ffesMee Vol, 53, No. 4, Oct, 2002 Alfred MarShall on Human CapitalandFuture Generations Tamotsu Nishizawa I hold that the most important capital of a nation is that which is invested in the physical, mental, and moral nurture of its people. (Marshall to the Editor of 7";he Tla;mes, 13 November 1909) growing earnestness of the age. [ibid: 2-4] 1. Introduction : `The Spirit of the Age' -1 Pigou addressed in the same kind of spirit Reviewing Marshall's Principles of Eto- in his inaugural lecture as the Cambridge nomics, Edgeworth wrote that there was one Professor of Political Economy as successor element there to be searched in vain among of Marshall : `The least imaginative among the older economist `the modern element, us sometimes sees with vividness the faces of the spirit of the age', which prompted the the suffering and the degraded who have been question : `Is it necessary that large numbers worsted in the industrial struggle. ..No doubt, of the people should be exclusively occupied those who feel these things most keenly are with work that has no elevating character ?' not always economists'. He should be glad if [Edgeworth 1890: 12] a man comes to Economics because of his In the "Introduction" of his Pim'nciples, interest in Edgeworth's Mathematical ky- Marshall stated ' chics or Fisher's APPreciation and interest. ' In addition to the Residuum, there are vast But he should be far more glad `if he comes numbers of people both in town and coun- because he has walked through the slums of try who are brought up with insufficient London and is stirred to make some effort to food, clothing, and house-room; whose help his fellow-men'. `Wonder', Carlyle said, education is broken off early in order that `is the beginning of philosophy':`Social they may go to work for wages;who enthusiasm', Pigou added, `is the beginning of thenceforth are engaged during long hours economic science'. [Pigou 1908 : 12-13] in exhausting toil with imperfectly nouri- Edgeworth continued his "Review" as fol- shed bodies, and have therefore no chance lows. Marshall declared against the pre- 1 of developing their higher mental faculties. tended harmonies of economic optimism ; he [Marshall 1961A : 2-3] broke with the `hangers-on of the science who used it simply as an engine for keeping the And observing the steady progress of the working-classes in their place'. He was working classes in the 19th century, he posed preceded by Adolph Wagner and F. A. the question `whether it is really impossible Walker, by Jevons, and Sidgwick who best that all should start in the world with a fair taught that `the art of political economy does chance of leading a cultured life, free from not necessarily consist in inaction' and was to the pains of poverty and the stagnating influ- found modern `welfare' economics. But in ences of excessive mechanical toil ' and this some sense more convincingly Marshall ' question is being pressed to the front by the reasoned that `it would be theoretically pos- 306 ff es M ee sible for a government by fiscal arrange- ments admittedly within in its province, by a 596] Generally speaking, Pigou･ argued, `every- nicely adjusted system of taxes and bounties, body prefers present pleasures or satisfac- to increase the welfare of its citizens'. While tions of given magnitude to future pleasures thus recoiling from extreme individualism or satisfactions of equal magnitude'. It the author of the Pri'ncipies `may be suspected implies that `our telescopic faculty is defec- of leaning towards a moderate socialism'. tive', and `we see future pleasures, as it were, [Edgeworth 1890:12-13;Hutchison 1953: on a diminished scale'. Thus `people distrib- 47]. ute their resources between the present, the As is well-known, in his Preface to industi y near future and the remote future on the and 7'hrade, Marshall described how he `devel- basis of a wholly irrational preference'. oped a tendency to socialism', which was Mortality provides a further check to taking fortified later on by J. S. Mill's posthumous the long view. For a person who carries out "Chapters on Socialism" in the Fbrtnightly long-term investment, `the satisfaction with Review (1879). But as he wrote to Helen which his desire is connected is not his own Bosanquet (28 September 1902), `it is more satisfaction, but the satisfaction of somebody important to dwell on the truths in Mill's else, ..possibly somebody quite remote in Liberly than on those in his ESsays on Social- blood or in time, about whom he scarcely ism [i. e. "Chapters on Socialism"]'. [Whita- cares at all'. Practically these discrepancies ker II: 399] between desire and satisfaction work them- selves out to the injury of economic welfare, by checking the creation of new capital and 2. Cambridge Tradition on Welfare and encouraging people to use up existing capital Future Generations to such a degree that larger future advan- 2. 1 `Defective Telescopic Faculty' tages are sacrificed for smaller present one. Recently David Collard, in his stimulating [Pigou 1920: 25-27] article "Pigou and Future Generations: A The same slackness of desire towards the Cambridge Tradition", argued for a strong future distant satisfactions was also respon- Cambridge tradition (Sidgwick-Marshall- sible for `a tendency to wasteful exploitation Pigou-Ramsey) against discounting future of Nature's gift'. Using enormous quantities utilities and the injury of economic welfare. of coal in high-speed vessels, `we cut an hour Pigou stressed `defective telescopic faculty' off the time of our passage to New York at and held that the present generation would the cost of preventing, perhaps, one of our devote too few resources to investment in descendants from making the passage at all'. human capital and undertakings, the return [ibid: 28] In the general issue of depletable from which would be distant. He linked his resources and natural resource conservation argument with the controversies about eco- Pigou was anticipated by Jevons who grap- nomic environment and natural resource con- pled with similar issues in 7ZVze Coal Ques- servation. This Cambridge tradition held that tion : An inquiay Conceming the Pragress of issues of generational justice left an impor- the Alketion and the Probable Exhaustion of tant role for the state and could not be our Coal Mines (1865)i). resolved simply at the level of the individual Pigou linked his argument to the Conserva- or the family. Pigou's VVizalth and Wb4i2zre tionist Movement which was at its peak at (1912), and later Economics of I)VizijZire about the time that he was writing Vltlealth (1920) was `the apogee' of this Cambridge and VTle4XZzre. His contemporary L. C. Gray tradition and the most explicit and extensive put the link:`This issue is the problem of treatment of this issue. [Collard 1996: 585, adjusting the conflict between the interest of Alfred Marshall on Human Capital and Future Generations 307 present and future'. [Collard 1996:] The would benefit both future generations and the adjustment, for Pigou, was a matter for the present poor without significantly affecting state, rather than the family: Pigou argued current national income. This Cambridge that because of our defective telescopic fac- tradition (Marshall-Pigou-Ramsey) con- ulty and the weak links provided by blood stituted a thread of immanent criticism which and time the state should have a positive led to a very positive role for the state in role: investment decisions, particularly those relat- There is wide agreement that the State ing to humari capital. [Collard 1996:595, should protect the interests of the future in 596]2) some degree against the effects of our ir- In contrast with Pigou's and Sidgwick's rational discounting and of our preference stress on the role of the state, for Marshall for ourselves over our descendents.... It is the family and the individual were rather the clear duty of Government, which is the more central and strategic to economic prog- trustee for unborn generations as well as ress and growth. The `family affection' was l for its present citizens, to watch over, and, not merely an engine of saving, capital accu- 1 : if need be, by legislative enactment, to mulation, and economic growth, it was, for defend, the exhaustible resources of the Marshall, a vehicle for human improvement country from rash and reckless spoliation'. and generational enhancement. Marshall had 1 [Pigou 1920: 28-29] emphasized a more crucial role for strong individuality, the family, and the intermedi- In his invocation of the state as the vehicle ate organizations and institutions rather than for taking a longer view than individuals and the state. He put his trust in education, 1 families, it is clear that Pigou was following morality, altruism, together with the growth Mill and Sidgwick. Sidgwick argued, in "The of knowledge and intellectual power. The 1 Art of Political Economy" of Tlhe Pn'nciples best that people could do was to leave the of Pblitical Economp : `if .it is economically `strongest and most vigorous progeny' with a advantageous to a nation to keep up forests, good physical, mental, and moral education. 1 on account of their beneficial effects in Throughout, Marshall emphasizes the evolu- : moderating and equalizing rainfall, the tion of `prudential behaviour', `the habit of 1 advantage is one which private enterprise has vividly realizing the future and providing for no tendency to provide; since no one could iV. [ibid: 591] appropriate and sell improvements in cli- Marshall wrote in the chapter on "Indus- mate'. [Sidgwick 1883 : 406-7] trial Training": Most parents are willing enough to do for 2. 2 Pigou and Marshall their children what their own parents did Collard's arguments are particularly inter- for them; and perhaps even to go beyond it esting because of his emphasis on `the if they find themselves among neighbours Marshall-Pigou fascination with human capi- who happen to have a rather higher stan- tal'.