Pigou's Influence on Clark: Work and Welfare

By Stabile, Donald R. | Journal of Economic Issues, December 1995 | Go to article overview

Pigou's Influence on Clark: Work and Welfare


Stabile, Donald R., Journal of Economic Issues


In an earlier article, Hans Jensen documented institutional elements in the work of Alfred Marshall but concluded that they did not have an influence on institutionalism because "these potential foundations were never discovered" by institutionalists [Jensen 1990, 405-411]. While Jensen's analysis may be correct, Marshallian economics did have an impact on institutionalism in a roundabout way. Marshall's student, A. C. Pigou, through his advancement of welfare economics, made an impression on J. M. Clark. Clark once said that Pigou "put 'Welfare Economics' on the map relative to social productivity vs. private acquisition" [Seligman 1962, 203].

Clark's statement needs a context, however, because Pigou's welfare economics employed utility theory, a perspective of little appeal to institutionalists. Following Marshall, Pigou attributed welfare gains to the greater marginal utility a dollar of income had for the poor compared to the rich; a transfer of income from rich to poor increased total utility. Neoclassical economists have since dismissed this argument by pointing out the problem of making interpersonal utility comparisons [Little 1957, 8-14, 55-6]. Clark sided with Marshall and Pigou and deplored the reversal of their welfare conclusions [Clark 1957, 59].

Clark's regard for Pigou's welfare economics had a still stronger footing. Pigou also argued that welfare gains came from improving the quality of the work force through changes in the distribution of income or by improved working conditions, and he devoted much effort to the study of "The National Dividend and Labor." This article focusses on Pigou's link between work and welfare as a stimulus to Clark's development of the concept of the social overhead costs of labor. The focus and evidence presented in this article is limited by time and topic. Pigou and Clark had lengthy careers and well-rounded views on economics. In the 1920s, however, both wrote a great deal on labor issues, more than in the rest of their careers. The analysis that follows rests on their writing of that time.

The case offered here depicts more than a historical oddity of neoclassical influence on a prominent institutionalist. The 1920s were the last era when labor was without a social safety net. That lack of a safety net for workers was important to Pigou and Clark in their studies of work and welfare. As a result of New Deal legislation and the growth of industrial unionism in the 1930s and 1940s, a safety net for workers was put into place. It became easy to leave the costs of work out of modern welfare economics by taking the social safety net for granted.

Business now threatens that safety net with cost cuts in the name of competitveness. Pigou and Clark asked whether such cuts really improved welfare. From their perspective, higher wages for workers improved their capabilities and led to higher production, adding to economic welfare. Lower wages meant the impairment of the work force. This point needs to be addressed again, and a good starting point is Pigou's welfare economics.

Pigou's Welfare Economics

The basic premise of Pigou's welfare economics was that economic welfare could be estimated in terms of the total annual production of an economy, what he called the national dividend, valued by "the measuring rod of money." He recognized that there were shortcomings in that approach; economic welfare was not total welfare, and the standard definition of the national dividend left out a number of items that influenced economic welfare. He did not intend to provide a precise calculation of total welfare, but to evaluate "how its magnitude would be affected by the introduction of causes which it is in the power of statesman or private persons to call into being" [Pigou 1932, 10-12]. For this purpose, the national dividend served as a surrogate for total welfare, and Pigou's gauge of welfare was if a public policy or private activity increased or decreased it. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Pigou's Influence on Clark: Work and Welfare
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.