The Sanguine Science: HistoricalContexts of Pigou’s Welfare Economics
Norikazu Takami, JSPS Fellow

1. Introduction
The aim of this essay is to reconstruct the intellectual environment in which A.C. Pigou (1877‐1959)
wrote his welfare economics in the beginning of the 20th century. For contemporary reviewers,
Pigou’s welfare economics changed the general impression of economics. A reviewer of The
Economics of Welfare (1st edition, 1920) wrote, “We have moved a long way from the times when
all was for the best in the best of all possible worlds,” and noted that the work as a whole was callingfor state intervention to the economy.1 When an economic historian William Cunningham attacked
Pigou’s forthcoming attitude toward income redistribution, he did so by giving him the epithet ‘The
Sanguine Science,’ contrasted with the classical ‘dismal science.’2 I will examine the historicalcontexts that coexisted with the creation of the doctrine considered to be distinctly novel ineconomics’ political implications.
In the United Kingdom in the years immediately before the First World War, a series of pioneeringsocial legislation was put into effect. Behind this political changeover were various political
campaigns, with which Pigou as a professional economist was directly and indirectly involved. Whena senior cabinet member, who also advocated old age pensions, started a campaign for the
introduction of tariff in 1903, Pigou actively joined the counter‐campaign against tariff reform bycontributing articles to newspapers and popular magazines and giving speech at political meetings.
1
2

An anonymous reviewer in Cambridge Review, May 13, 1921.
Times, May 16, 1914, p. 13.

Afterwards when the Labour Party emerged into a major political force in the 1906 election and the
newly aroused popularity in socialism caused anti‐socialism in the popular debate, Pigou mademoves to check the latter’s arguments against social legislation. Pigou thus took part in this time ofhigh politics, and this makes it plausible that Pigou’s doctrine of those years strongly reflects theinfluence of the time.
The literature on co‐production in the sociology of science has affinity to this viewpoint. Co‐
production is the conception that focuses on interactions between a subject (scientists) and an
object (research objects) in science. The essays included in Jasanoff (2004) examine the cases where
research objects, normally regarded as passive, took the initiative in the research, for instance, acase concerning patients’ group in the research of muscle dystrophy. This conceptual guide is
instrumental in considering Pigou’s welfare economics since it is possible to see that active politics oflabor classes influenced the orientation of Pigou’s theoretical research. In what follows, I will
examine Pigou’s intellectual environment from this insight and aim to bring into relief the social andpolitical nature of his moves as an economist.
In this essay, I will trace the early days of Pigou’s life up to the point at which he published Wealthand Welfare, predecessor of The Economics of Welfare, in 1912. The next section briefly follows his
quick passage from an excellent orator in the Cambridge Union Society and protégé of Alfred
Marshall to one of the best theoretical economists in Britain. The following section concerns thetariff reform controversy. I will note that Pigou discovered an important concept in his welfare
economics through the bitter debate with various opponents. Section 4 deals with criticisms tosocialism after 1906 and Pigou’s response to them. I will go on to discuss in the next section how
Pigou responded to the students’ socialist movement in his close environment, namely in Cambridge.
In conclusion, I will note that Pigou’s interest was directed at progressive political reform.

2. Career Building in Cambridge, 1897‐1908
Pigou entered the University of Cambridge with a scholarship to King’s College to study history andmodern languages. Historical teaching in Cambridge in those days reflected the influence of John
Seeley (1834‐1895), who founded the History Tripos in 1873, which made it more clearly groundedon the interest in modern politics than on the interest in history itself.3 Not only were pure historicalsubjects given, but also basic theoretical economics and politics were taught in the History Tripos. At
the point of his completion of the undivided Historical Tripos three years later, he had already been
attracted to Marshall’s The Principles of Economics. In letters to his history teacher Oscar Browning(1837‐1923) he wrote that he found Marshall’s work interesting and that he was working hard on
economics.4 Following this interest, Pigou moved on to Part II of the Moral Science Tripos, where thecourse on advanced economics was given, and majored in “ethics, political philosophy, andadvanced political economy” among the wide range of subjects in the Moral Science Tripos andcompleted it in the first class in 1900.
As an undergraduate, Pigou established his reputation as an orator in the Cambridge Union Society,a debate club, which brought him a great honor to a Cambridge student, the election to the
President of the Union Society. It can be estimated what intellectual proclivity young Pigou
possessed from his speeches at the Union. On the question of the conflict in South Africa, Pigou
criticized the British government by stating that its failure in the negotiation with the Boers hadbrought the military conflict. Among the topics he himself moved were renouncement of Puritan
beliefs and censure to American expansionism. The former speech testifies to Pigou’s liberalreligious views, which also gained him a favorable review from the Cambridge Review.5 Despite his
liberal views in general, he was not necessarily attached to the Liberal Party. When Oscar Browning,
3

Kadish 1989, 134‐141
See Pigou’s letters dated 1897‐1899 in Oscar Browning Papers (OB/1/1281/A). In a letter dated Thursday,
September 23, namely in 1897, his second year in Cambridge, he said, “of books that are dull & improving I’ve
read Hallam’s Constitutional History & Marshall’s Political Economy / not nearly as bad as Hallam.” In anotherletter dated just Sunday and with a marginalia, 1897‐1899, apparently written by someone else, we read after
an illegible phrase, “so I’m going to do Pol. Econ. & Economic History here.”
5
Cambridge Review, Feb 14, 1899.
4

a long‐time treasurer of the Union, proposed that the only hope of efficient social reform lies in the
Liberal party, Pigou first took him to task for the vagueness of the proposition and responded that
the Conservative Party was less liable to radical sentiments and hence more reliable in some cases.
Apparently thus Pigou was leaning towards liberal views but tended to only utter balanced cautious
judgments.
Cautiousness and sobriety were also major characteristics in Pigou’s scholarly attitude when he wasyoung. In his article on Pigou of the Dictionary of National Biography, Austen Robinson (1971, 815)
writes that young Pigou’s method was a philosopher’s one, though it might be more correct to say alogician’s one. According to McLure (2010), this method characteristic of Pigou can be found in his
fellowship dissertation submitted to King’s College. At his first attempt, he submitted the essay that
won the Burney Prize, a prize for theological essays, a year before, the title of which was “Robert
Browning as a Religious Teacher.” The essay’s aim was to describe the poet’s religious, ethical viewsin his literary works. Westcott (1825‐1901), the Bishop of Durham and Raleigh (1861‐1922), theRegius Professor of English Language and Literature at the University of Glasgow, were selected fromthe connections of King’s college to review an essay on religious views of a poet. These referees
praised Pigou’s broad knowledge of Browning’s works but expressed bewilderment as to the writer’s
intention. That is, the dissertation was to them too scholarly and analytical for a literary criticism ortheological study, and Pigou brought an excessively strict framework into Browning’s literary works.
As a consequence of these indecisive reports, Pigou was not elected a fellow at this attempt. McLuresuggests that Pigou’s forced realization of his own analytical inclination, at least partly, made him
decide to specialize in economics.6

6

However, Pigou maintained the interest in ethics and theology afterwards at least until he succeeded
Marshall in the Chair of Political Economy. The Problem of Theism and Other Essays (1908) is one of its
products. In this work, he called for a scientific method of theology that takes the state of consciousness of thepeople who went through religious experiences as a datum. Dalton (1953, 57) reports Pigou’s participation in
Lowes Dickinson’s personal seminars on philosophy when Dalton was a undergraduate in Cambridge.

A year later in 1902 Pigou submitted an economics essay for the fellowship and obtained favorable
reports from the two economist referees, Alfred Marshall (1842‐1924) and H.S. Foxwell (1849‐1936);
and he was elected a fellow. However, Foxwell’s report was far from unconditional, and its large partwas devoted to criticisms to Pigou’s method. There Foxwell expressed dissatisfaction towards
Pigou’s sole dependence on theoretical analysis and to the fact that the young economist tended toignore the cases incompatible with the prediction of economic theory.7 It is known that Foxwell was
hostile to Pigou for a personal reason. When Marshall tried to hire Pigou to lecture on introductory
economics in 1901, Foxwell opposed it for fear that less students would take his course. Foxwell’s
distrust of Marshall reflected on his relationship with Pigou as well: in a letter to J.N. Keynes, Foxwell
remarked Pigou was “a man, of all I have known, least qualified to deal with a general class, as he issuch a prig!"8 According to Marshall’s letter to J.N. Keynes, Foxwell changed the content of his own
course into the one that Pigou would give.9 Despite this disagreement on teaching, however, Foxwell
noted Pigou’s high caliber in lucid logical analysis, and this report, along with Marshall’s
unconditionally praising one, had Pigou elected as a fellow of King’s College and gave him a foothold
for an academic career in Cambridge.
Foxwell’s opposition to hiring Pigou as a lecturer was not heard in the end, and Pigou began teachingin the year 1901‐02. In the first year, he taught introductory economics to lighten Marshall’s
teaching load, and in the second year, he lectured on history of industrial combinations and labor
movements, which subject was also his research object at this time. In 1903, his thesis on industrial
relations won the Adam Smith Prize, then triennial prize administered by Marshall’s own finances forthe promotion of economics research in Cambridge. As is noted in the preface of the later publishedwork, The Principles and Methods of Industrial Peace (1905), Marshall suggested this topic to Pigou.
Marshall had served in the Royal Commission on Labour in 1891‐1894, where he had opportunities
7

Foxwell’s report on Pigou’s dissertation, King’s College, Cambridge. See also Coase (1972); Kadish (1989, 194‐195); McLure (2010).
8
JNKeynes 1/48, also quoted in Coase 1972, 476.
9“[Foxwell] instantly cuts in before Pigou & duplicates in anticipation a part of the course .. wh[ich] Pigou has
been preparing himself to give.” JNKeynes 1/195, also quoted in Coase 1972, 477.

to discuss with experts on labor issues such as Ben Tillett (1860‐1943) and Sidney Webb (1859‐
1947)10. He brought back strong impression on labor issues and encouraged his other students aswell as Pigou to study such issues.11
The 1905 book that developed from this prize thesis brought Pigou into sharp relief amongcontemporary economists. A review to this book was written in the Economic Journal by L.L. Price(1862‐1950), fellow at Oxford and Marshall’s former student when he was briefly there in 1883‐4.
Price’s criticisms were that economic theory wielded by Pigou was hard to understand for
economists not theoretically inclined as well as for general readers and that it was oversimplifying
the actual situations surrounding industrial bargaining. Indeed, in this work, Pigou treated normal
wages (competitive wages) as if they could be easily known in the real world and worked out abargaining model based on Edgeworth’s theory.
Price’s charge on Pigou’s theoretical treatment ought to be seen in the light of the condition of
economics of this time where the discipline was not clearly divided with history. What Marshall tried
to achieve by the creation of the Economics Tripos in 1903 was to erect economics as anindependent discipline upon theoretical foundations (Maloney 1985). As his loyal disciple Pigou did
not shy away from applying advanced economic theory to industrial relations. Price in turn detected
implicit disregard for the historical method in Pigou’s book and expressed his dissatisfaction. Pigou
concluded that normal wages should be awarded for the best long‐term result rather than giving
higher wages that would eventually cause loss to labor as a whole. Price rejected his theoreticaltreatment as “fatally defective in their application to the central problem which arises here” (Price
1905, 385), even though he did not clearly describe what the central problem was in the review.
The hostility between Pigou and historians was not confined to Foxwell and Price. When Marshalldevoted enormous efforts to create the Economics Tripos in 1903, it was William Cunningham who
10

Groenewegen (1995, 360‐371).
For instance, Sydney Chapman won the Adam Smith Prize in 1900 with an essay on the cotton industry thatpossessed an advanced bargaining system between workers and firms. C.R. Fay dealt with labor conditions in
Britain and Germany (Pigou 1925, 74‐75).
11

opposed this attempt most fiercely. In May 1903 both camps sent letters to the editor of theCambridge Review concerning the value of economics learning as a distinct subject. Cunningham’s
former student Ellen McArthur (1862‐1927) warned its danger by illustrating her point with her own
recent experience while Pigou cautioned against the danger of insufficient economics learning byadducing his own recent experience12.
Although Pigou’s research in economics met with the opposition from historically trained
economists, apparently this did not hamper his career building. It is largely because he had highreputation among more influential economists such as Marshall, Marshall’s students and Edgeworth(1845‐1926), who was then the Drummond Professor of Political Economy at the University of
Oxford. When Marshall retired from his Chair in 1908, he publicly supported Pigou as a successor,
and Edgeworth, who held Pigou in high regard, served as a member in the election committee.13
Pigou was elected the Professor of Political Economy in preference to a strong rival candidate
Foxwell, who had long taught economic history and history of economic thought in Cambridge.

3. The Great Tariff Controversy, 1903‐1906
Parallel to the conflict between Pigou and economic historians was the ongoing great controversy.
Triggered by the speech of the Colonial Secretary Joseph Chamberlain (1836‐1914) to call for tariff,the controversy led to resignation of both Chamberlain and pro‐free trade cabinet members,
creating heated debates on all media of periodicals, newspapers, pamphlets, and platform speech.
Before moving into the Unionist camp in the wake of the Ireland Home Rule issue, Chamberlain wasa radical Liberal politician turned from a business manager in Birmingham and administered thedevelopment of underdeveloped colonies as the Colonial Secretary (he is said to have been among
12

Kadish 1989, 213. McArthur was a history tutor at Girton College, Cambridge and taught economic history at
the LSE. She coauthored Outlines of English Economic History with Cunningham in 1895 and wrote articles andbook reviews mostly in the English Historical Review. See Berg (1992, 314).
13
According to Coase (1972, 478), the other members were J.N. Keynes, lecturer in logics, W.R. Sorley,
Professor of Moral Science, V.H. Stanton, Professor of Theology, R.H. Inglis Palgrave, former editor of The
Economist, J.S. Nicholson, Professor of Political Economy at the University of Edinburgh, Lord Courtney, former
MP, and Balfour, former Prime Minister who was not present at the meeting.

the first high‐level official in Britain who used the word ‘development’ in the modern sense14). The
tariff reform campaign was thus projected as a political reform by a radical politician. Chamberlain
made an additional claim that unemployment and poverty among labor classes were attributable tofree trade, and thereby appealed to those classes. Although the tariff issue was also a political one
that involved the governance of colonies, many economists were called into the controversy by
being asked for professional views by politicians or compelled to counter other economists.15
The most well‐known episode that involved economists during this controversy would be a letter
sent to the editor of The Times that came to be called fourteen economists’ manifesto in August
1903. A series of letters signed ‘An Economist’ had appeared on The Times since June to support
Chamberlain’s tariff reform, and pro‐free trade economists felt compelled to counteract theseletters. Initiated by Edgeworth, a letter signed by fourteen economists including Marshall and Pigou
was sent to the editor of the newspaper and appeared on August 15. Economics professors andlecturers in prestigious universities signed the letter with their affiliations, but the influence of theletter was weakened by the further response from pro‐tariff reform economists. Right beneath the
manifesto appeared L.L. Price’s letter addressed to Edgeworth, telling he had refused to sign it, andfive days later, The Times printed the dissent of an economic historian Foxwell and the director of
the LSE and author of the above letters by the pseudonym ‘An Economist’ William Hewins (1865‐
1931). Thus Edgeworth’s attempt to exert strong influence upon the general opinion was partly
thwarted16.

14

Storey 2004, 117.
The following paragraphs depend on Coasts (1968), Coats (1964, 99‐103), and Groenewegen (1995, 376‐388).
16
Sydney Chapman, the Professor at the University of Machester, sent letters to support free trade to thepaper Daily Mail before the manifesto was printed on the Times. Being abroad, he did not sign the manifesto,
but he sent a letter to the Times a month later to defend the manifesto by claiming that it was not fair to say
the manifesto was authoritatively imposing their specific view upon the general public. Alfred Marshall was
asked for an opinion by the pro‐free trade Chancellor of Exchequer Ritchie and wrote a memorandum. The
memorandum was not published because of the cabinet crisis in September, but eventually the thenChancellor Lloyd George discovered and published it with Marshall’s permission in 1908. Foxwell was asked forcomments on his economic notes by Balfour.
15

In addition to these three – Price, Foxwell, and Hewins –, William Ashley (1860‐1927), the director of
the Faculty of Commerce at the University of Birmingham, also publicly supported the introductionof tariff, which means that professional economists avowedly in support of tariff reform were almost
all economic historians. Foxwell himself noted in his letter to The Times that almost without an
exception, the economists adopting a historical method supported tariff; and he revealed strong
hostility to theoretical economists thus: “The fact goes far to justify the position they [NT: historicaleconomists] hold as to the importance of historical study in economics.”17 According to Koot (1987,
99, 117‐118), they became convinced of the necessity of tariff for a similar reason to each other. The
watershed event to them was the preceding Second Boer War, which made it undeniable that
Britain’s supremacy had disappeared. In his 1902 article, Price contrasted the situation at the pointof the repeal of the Corn Laws fifty years before and the current situation and claimed that behind
the repeal of the Corn Laws were industrial superiority of Britain and the concern over food supply inthe aftermath of the Irish Famine but that the current situation was entirely different and required
protection of domestic industries more urgently than food supply. Ashley, who provided the tariffreform camp with professional views through the book The Tariff Problem (1903), also noted
specificity of current economic situations. Ashley described gloomy future for the economy overly
relying on the financial sector and insisted on rebuilding manufacturing industries by activating scaleof economy with the increased demand in the colonial market. Ashley additionally demanded
combining protection and social welfare policies as realized in the contemporary Germany. Koot(1987) characterized these economic historians’ claims as neomercantilism for their sensibility to thespecificity to their time.
As young college lecturer Pigou was not in the position that could exercise a great influence on thegeneral debate but nonetheless appeared as a free trader in the public sphere by sending pro‐freetrade arguments to newspapers and publishing a pamphlet even before he signed the Times

17

The Times, Aug 20, 1903.

manifesto with other thirteen economists18. After the manifesto, he came to contribute to The Times.
On participating in debate on the general media, Pigou had received an advice from Marshall in a
letter. “When I write it is always because I think some general principle, which belongs to the spherein which I work, is being misquoted, or misunderstood” (Pigou 1925, 432). Marshall thus instructed
him to join such debate only for the purpose of correcting others’ arguments along the line of
economic principles. However, Pigou’s intervention in the general debate was hardly as reticent asMarshall’s words suggest. It was rather the one with bitter wit, reminiscent of opposition speeches
at the debate club Union Society.
Pigou offered an earliest response among economists to Prime Minister Balfour’s Economic Notes on
Insular Free Trade. Balfour proposed to make the tariff more flexible to have leverage in the tariff
negotiation with the United States and Germany, but Pigou answered that everyone knew thisargument and added that it was its feasibility that should be examined with well‐groundedevidence.19 To Leo Amery of The Times, who played an active role as a field combatant for the tariffreform camp, Pigou highlighted his ignorance of economic theory. When Amery responded to
Pigou’s criticism without understanding the latter’s points, Pigou in turn submitted a longer article
than the original one, in which he assaulted on the inconsistencies within Amery’s response article.20
In his book The Riddle of Tariff, published in the end of the same year, Pigou also made a criticalresponse to Ashley’s point concerning imperial preference and scale of economy, arguing that asmall increase in the output enabled by the colonial market would not lead to much improvement in
manufacturing efficiency.21

18

See the preface of Pigou (1903). Pigou wrote articles in newspapers Pilot and a pamphlet Great Inquest in
1903. Given the high interest in the tariff issues, publishers would have readily accepted pieces on the issue
regardless of author. When he published a book on the tariff issue from Macmillan in 1906, Pigou accepted
publication with full risk on the author (See a letter dated July 30, 1906 in the Macmillan Archive). He could
expect a certain number of copies to sell.
19
The Times, Sep 18, 1903, p. 4.
20
The Times, Nov 11, 1903, p. 3, and Nov 14, 1903, p. 14.
21
Pigou (1903, 80).

L.L. Price wrote a critical review to Pigou’s 1903 article in the Oxford‐based less theoretical Economic
Review than the Economic Journal. In not very clear words, Price claimed that Pigou based hisargument upon the assumption of perfect competition and therefore that it is circular reasoning toargue for free trade as its conclusion.22 Not only Price but other pro‐tariff economists tended to list
the growth of trusts and trade unions as evidence to support tariff. Pigou ignored Price’s review for
the time being but answered it in June 1906, when the tariff issue was less urgent23. He poked fun athim by saying that if he had fallen into any error, it would not be circular reasoning but merely an
incorrect assumption, and further noted that there is no necessary link between free competition
and the value of tariff – e.g., the infant industry theory is held tenable under free competition – andthat theoretical economists including himself also dealt with the case of monopoly.
Pigou thus directly fought against various opponents, namely politicians, journalists, and economists
who adopted entirely different methods. In parallel to these battles, his argument on tariff became
more methodical and systematic. His 1903 book adopted the style of dealing with one opposing
argument after another to impress that the original proposal is riddled with problems, as in the
speech at the Union Society, while the later article published in the Edinburgh Review in January
1906 contained an ethical framework by which Pigou normatively judged the tariff proposal. The
ethical criterion presented there was ‘national dividend’ (practically the same thing as national
income or national products), which Pigou took from Marshall’s Principles of Economics and uponwhich he built his own Wealth and Welfare and The Economics of Welfare.
From this general principle [NT: national dividend], it is easy to deduce thecorrect method of estimating the effect of Protection upon Labour. The firststage is an inquiry into the effect of that policy upon the National Dividend asa whole. For, prima facie, anything that enlarges that dividend is likely to beadvantageous, and anything that diminishes it disadvantageous, to all the22
23

Price (1904).
Pigou and Price (1906).

agents of production in the country. The second stage is an inquiry as to theeffect of Protection upon the distribution of the dividend among the various
agents. For, this may be altered in such a way that, despite the increase in thewhole dividend, the share that goes to certain agents may be, not merely
proportionately, but absolutely less than it was before. (Pigou 1906, 12‐13)

Besides activities through writing, Pigou made various moves to influence the public opinion. To
counter the open lectures given by Cunningham in the Michaelmas Term in 1903, three lecturers –Pigou, H.O. Meredith, J.E. McTaggart, (the latter two were also Marshall’s former students at
Cambridge) – jointly held a series of lectures for free trade in the next term. Pigou also gave free‐of‐charge lectures on trade, open to students other than ones studying for the Economics Tripos in theyear 1904‐05. When the pro‐free trade organization ‘Cambridge University Free Trade Association’
was formed in May 1904, Pigou served as secretary to this organization and administered many
meetings. The president of the Association was Arthur Elliot (1846‐1923), who resigned from thecabinet together with the pro‐free trade Chancellor of Exchequer Charles Ritchie (1838‐1906) andothers. Elliot was the editor of The Edinburgh Review, where Pigou contributed two articles on thetariff issue, and he also advised him to separately publish them as a book.24 Among the committee
members of the organization were celebrated Cambridge dons such as a botanist A.C. Seward andthe Professor of Law John Westlake, but the then sitting Professor of Political Economy, namely
Alfred Marshall, did not join the Association.
In December 1905, shortly before the coming election, Pigou gave a public speech in front of thegeneral audience at the Cambridge Guildhall.25 The subject of the speech was the one similar to theabove‐mentioned Edinburgh Review essay, “Protection and the Unemployed.” According to thesummary in the Cambridge Review, Pigou in this speech attributed the large part of unemployment

24

A letter dated 29 Aug 1906 in the Macmillan Archive.
Dalton (1953, 59) notes that Pigou made another speech at an election for Philip Noel‐Baker’s father, aLiberal MP for Finsbuery.

25

to the fact that labor is only imperfectly mobile and responsive to the fluctuation of the industry. He
quoted Marshall’s words and claimed that free trade is more likely to stabilize the industry. And at
the end he added:
As to the emotional appeal, which accuses Free traders of standing byunmoved while the workless families are starving in the streets, the lecturer[NT: Pigou] styled it as the reasoning, or want of reasoning, on the strength ofwhich every quack or charlatan, whether in medicine or politics, maintains his
career. Mr Chamberlain’s remedy would make things worse than they are;26
the fact that Free Traders were unable to make them better was, indeed, amournful, but a wholly irrelevant, circumstance. (Cambridge Review, Dec 7,
1905)

In the election one month later, the Unionist Party suffered a landslide loss, but the tariff reform
campaign did not entirely disappear from the political debate afterwards.
Thus far I have discussed Pigou’s research and political activities up to the point around 1906. He
was given high credit as an economic theoretician by Marshall and Edgeworth on the one hand but
fiercely opposed by historical economists on the other hand. This polarity further worsened with thetariff controversy, through which Pigou discovered a methodical criterion with which to judge
economic policy proposals in the concept of national dividend. His intellectual proclivity would haverequired the capability of more systematic treatment on policy proposals. When he reviewed thefifth edition of Marshall’s Principles, he viewed the concept as “a practical instrument of great power
designed for service in the concrete solution of social problems” (Pigou 1907, 534) and contended
that this should constitute the center of policy guidance, more important than its moral or cultural
aspect.

26

Pigou spoke at the March 1906 Union debate and attacked Chamberlain again. ”Mr Chamberlain was anignorant and a blatant demagogue” (Cambridge Review, Mar 15, 1906).

4. Anti‐Socialism in the Public Sphere, 1906‐1914
As featured well in the tariff reform controversy, poverty and unemployment among labor classes
had been a great social issue since the end of the nineteenth century. Socialist organizations such as
the Social Democratic Federation organized political activities. Many demonstrations, including theone in November 1887 that caused casualties, were arranged, and the large sum was raised tosupport the London dockers on a strike in 1889 through their activities. On the other hand, the social
investigations administered by Charles Booth and others stressed the urgency of the poverty issue
by exposing the living conditions of labor classes.
After the election in 1906, the emergence of the Labour Party as a political force was widely
publicized on the general media. This political success was made possible by the electoral
cooperation between the Liberal Party and the Labour Representation Committee (predecessor of
the Labour Party), under which the decline in the Unionist approval brought many labor
representatives along with Liberals into parliament. After 1906, high interest in the labor politicalmovement gave further encouragement to socialist writers such as Sidney and Beatrice Webb, J.A.
Hobson, L.T. Hobhouse, and H.G. Wells. To take only the years between 1906 and 1914, Sidney
Webb wrote twenty books and pamphlets and Hobson twelve.27 They also traveled around thecountry to give speech (See the next section for their visit to Cambridge). On the other hand, somejournalists who opposed this political trend launched a campaign to counteract it. I will try to map
out the political scene after the 1906 election by focusing on the latter’s views and movement
below.28
Harold Cox (1859‐1936) was one of such writers who expressed strong opposition to socialism after
1906. After completing the Mathematical Tripos at Cambridge in 1882, Cox lectured on economics invarious places in England through the University Extension Society and taught mathematics in India.
27

These figures were the numbers of publications in the online catalogue of the British Library (www.bl.uk). I
excluded new prints and editions and preface written for others’ books.
28
There is literature on the socialist camp in the debate after 1906. See the chapters on J.A. Hobson and H.G.
Wells included in Backhouse and Nishizawa (2010).

Afterwards he had contact with socialists and coauthored The Eight Hours Day with Sidney Webb in
1891. He continued to work as a journalist and after 1903 became one of the most strident free
traders29, through which activities he earned name recognition and got elected as a Liberal memberof the parliament in the 1906 election. Soon afterwards he found new opponents in socialism, withwhich he once aligned himself. In the article published in The Edinburgh Review in October 1906,“Socialism in the House of Commons,” he denounced social welfare policies.30
In this article, Cox examined three pieces of social legislation – free meal in school, old age pensions,and unemployment remedies. First, he rejected free meal in school as only fostering parents’
idleness in raising their children. In most cases, he noted that parents let their children go to schoolwith empty stomach not for financial reasons but for the lack of their responsibility while theytended to use the spare money for their own leisure; socialists would be pleased by the state looking
after children instead of parents, but this would weaken filial affection and hence affection towards
the society. What should be done, he claimed, was to investigate families of unhealthy children
rather than free meal in school.
Second, Cox observed that up to then, no satisfactory system of old age pensions had been
proposed because any proposed system involved unfairness in such institutional questions as
whether to set an income limitation, what age should be the age for the start of payment, and so on.
On top of this, people would complain about unfair competition for employment if those receiving
pensions were allowed to continue to work. For these reason, Cox concluded that it is the wisest
policy for each individual to save for the years in her old age, to which he added that it is as natural
to save for the old age as to save for Sunday on weekdays.

29

Between 1903 and 1905, he published five books and pamphlets on tariff and contributed numerous articles
to newspapers and periodicals.
30
Since The Edinburgh Review adopted anonymity of authorship until 1912, the article in the journal is not
signed by any author. However, a pamphlet authored by Cox with the same title and the description that thiswas the reprint from The Edinburgh Review appeared the following year. Hence I can conclude that the article
was written by Cox.

Finally, on unemployment remedies, Cox adduced the National Workshops (Ateliers Nationaux),
instituted in France at the time of the Revolution in 1948. According to his description, theseworkshops allowed unemployed workers to continue their old work at sufficient wages; however,products made in the workshops could not be sold in the market for opposition by private business
managers; and the workshops quickly fell into financial difficulties and closed in months. Even insocially valuable public works, Cox noted that authorities cannot employ unemployed workers
indiscriminately since these works usually require special skills; and he also mentioned the crowdingout effect in plain words; namely, a state fund to finance public construction projects ultimately
comes from the money that would have been paid for employment in the private sector; therefore,public works merely destroy private employment. After reporting on absurd expenditures that wereactually made under schemes designed to reduce unemployment, Cox claimed that instability of
employment was a more important issue than unemployment itself and that therefore, morerational reorganization of the economy was needed instead of a simple measure of direct
employment by the government.
Harold Cox thus emphasized inefficiency and moral degradation that would accompany socialist
policies. He came to be viewed as a representative figure who resisted the socialist trend in the
British politics after 1906.31 However, a more organized anti‐socialist campaign was made by theorganization affiliated with the opposition Unionist Party. The London Municipal Society,organization which opposed socialism in the local politics of London, coordinated with similarorganizations in other regions and created an umbrella society, the Anti‐Socialist Union, in 190832.
The president albeit titular was a former cabinet member Duke of Devonshire, the vice president
Walter Long, an influential Unionist M.P., and many other Unionist M.P.s served the committee ofthe organization. The well‐financed Union administered a school to train speakers, hired able
31

For instance, a review on a book on unemployment has a phrase, “Individualists like Mr. Harold Cox” (FabianNews, Sep 1906, p. 40); and in a book written by a French journalist and former cabinet member Yves Guyot(1843‐1928), Economic Prejudice (1910), Harold Cox is one of the few real figures who appear in the dialogue
besides Keir Hardie and Lloyd George.
32
This paragraph relies on Brown (1974).

speakers with good salaries – they had an occupational hazard of getting attacked by some audience–, and issued a periodical called Anti‐Socialist (after 1910 Liberty although ceased publication in1912). The publication of Anti‐Socialist Union Speakers’ Handbook (1911) was a direct consequenceof these activities. Harold Cox also published his The Taxation of Land Values (1909) from thepublication department of the Anti‐Socialist Union.
Despite the current political trend, there were few publications by economists that dealt withsocialism in this period. Although this lack of attention may be natural given socialist doctrines
having already faded into the past, a book written by an economist that won a contest with set
subject was published in North America. The author was O.D. Skelton (1878‐1941), Chicago trained
Professor at the Queen’s University, Canada.33 At the University of Chicago, he took the courses onsocialism and industrial relations, given by Veblen and J. Lawrence Lauchlin the first Head of the
Department of Economics, and he picked the analysis of socialism as the subject of his dissertation.
This thesis won a contest for the best essays on economics, sponsored by a Chicago clothingcompany, and was published a year later. In this work Skelton emphasized merits of capitalism,
incoherence within Marx’s doctrine, and inconsistencies of his doctrine with observable recent
historical tendencies. This work is comparable to Pigou’s Wealth and Welfare in that both works
concerned socialism or policies inspired by it, but Skelton’s work is more clearly politically motivatedwith its central aim being a critique of a specific doctrine.
After the tariff controversy, Pigou contributed letters to The Times on economic issues, apparently inmore detached tone than his letters on tariff issues had been. He stated his neutrality from any
specific policies, but in fact, he constantly presented favorable arguments to welfare legislation. In
October 1907 Pigou intervened in the debate upon old age pensions by offering a modern economic
argument. Some participants in such a debate took it for granted that if old workers receiving
pensions are allowed to continue to work, other workers’ wages would decline, but Pigou contended33

See Levitt (1983) for the description of Skelton’s life and views.

that this view was rooted in the obsolete wage fund doctrine and that at least in the long run, real
wages tend to increase as the number of workers rises. The following year, he suggested
economically more rational pension systems than the one proposed by some that confines payment
to those whose incomes are under a certain limit. His proposed schemes constituted the ones thatwould not harm labor incentive.
When Lloyd George’s budget speech in April 1909 brought the Parliament into a state of frenzy,
Pigou wrote a pamphlet The Policy of Land Taxation34 and sent letters to the editor of The Times, atwhich point he had been elected the Professor of Political Economy at Cambridge. In one of theseletters, he defined an increment of land value not attributable to the owner’s effort as a windfall andviewed taxation upon such an increment as economically rational. This article was considered to bea support from the Professor of Political Economy at the University of Cambridge and “hailed withacclamation by the supporters of those taxes, from the Prime Minister downwards.”35 Harold Cox
swiftly responded to Pigou’s letter and tried to counteract its political influence. First, Cox drewattention to Pigou’s concession on various institutional difficulties and described his letter as an
opposition to the land taxes conveyed in reductio ad absurdum. Cox then added that an important
item was lacking in Pigou’s list of institutional difficulties, namely that an increment of land value
due to the increased present value of land caused by the decline of interest rates should be also
exempted from taxation.36 On the daily paper of the next day Pigou accepted this point andrepeated his intention of merely sorting out the issues involved in the land taxes and his indifference
to the policy in question itself. Cox referred to the Professor’s withdrawal of his original argument in
his speech at the Parliament to the utmost benefit to his political purpose.

34

In a letter dated July 20, 1909 (the Macmillan Archive), Pigou told the Macmillan publisher, “the pamphlet inquestion is mainly a reprint of an article written originally for the Edinburgh Review.” However, none of theissues of the periodical that were published in 1909 contain an article on land taxation; his essay was obviously
rejected to be included in the Review.
35
Times, July 7, 1909. “Professor Pigou on windfalls” by H. Cox.
36
Strangely enough, right above Cox’s letter appeared Pigou’s letter, where he discussed a difficulty in land
taxation in relation to a change in present value due to a change of interest rates.

The exchange of letters on The Times between Pigou and Cox demonstrates the former’s naivety andthe latter’s shrewdness in the highly political debate but it also points to Pigou’s implicit assumptionthat the governing party’s policies had the general approval from the public. As I noted above, Pigou
stated his neutrality to specific policies and yet offered favorable arguments to those policies. He
seems to have done so because he thought such arguments were needed by the general democratic
opinion. Indeed, Cox’s classical liberalism based on strict self‐help failed to win wide support within
the governing Liberal Party although he was considered an able speaker.37 Furthermore, we canobserve that Pigou was exposed to a very active political movement by socialists and able to feelpart of the general political trend in his vicinity. I will discuss a socialist movement in Cambridge
after 1906 below.

5. Socialist Movement in Cambridge, 1906‐1914
Founded in 1884 in order to influence the opinion of the middle class, the Fabian Society formed
affiliated societies in universities to spread socialism among students. Especially after 1906, alongwith the expansion of membership in the parent society in London – from 730 in 1904 to 2462 in1909 (Pease 1963, 185) –, university societies became more active. In addition to the ones that had
already existed in Oxford (founded in 1895) and Glasgow, the Fabian Society was launched in the
Cambridge University in February 1906, a month after the election. The founders were a group of
students whose parents had close relationship with Fabians. Haden Guest (1877‐1960) was sentfrom the parent society and gave a speech at the first meeting. As women played an active role in37

Cox’s obituary by Mallet’s (1936). See also “The government and the country,” The Edinburgh Review, July
1909, p. 254, and ”Mr. Harold Cox on Socialism,” in Times, Feb 2, 1909. The second of the three pieces says:“Almost alone Mr. Harold Cox protested against the principle on which this legislation [NT: old age pensions]
was based. Almost alone he argued that the measure was corrupting to that spirit of independence and self‐
support which used to characterise the British working man. Almost alone he refused to approve the taxationof the workers and the provident in order to endow almost indiscriminately the most improvident section of
the community. There was no real fight in the House of Commons against the Ministerial proposals, and thefirst instalment of an Old Age Pensions scheme became law without having met any serious opposition ineither House of Parliament.”

the parent society, out of the twenty founding members of the Cambridge Society six were fromeither Newnham or Girton Colleges. The Society was one of the few student clubs open to women.
Socialism was already something that readily appeared in the mind of students regardless ofwhether they approved of or opposed it. When a group of students injured people on the street andvandalized stores, the president of the Union Society mentioned socialism in his apology printed on
the Cambridge Review. It was feared that a riot by privileged students at Cambridge would only
reinforce socialists’ rhetoric to attack the wealthy; and it demanded from students to recognize theirsocial responsibility. According to the recollection of Edward Pease (1857‐1955), who served thesecretary to the parent Fabian Society in London, university societies were “fashionableorganization[s]” (Pease 1963, 194). Membership tended to expand, “when an undergraduate offorce of character and high social position, the heir to a peerage for example, is for the moment anardent Socialist” (Pease 1963, 194). However, many of the students who became a member of thesociety lost the interest in social problems and did not participate in the activities of the society after
they graduated from universities. “On the whole it is true that Socialists are born and not made”(Pease 1963, 194). In his biography of Keynes, Skidelsky depicted the Fabian Society of Cambridge asa heterosexual (not homosexual as before) community centered on Rupert Brooke, anundergraduate and poet known for his good looks. The Society thus would have created new
attractions for students.
The main activities of the Cambridge University Fabian Society were to organize meetings. In its firstyear 1906‐07, high profile speakers such as H.G. Wells, J. Keir Hardie, and Beatrice Webb visited
Cambridge to give a speech. First H.G. Wells, popular writer and then Fabian, presided at a
discussion meeting at Newnham College and answered questions from students. He stressed thatsocialism does not necessarily mean Marx’s doctrine and that the work of Fabian socialists such as
Sidney Webb and Sidney Olivier should be held as high as Marx’s for their constructive vision ofsocialism.

Keir Hardie’s visit to Cambridge in February 1907 generated a scandal that attracted the attention ofgeneral newspapers.38 Avowedly opposing the Boer War and the Indian colonial policy, Keir Hardie
was a controversial figure, but growing hostility towards the Labour Party would have also affected
this episode. At the dinner held before the meeting, some students screwed up the door and shut
him inside. But this Keir Hardie was a decoy disguised by a student, and Keir Hardie himself appearedon the stage in the Cambridge Guildhall where he was supposed to give a speech. Seeing him on thestage, the students who was responsible for the trouble were reported to be “hugely astonished” by
the Cambridge Review (February 21, 1907). Nevertheless, they shouted at him during his speech,
and the meeting had to be cancelled. Members of the University Fabian Society forced their way into
the agitated crowd and guided Keir Hardie from the Guildhall to King’s College. Like in the previous
student riot, The Union Society again posted an apology on the Cambridge Review (The president of
the Union when this occurred, E.G. Selwyn, was a member of the University Fabian Society39).
The following month, Beatrice Webb gave a lecture on “The Faith We Hold.” Webb was a member ofthe Royal Commission on the Poor Laws at this time, and the meeting attracted a large audience.
Since the Fabian News (May 1907) reported that several well‐known orthodox economists attended
it, it is likely that Marshall, Pigou, and others listened to Webb’s speech. This article also reported
that they “preserved a discreet silence;” it seems that they did not have discussion with Webb atleast at the meeting. It is possible to sense disregard of the Fabian Society for academic economists
in these words. The Fabian Society had radical proposals to allay distress among labor classes
advocated and supported by able writers and social investigators with active publications ofpamphlets and investigation reports, which made them inclined to disregard academic economists
who tended to defend the status quo with abstruse theories.40

38

Townsend (1918, 11‐12); Dalton (1953, 45‐46); Benn (1992, 223).
Fabian News, Dec 1907. Selwyn became an official member of the University Society after Keir Hardie’s
incident. Dalton (1953, 51‐52) remarked that there was no socialist who was elected the president of theUnion until 1925.
40
This tendency is noticeable in the book review section in the Fabian News. In the review on Suthers’s My
Right to Work, Edward Pease criticized economic theory in general. ”The abstractions of political economy are39

When George Barnard Shaw gave a lecture at Cambridge in the following 1907‐08 year, anundergraduate student questioned Shaw on the Cambridge Review.41 Charles Webster (1886‐1961),
history student at King’s College, sent a critique that it is a contradiction that Shaw called forincreased taxes to the wealthy while he noted the danger of capital flight. Frederick Keeling (1886‐1916), one of the founding members of the University Fabian Society, and Dudley Ward (1885‐1957),
member of the Society and economics student, responded to Webster by repeating Shaw’s remarkthat taxes upon incomes from foreign investment would prevent foreign transfer of capital. Keeling
further insisted that greater good of socialism justify sacrifice to a certain extent and that capitalflight never be a sufficient reason to deny socialism. Webster answered that it is practically
impossible to enforce such taxes and also noted that taxes upon the wealthy would discourage themfrom saving and hence bring down investment. Finally Shaw sent a letter to the periodical two weeks
after Webster’s last letter, but Shaw’s response was cryptic and vague and would not have satisfied
Webster. A later commentator noted that Shaw’s understanding of economics was grounded on the
Henry George‐style labor theory of value.42
In the following 1908‐09 year, Sidney Webb visited Cambridge in the middle of his national lecture
tour in which he promoted the Minority Report of the Poor Law Commission. In 1910‐11, theactivities of the Cambridge University Fabian Society grew more intense, with lectures by high profile

as useless for dealing with unemployment as the abstractions of ethics for settling a Belfast riot. . . When
politicians have reduced unemployment by common sense remedies, the economists will come along andexplain how the new facts are really in accord with the old abstractions, as properly interpreted. And that isabout all that abstract economics is good for” (Fabian News, Sep 1906). Again, Pease’s review on Skelton’sSocialism: Critical Analysis has the following remark. ”Being a professor, Dr. Skelton naturally adopts the
typical professorial attitude in one respect. Every true professor of Economic Science deems himself to be born
into a world which has just entered on the culminating period of its existence. The past is to him a dreary
record of mistakes: the future a dangerous jungle of experiments. The present is the acme of perfection. So Dr.
Skelton explains that governmental sick insurance, as in Germany at the time he wrote, of labor bureaus, ofworkmen’s compensation, is proper and right; but non‐contributory old age pensions is “regrettable,” ifjustified by “concrete difficulties.” If he had started his essay a year or two later, old age pensions would havepassed into the golden present, on which the professorial eye would have glanced glad approbation” (FabianNews, Oct 1912).
41
Articles cited in this paragraph are found respectively in Cambridge Review, Oct 31, Nov 7, Nov 14, and Nov
28, 1907.
42
Sweezy (1949). Here Sweezy concluded that this lack of Fabians’ understanding of modern economics is toblame for the Fabian socialism’s (and the Labour Party’s policy reputedly based on it) disregard for distribution.

speakers such as J.A. Hobson, Henry Hyndman, and Philip Snowden held almost on a weekly basis.
Such active political movement naturally produced strong response. The Cambridge Review devoted
more than one page to report on Snowden’s speech while a usual report takes only one paragraph;and a reader who called himself a ‘Radical’ complained that despite the low intellectual level of
Snowden’s speech, not up to the Cambridge standard, it is evidently politically biased to report onthat meeting at such length and not to say a word on meetings of the University Liberal Club or theUnionist Carlton Club.43 The above‐mentioned Anti‐Socialist Union also founded a university
organization at Cambridge in October 1911, and had a fierce, though not very productive, debatewith the Fabian Society.44
An economist provided a course on socialism at Cambridge in this period. The course was not a
subject offered in the Economics Tripos, but it was sponsored by the local lecture syndicate, andheld in the evening, it could be attended for fees by people other than regular Cambridge students.
The lecturer was Sydney Chapman (1871‐1951), Marshall’s former student who obtained Part II of
the Moral Science Tripos two years before Pigou did. Consisted of six lectures in the Lent term in
1910, Chapman’s course concerned intellectual and economic origins of socialism, the history ofsocialist doctrines, Marx’s and later theories, contemporary socialist movements in Europe, andlessons to British economic policy. Chapman concluded by suggesting aiming to influence the forces
which determine income distribution by cultivating young people’s capacity45.
Socialism thus had become a much disputed topic in the Cambridge University by 1910. Economics
also had various contact directly and indirectly to this surge of political movement in the University.
First of all, with few exceptions, the students engrossed in socialism took courses on economics. Oneof the founders of the University Society Frederick Keeling attended Marshall’s lectures in the year

43

Cambridge Review, May 25, 1911.
Fabian News, May 1911.
45
Cambridge Review, Jan 27, Feb 10, Feb 17, Feb 24, Mar 3, and Mar 10, 1910.
44

1907‐08 after obtaining a First in Part II of the History Tripos.46 Dudley Ward, Society member who
defended Shaw, studied economics and got elected a fellow of St. John’s College in 1909, where he
instructed students.47 Hugh Dalton (1887‐1962), who completed Part II of the Economics Tripos witha second in 1910, and Gerald Shove (1887‐1947), who completed it with a first the following year,48
were in the circle of Rupert Brooke and others. Dalton and Shove played important roles ingoverning the Society by serving the important posts of the University Fabian Society. Dalton (1953,46) recollected that he was strongly impressed by Keir Hardie being unmoved by the crowd at his
lecture and at this point he became a convinced socialist. Later Dalton became an influential Labour
politician. Shove, on the other hand, told Keynes that he despised Keeling’s dogmatic attitude49, but
he stayed in the Society at the time of his completion of the Tripos in 1911. Later Shove ran a journal
called War and Peace: a Norman Angell Monthly for Norman Angell, later Labour M.P., and worked
in farms as a conscientious objector during the war. Finally he returned to Cambridge as an
economics instructor.
Having won a first in the History Tripos in 1906, C.R. Fay (1884‐1961) was a colleague of Marshalland Pigou as a lecturer on economic history from 1907, but he became a member of the Cambridge
University Fabian Society the same year. It is likely he had already had relationship with the FabianSociety because he won a Shaw studentship and worked at the LSE in the previous year. His researchreflects this political inclination. Fay wrote a book and an article on agricultural cooperation
respectively in 1908 and in 1910, and sent an essay on Chartism to Keynes in 1911.50 After serving in
the military, he also participated in the organization in the university affiliated with the Labour Party
until he became the Professor of Economic History at the University of Toronto in 1921.

46

Townsend 1918, 21.
There is no lecture given by Dudley Ward on the list of lectures on the Cambridge University Reporter in
1909. Afterwards, instead of joining socialist activities, he began working for the newspaper Economist in 1910,
served in the Treasury during the war, and became a banker after the war. See Edwards 1995, 495‐6.
48
Geoffrey Toulmin (1888‐1953), who finished the Economics Tripos with a first in 1911, was also a King’s man
and a member of the CUFS. But his name does not appear either in Dalton (1953) or Hale (1998).
49
Quoted in Skidelsky 1983, 240‐241.
50
In a letter to Keynes (Fay 1/20, Marshall Library, Cambridge, http://www.econ.cam.ac.uk/marshlib/archives/
fay.pdf).
47

Other economists participated in the activities of the Fabian Society although they did not become
its official members. Walter Layton (1884‐1966), who succeeded Pigou as Girdler’s Lecturer, andhistorian and philosopher Lowes Dickinson (1862‐1932), who lectured on politics in the Economics
Tripos, took part in the Society’s activities by presiding over and giving speeches at the meetings.
Layton was a friend of Keeling at Trinity College, and Dickinson was close to Dalton and Brooke, hisstudents at King’s College.51 Because of the personal relationship and also their shared support for
non‐economic issues such as women’s suffrage and pacifism, they would have been readily available
to cooperate with the Fabian Society. Afterwards Layton built career as a journalist as the editor of
the Economist, and Dickinson helped launch a campaign for the League of Nations during the FirstWorld War.
J.M. Keynes, who left the India Office and returned to Cambridge in 1908, had close relationshipwith the Fabian Society members at King’s College such as Brooke, Dalton, and Shove. Biographers ofKeynes agreed that Keynes harbored sympathy to socialism in this period. In the Union debate in
February 1911, he spoke in support of a motion “[t]hat the progressive reorganisation of Society
along the lines of Collectivist Socialism is both inevitable and desirable” (Skidelsky 1983, 241); andwhen he had lunch with Beatrice Webb in 1913, Keynes described it as “deep spiritual experience.”
Later in the essays “Short views on Russia” and “Liberalism and Labour” written after the First World
War, he left favorable comments on socialism.
Unlike many other colleagues I have so far discussed, there is no record that Pigou took part in theactivities of the Fabian Society; he thus seems to have distanced himself from the organization. This
is in sharp contrast with his involvement in the political campaign for free trade. Even so, it is nottrue that Pigou did not respond to the intramural political movement at all. For, Pigou opened
lecture courses in the Economics Tripos that would have attracted students interested in social
51“I [Keeling] attended the last meeting of that body in October, 1904, along with another freshman, W. T.
Layton, whom I persuaded to come with me, although he protested his fidelity to sound economic truth”(Townsend 1918, 9). “I [Dalton] knew him [J.M. Keynes] better than Pigou, less well than Dickinson” (Dalton
1953, 60). See also pp. 56‐57 in the latter book.

improvement. Pigou gave a course on ‘wages and conditions of employment’ in the years 1908‐09
and 1909‐10; and gave a course on ‘economic principles in relation to some practical problems’ inthe years from 1911‐12 through 1914‐15. The Cambridge Review reported on the latter course in
1912‐13. Following the first introductory lecture, the course consisted of six lectures, each dealing
with a separate topic. The topics were “employers and economic chivalry,” “the principle of theminimum wage,” “the principle of laissez‐faire in practice,” “the housing problem,” “advantages anddisadvantages of international trade,” and “the uses and abuses of statistical reasoning.” It was
pronounced that these lectures did not require the knowledge of economics; therefore, students
who attended the meetings of the Fabian Society and other political organizations could haveattended and brought some knowledge back from them.
The content of some of these lectures can be estimated from his works published in the same periodwith similar titles. The essay “Employers and economic chivalry” was written in 1913 and included in
his 1923 collection of essays. This essay started from where Marshall’s famous essay ended anddiscussed in a morally charged tone what employers could do for their employees. He observed that
employers were in the situation to set working environment in which workers spent most of theirlives, and therefore their position was more important than that of charity activists in terms ofimproving employers’ lives. Pigou then noted that employers could follow their more enlightenedcolleagues who treated their employees as active partners and created hygienic, cultural working
environment for them. 52
Next, Pigou’s lecture on the housing problem can be estimated by his lecture given in the different
occasion in the same period. He offered a lecture on housing at the University of Manchester inJanuary 1914, and this lecture was published together with Seebohm Rowntree’s lecture held on adifferent date. This lecture presented his general views on welfare policy in relation to minimum
52

Pigou mainly relied on a book of a candy maker Cadbury’s manager Edward Cadbury, Experiments in
Industrial Organization (1912). The Cadbury family was Quakers and subsidized the Liberal leaning Daily News,
which was quite comparable to the Rowntree family, of which Seebohm was one, was Quakers and subsidized
the Nation. Clark (2004: 42‐43).

wages, state medical and unemployment insurance, and the principle of laissez‐faire53. Pigou firststated that it is the state’s duty to set the minimum standard for housing conditions such as area perresident and appearance of towns, also noting that the effect upon children makes it more urgent
than regulation of working environment. He partly admitted the argument that attributed the
housing problem of the poor to their ignorance and laziness and acknowledged the significance ofmoral persuasion by landlords and municipal workers. However, he also stressed that necessarily
some workers could not live in the house above the standard for the lack of finances rather thanmere indifference and argued as follows: for those low income people the institution of minimum
wages would merely diminish employment and therefore should not be considered the final solution
to the housing problem; hence subsidies in some form from the public authorities were needed. In
popular discussion, Pigou noted that state subsidies in any form were associated with thediscredited Speenhamland system, in which a sum inversely proportional to income was given, andtended to be rejected as prone to laziness. He did not accept this criticism for housing subsidies;rather he discussed this issue in relation to education, medical and unemployment insurance, forwhich public funds had been already spent by 1914. Then how should one address this issue? Herephrased what he had offered in Wealth and Welfare as follows:
I myself approach this question with a major premise that some would dispute.
I believe it to be right that the well‐to‐do should be summoned by the State tohelp their poorer neighbours whenever that summons can be enforced
without evoking gravely injurious reactions upon the production of wealth,therewith, ultimately upon the fortunes of the poor themselves. (Rowntree
and Pigou 1914, 62‐63)53

Flatau (1997) highlighted Pigou’s take on a national minimum living standard in this essay.

Although he referred to institutional problems to not harm labor incentive, confine housing
subsidies to low income people, and not discourage private supply of houses, Pigou concluded that
housing subsidies were worth serious consideration.
These two lectures reveal the general drift of the lectures he gave at Cambridge during the crucial
years. His views presented above might have been insufficiently radical for the students leaning
towards socialism. Even so, the lectures would have left strong impression to those young socialists
with the clear normative position and sincere attitude to deal with issues related to poverty. Pigou’s
1912 Wealth and Welfare similarly started with ethical discussion, and by way of Marshall’s conceptof national dividend, he was able to discuss various state intervention in a systematic way. According
to his later recollection, Hugh Dalton, who left Cambridge in 1910 and was a research student at theLSE, was greatly inspired by Wealth and Welfare.
His Wealth and Welfare, published in 1912, . . . changed old confusions into
new clarity. It laid down sharper criteria for economic policy than I had found
before. It brought out new conclusions, significant for practical action, fromold generalities. It was a book that helped me, more than any other, toformulate my own approach from ethics, through politics, to economics. He
was splendidly free from party or class prejudice, but he believed, as Marshall
did before him, that great inequalities of wealth and opportunity are both
unjust and wasteful of welfare. (Dalton 1953, 58)

Dalton thus viewed Pigou’s work as a set of old ideas rearranged to satisfy the time’s need.

6. Conclusion
In the period dealt with in the second half of this paper, namely the time when welfare policy andlarger taxation upon the wealthy were debated, Pigou’s position cannot, indeed, be seen associalism. He did not join the socialist movement in the university, and nor would he ever havesympathized socialist doctrines regardless of whether it was Marx’s or Henry George’s. Even so, his
policy discussion and welfare economics were capable of appealing to even young people who
gravitated to socialism as Dalton was such one case. The reason for this would have been that Pigou
shared the same direction with those young people while classical liberalism held by Harold Cox orimperialist reform supported by economic historians did not. In Pigou’s welfare economics,
economic theory did not emerge as an obstruction to his argument in this direction. On the contrary,economic theory grounded on individual incentive that was developed after the Marginal Revolution
enabled him to build arguments in support of the policies of old age pensions, housing subsidies, andland taxation. Thus the epithet Cunningham gave to Pigou ‘The Sanguine Science’ is implicative.
Pigou’s welfare economics was a doctrine that reconciled theoretic economics as science with thewill for progressive reform and thus characteristic of the time.

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