. to a study of influences specifically connected with labour. In Part IV. the question is raised in what circumstances it is possible for the absolute share of the dividend accruing to the poor to be increased by causes which at the same time diminish the volume of the dividend as a whole; and the relation of disharmonies of this character, when they occur, to economic welfare is discussed. The two Parts contained in the first edition, which discussed respectively the Variability of the National Dividend and Public Finance, are omitted from this, as they were from the second edition. Their subject-matter is now treated more fully in my Industrial Fluctuations and A Study in Public Finance. I have done my best, by restricting as far as possible the use of technical terms, by relegating specially abstract discussions to Appendices, and by summarising the main drift of the argument in an Analytical Table of Contents, to render what I have to say as little difficult as may be.