Academic, Economist (1877-1947)
Arthur Cecil Pigou was an incredibly successful economist who contributed key themes to welfare economics, the measurement of national output, business cycle theory, unemployment and public finance. He studied economics under the tutelage of Alfred Marshall and eventually succeeded him as professor of Political Economy at Cambridge. He went on to influence many economists to also take up chairs in academic institutions all across the world.
Pigou’s most significant contribution to economics was the introduction of externalities. Pigou discussed the idea of externalities, as well as their problems and solutions with his Pigouvian taxes. His concept of externalities remains a key part of the theoretical and empirical framework with which modern welfare economics revolves around. In his honour, the Pigou Club was set up to encourage the use of carbon taxes in the battle against climate change.
Pigou and Keynes shared a tumultuous relationship. Pigou was critical of Keynes’ work and conjured up the idea of the Pigou effect to contend that the economy is more self-stabilising than Keynes argued. In response, Keynes was also critical of Pigou’s work, disparagingly mentioning Pigou multiple times in ‘The General Theory’. However critical they were of one a other though, they also formed a great affection to one another. It was Pigou, for instance, who financially supported Keynes during his work on probability theory.
“If a man marries his housekeeper or his cook, the national dividend is diminished.”
– Arthur Cecil Pigou