The First Serious Optimist: A. C. Pigou and the Birth of Welfare Economics

by Ian Kumekawa

Overview

A groundbreaking intellectual biography of one of the twentieth century's most influential economists

The First Serious Optimist is an intellectual biography of the British economist A. C. Pigou (1877–1959), a founder of welfare economics and one of the twentieth century's most important and original thinkers. Though long overshadowed by his intellectual rival John Maynard Keynes, Pigou was instrumental in focusing economics on the public welfare. And his reputation is experiencing a renaissance today, in part because his idea of "externalities" or spillover costs is the basis of carbon taxes. Drawing from a wealth of archival sources, Ian Kumekawa tells how Pigou reshaped the way the public thinks about the economic role of government and the way economists think about the public good.

Setting Pigou's ideas in their personal, political, social, and ethical context, the book follows him as he evolved from a liberal Edwardian bon vivant to a reserved but reform-minded economics professor. With World War I, Pigou entered government service, but soon became disenchanted with the state he encountered. As his ideas were challenged in the interwar period, he found himself increasingly alienated from his profession. But with the rise of the Labour Party following World War II, the elderly Pigou re-embraced a mind-set that inspired a colleague to describe him as "the first serious optimist."

The story not just of Pigou but also of twentieth-century economics, The First Serious Optimist explores the biographical and historical origins of some of the most important economic ideas of the past hundred years. It is a timely reminder of the ethical roots of economics and the discipline's long history as an active intermediary between the state and the market.

Product Details

ISBN-13:	9781400885206
Publisher:	Princeton University Press
Publication date:	06/06/2017
Sold by:	Barnes & Noble
Format:	eBook
Pages:	352
File size:	4 MB

About the Author

Ian Kumekawa is a PhD candidate in history at Harvard University, where he works on the history of economic thinking.

Read an Excerpt

The First Serious Optimist

A. C. Pigou And The Birth of Welfare Economics

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By Ian Kumekawa

PRINCETON UNIVERSITY PRESS

Copyright © 2017 Princeton University Press
All rights reserved.
ISBN: 978-0-691-16348-2

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CHAPTER 1

Beginnings

IN NOVEMBER 1876, the parents of Arthur Cecil Pigou emerged from the Holy Trinity Church in Ryde, on the Isle of Wight, to the strains of Mendelssohn's Wedding March. Accompanied by a forty-five member wedding party, the couple advanced "over a flower bestrewn pathway" lined by a crowd of more than 3,000. The bride, Pigou's mother Nora Lees, was of the minor Anglo-Irish nobility, the second daughter of Sir John Lees, third baronet of Blackrock, who had moved to the Isle of Wight in the mid-1860s. Pigou's father, Clarence, was a recently decommissioned lieutenant of the Fifteenth Regiment of Foot. Their marriage was as lavish as any ever held in Ryde; the presents, of which there were about 200, were "costly and almost of endless variety, forming a glittering show ... [of] unique articles, rare specimens, curiosities, and things useful as well as valuable." Among them were diamonds and rubies, pearls, and "Indian embossed" jewelry. These were gifts from families accustomed to comfort and intimately connected to empire. Nora Lees's maternal uncle, from whom the embossed jewelry came, was a well-known Orientalist, and the international connections of the Pigou family were even stronger. Huguenots who had immigrated to England in the late seventeenth century, the early Pigous had made their wealth as traders and officials in China, India, and North America as well as in the manufacture of gunpowder.

Pigou's father, Clarence, was born in Bombay in 1850 to a civil servant, but he grew up in England, outside London. Clarence Pigou was comfortably rooted in the upper-middle tiers of the Victorian establishment. Though his eldest uncle was disinherited for marrying without permission and became a stationmaster for the London and Birmingham Railroad, another of his uncles was a solidly respectable Anglican priest. His brother-in-law, Sir Henry Oldham, became a Knight Commander of the Royal Victorian Order for military service in China and India. His first cousins, with whom he grew up while his parents were in India, managed the successful family gunpowder business located outside Dartford. After finishing at Harrow, the distinguished boarding school, Clarence secured a commission in the army, but with a substantial legacy from his father, he left the service in 1876 and moved to the Isle of Wight. His wedding gifts to Nora Lees — among them "a diamond ring," a "white gold bracelet," and a "black laced parasol with [a] carved ivory handle"— reflected a life of ease.

It was into this life that Arthur Cecil Pigou was born in 1877, about a year after his parents were married. Cecil, as A. C. Pigou was likely called in his youth, spent the first year of his life at Beachlands, the home of his maternal grandfather. The eighteen-bedroom house sat on the seaside Esplanade in Ryde, the vistas from its large windows sweeping over the Solent toward Portsmouth. It was a prestigious address, five miles from Queen Victoria's residence at Osborne House. It was, however, his grandfather's house, and his parents acted quickly to find a roof of their own. A year after Pigou's birth, the young family moved to the village of Pembury in Kent, where it grew to include a second son, Gerald, in 1878 and a daughter, Kathleen. In 1881, the year of Kathleen's birth, the Pigous lived in a large house called Stone Court with Nora's sister and a domestic staff of six. By the time Pigou left for boarding school, the family had moved into The Larches, a different house in Pembury, and had taken on a seventh servant.

Pembury was a small village just outside Tunbridge Wells, a prosperous resort town in southeast England that had grown in both population and wealth after visits from Victoria and Albert. Pembury itself was still largely rural: a small collection of houses surrounding a green, with orchards and fields stretching out behind. But as Tunbridge Wells gained popularity in the mid-nineteenth century, Pembury had begun to attract well-todo Victorians, who erected houses along the road into town. The Larches was one of these, substantial and stuccoed, its entrance portico sheltered by a stand of trees and its back windows surveying an expanse of meadow. This was Pigou's childhood home, the place where, according to a playful college profile, he gained "the record for the number of questions asked of a much-enduring parent per week."

School drained some of the precociousness out of Pigou and when — like his father, uncles, and cousins before him — he arrived at Harrow, ten miles northwest of central London, at the age of thirteen, he had become a self-described "shy and timid boy." One of the most prestigious of the English public schools, Harrow was steeped in tradition, with pupils often donning a morning coat as part of their dress. Yet it was also a place that was rapidly and self-consciously modernizing. Its setting, Harrow-on-the-Hill, was a village in the throes of maturation into a suburb. The Metropolitan Line of the London Underground arrived in 1880 and with it, a type of worldly middle-class Londoner who fituncomfortably into the old town-gown dichotomy between Harrovian and villager.

Other changes came from central London as well. The passage of the 1868 Public Schools Act obliged Harrow and six other public schools to change their administration and update their teaching in an effort to "make further Provision for the[ir] good Government and Extension." Arising from a perceived need to curb abuses and to update outdated curricula, the act pushed Harrow and peer institutions to broaden their offerings beyond classical material taught mostly by members of the clergy to include modern history, modern languages, and natural sciences. Response to legislative reform had taken a stately pace, lasting well into the 1890s. Before Pigou himself became head boy in his final year, all of Harrow's head boys had received an education based on a classical, rather than modern, curriculum.

Nevertheless, Pigou would have experienced Harrow's modernization in the very wiring of his schooltime home. The Harrow house in which he lived, Newlands, was just three years old on his arrival. At its opening in 1889, the school newspaper, The Harrovian, had noted "two striking features in connection with it. The colours of the football shirts is a bright canary yellow, and the house is illuminated throughout with electric light." The people of Harrow were also changing. Though the boys and their families had been solidly Conservative for more than three decades, throughout the Gladstone governments, the masters and governors had been predominantly Whigs and Liberals. By the time Pigou arrived, however, the educators had themselves shifted to the right. Political unity between the boys and their teachers ushered in an age of self-satisfaction and breezy, often ignorant, indifference. The future historian G. M. Trevelyan, Pigou's contemporary at Harrow, fumed in 1892 at the age of 16 that "in a school of 600 boys I have found just two people capable of talking sensibly about politics ... I might just as well talk Greek politics to the rest." Harrow was, in the words of its historian, "a nursery of upper class Englishness."

Harrow's fees were among the highest of any public school, between £150 and £200 per year, but for families seeking a social marker recognized by the English establishment, this was a small price to pay. A high proportion — upward of 30 percent — of Pigou's classmates came from outside England or Wales, with many hailing from the four corners of the Empire. Yet the diversity at Harrow belied the powerful conformist forces at work at the school. It was, after all, a training ground for the ideal type of gentleman, a place with a very clear and quite traditional vision of what it sought to instill in its students.

Pigou grew up not with his family but at Harrow. He became involved in sports, taking up cricket and fives, a sport much like handball. He was by no means a natural athlete, but as his friend J. W. Jenkins was to later recall, "in a modest way, he was quite a useful cricketer." Off the practice fields, Harrow, blanketed and insulated, offered a deeply sheltered environment, but it served as the backdrop against which serious life lessons played out, as any place might. Two of Pigou's housemates died during his time at the school, and the boys were largely left to their own devices in sorting out the "minor politics" of living and working together. And there was plenty of work. "There is no spot in the three kingdoms," a doleful contributor to the Harrovian complained in 1893, "where a 'long lie' a lie of indefinite length, unbroken even by a nine o'clock bell, is so appreciably luxurious as at Harrow. Freedom tastes sweetest in sight of the prison gates."

But for Pigou, school was likely not a jail, especially given the respect he held for his house master, Frank Marshall. "What was the first impression he made?" Pigou mused shortly after Marshall died. "Friendliness, I think, and openness and sympathy — anything but the clouded terrors of authority." Marshall had studied mathematics at Trinity College, Cambridge, and was at once a mature educator, having moved to Harrow in 1871, and a steadfast Liberal modernizer. As such, he was also, in the words of Head Master Henry Montagu Butler, a "faithful servant not only to the school, but to every good cause in Harrow."

But just as the paucity of archival material makes it hard to parse Pigou's feelings about his early childhood, it is similarly difficult to guess how he might have reflected on his time at school. Harrow was, after all, an immensely difficult social environment, propagating a rigorous hierarchy characterized by snobbishness and entitlement, and laced with sex, bullying, violence, and conformism. And, indeed, Pigou would wryly remark about the "Bacchic orgies" to which he had given a miss. Jenkins, writing in 1964, remembered Pigou as being "perhaps a bit too unconventional and eccentric to be widely popular, but his few intimates including myself were really fond of him." It was these friends with whom he would return to Kent during holidays and organize cricket matches, pitting Harrovians against "the villagers" from Pembury. Jenkins, who traveled home to The Larches with Pigou several times, recalled a clouded atmosphere despite the bright athleticism. Pigou "lived with a bluff old (or who then seemed to me to be old!) father, with whom I think he had little in common."

Back at Harrow, Pigou excelled in academic pursuits. He won three separate entrance scholarships, partly as a result of his early study of mathematics in preparatory school, and went on to take home nearly every major academic prize the school offered. This was no mean feat. Harrow maintained a rigorous academic program; Trevelyan, three years his senior, claimed that he himself "was better taught in history than any other schoolboy then in England," and Pigou was subjected to the same rigorous instruction. Pigou gained authority as well, becoming a monitor in early 1894, but sports soon took on secondary importance. He badly lost the one boxing tournament he entered and though in time he came to be the captain of Newlands House cricket team, by his fourth year, he was devoting much more of his energy and time to the school's debating club.

The Harrow Debating Society was plagued with the sort of problems that frequently dog school clubs. Members and outside commentators lamented the absence of a consistent schedule, the dearth of active participants, and the sometimes lackluster performance of interlocutors. Still, it was an outlet for the young Pigou to express his nascent beliefs and an institution he would come to dominate. Pigou was barely fifteen, but he already had a well-articulated set of convictions. His early debates demonstrate a keen faith in progress; a student himself of "the moderns," he "denounced Greek as well as Latin," arguing unsuccessfully that "Latin does not repay one for the time bestowed upon it." He also evinced a developed political outlook, an awareness reflective of Harrow's cultural landscape. Boys were expected to keep up to date on current events, and though some of the many guest lecturers spoke of sport and alpine expeditions, others advised Harrovians on geopolitical topics — the importance of Gibraltar as a military base, or the state of the Royal Navy. For Pigou, the latter of these lessons would have had special resonance; his younger brother Gerard had joined the navy in 1893 and two years later would be posted as a midshipman to the HMS Ramillies, a battleship stationed in the Mediterranean.

Over the course of 1894 and 1895, Pigou took strident stands on a host of politically sensitive issues. In a debate on "admitting" women to "all Social and Political Rights," he "devoted himself to utterly demolishing the idea." Pigou was, later in life, accused of misogyny — even his schoolmate Jenkins noted that he "never seemed particularly at ease" with women — and it is easy to view this early debate as consonant with lifelong prejudices of a decidedly misogynistic tint. Prejudice is especially clear in this case, as the young Pigou clearly prized the ideal of political freedom, at least when it came to men. In a later debate over whether "King Charles I did not richly deserve his fate," he argued that the monarch had indeed deserved to be executed, "dwell[ing] principally ... on the general charge of 'treason against the people.'" This position put him in a distinct minority, a fact reflective of his dissonance with the overwhelming Tory traditionalism of his peers.

Though he may not have been "widely popular," Pigou was no doubt skillful in navigating Harrow's traditions and hierarchies. In his final year, he became the head of the school, and as such, he was given ex officio roles on the boards of many of its organizations. Thus he was an officer of the Musical Society despite being tone deaf; of the Racquet Committee, despite his penchant for cricket; and of the Harrow Mission, a charitable enterprise set up to help the disadvantaged. This last appointment is notable because, in spite of his later writing on charity and social work, this ex officio position was arguably the closest Pigou would ever come to the London slums. Still, though the number of his responsibilities had grown, it was to the Debating Society, of which he was now president and to which he delivered some of the "best speech[es] heard in ... some time," that Pigou invested most of his attention and care. "Owing to the energy of the Head of the School," The Harrovian noted, "the Debating Society is fortunately more flourishing at the present time than it has been for many years past."

Although Pigou found a home at Harrow, he was not a creature of the place. Harrow was overwhelmingly clubby, and Pigou was too much a student for his heart to beat in tune with the rhythm of the school. The Debating Society, for instance, was, for him far more about debating than it was about society. "If members continue to take a purely silent and coffee-drinking interest in the society," he opined in his final year, "it can never be really successful." In his last debate, he reaffirmed his resistance to popular pressure and demonstrated an increasingly mature liberalism of his own. Arguing against his friend Jenkins over the motion that "this house sympathises with Dr. Jameson," a hero of the colonial South Africans, Pigou "vainly protested against the new jingo patriotism ... of the London Music Halls." Whereas Jenkins "made an eloquent appeal to the chivalrous sentiments of the Society," the young Pigou coolly distanced himself from recourse to mass sympathies. By the time he graduated, Pigou had grown from a timid country boy into the head of one of the most prestigious schools in England, a teenager with a hat and cane. In his own way, he flourished at Harrow, and his affection for his home of the past six years was on display in a short article he wrote during his last year. Reflecting on the chapel services for a school holiday, he took careful note of the bond between Harrow and its past sons, pausing to pay respect to "the fair sprinkling of those [Old Harrovians] to whom the memory of their schooldays must be growing dim, but whose love for Harrow is still undiminished." Harrow's easy grandeur, tempered somewhat by the reformist influence of Frank Marshall, had nurtured a sweeping and comfortable liberalism in Pigou, and he finished his time at the school by delivering "a fine rendering" of one of William Gladstone's addresses at the annual "Speech Day." Thus, armed with a tidy collection of prizes, Pigou stepped forth an Old Harrovian with the words of Gladstone, the Liberal hero, ringing in his ears.

Cambridge at the Turn of the Century

In 1896, Pigou's liberalism followed him to King's College, Cambridge, where it found a much more congenial home than it had at Harrow. Reform and progress were the words on everyone's lips in Cambridge in the 1890s. Of course everyone, or at least a great majority of everyone, had been to a public school like Harrow. Though a good number of its students did not come from means, Cambridge, like Harrow, was overwhelmingly a preserve of the upper and upper-middle classes. As a preserve, it had its own idiosyncratic system of inequalities. Age, college, program of study, and athletic success all mattered, but unlike at Harrow, there was a pluralism of overlapping hierarchies, so that an individual was evaluated not according to one master scale but to any number of them. A Cambridge contemporary of Pigou, Maurice Amos, wrote that "we were free from the social tyranny of any one set of people or of any one kind of taste." This was largely a function of a much larger student body: just under 1,000 young men matriculated at Cambridge each year in the 1890s, whereas the total student population at Harrow peaked at about 600.

(Continues...)

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Table of Contents

Acknowledgments ix
Introduction History and Economics 1
1 Beginnings 8
2 Ethics, Politics, and Science 34
3 Bearing Fruit as Well as Light: Pigou’s Welfare Economics 61
4 War, Peace, and Disillusionment 83
5 Retreat to the Ivory Tower 111
6 Paradigms Lost 130
7 Another War and a Fresh Start 172
8 To “Really Do a Little Good:” A Redemptive Conclusion 194
Epilogue 208
Notes 213
Bibliography 293
Index 321

What People are Saying About This

From the Publisher

"Among economists, A. C. Pigou is the hero of the market failure school and the scourge of laissez-faire. It is left to historians to move beyond such simplifications and bring out the full complexity of the man. Kumekawa has done just that, offering an enlightening and beautifully written portrait of Pigou and providing a touchstone for putting economists' attempts to increase economic welfare in historical context."—Steven G. Medema, author of The Hesitant Hand: Taming Self-Interest in the History of Economic Ideas

"The most influential British economist between Alfred Marshall and John Maynard Keynes, A. C. Pigou was the first to describe the field of welfare economics. This deeply researched, wide-ranging, and convincing biography brings Pigou to life as never before, both as a pioneering economist and a public figure, showing the importance of his work during his times and its continuing relevance today."—David Cannadine, Princeton University

"The First Serious Optimist is a remarkable portrait of one of the most influential economists of modern times. A. C. Pigou was a theorist of the market and the state, criticized by the right and the left. His theories were the reflection, throughout his life, of his changing understanding of war, poverty, pollution, and economic crisis. Ian Kumekawa's book is a brilliant evocation of the economist in public life."—Emma Rothschild, Harvard University

"This is a remarkable book, from which I learned an enormous amount. Kumekawa has uncovered far more details of Pigou's life than I thought were available."—Roger E. Backhouse, Birmingham University and Erasmus University Rotterdam

Editorial Reviews

Co-Winner of the 2018 Joseph J. Spengler Best Book Prize, History of Economics Society

From the Publisher

"Through his biographical and historical study of Pigou and his work, Kumekawa shows us how the Cambridge professor bound ethics and economics together, and did so in a way that intersected with the social changes, spurred by the rise of the Labor Party, that were taking place around him."

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