Cambridge Theories of Welfare Economics

Rogerio Arthmar and Michael McLure

Introduction

During the last decades of the nineteenth century in England, ideas related to socialism evolved from early agrarian pleas for land redistribution into the development of labour-exploitation theories of industrial society and the purported iniquity that derives from the private appropriation of wealth (Callaghan 1990: 1-61; Claeys 1987: 130-195). Concurrent with the spread of socialist doctrines and the rise of syndicalism, the prevailing liberal view of society underwent a profound adjustment of its own in Britain. Private actions began to be recognized for their impact on the community at large, while the long cherished laissez-faire doctrine came under pressure from the new belief that social problems could be mitigated through state policies. An evolutionary and practically oriented form of liberalism started to take shape, anchored in the principles that private property and authentic equality of opportunities could exist side by side, and that individualism entails social

R. Arthmar (*)

Associate Professor, Department of Economics, Federal University of Espfrito Santo, Brazil

e-mail: This email address is being protected from spam bots, you need Javascript enabled to view it M. McLure (и)

Professor of Economics, Business School, University of Western Australia,

Australia

e-mail: This email address is being protected from spam bots, you need Javascript enabled to view it © The Editor(s) (if applicable) and The Author(s) 2017

R.A. Cord (ed.), The Palgrave Companion to Cambridge Economics,

DOI 10.1057/978-1-137-41233-1_3

responsibility in a just society. To a considerable extent, this transition was facilitated by John Stuart Mill’s substantial qualification of Bentham-inspired utilitarianism (Freeden 1986: 25-75; Baumol 1967: 180-196; Roach 1957) as well as by Henry Sidgwick’s even greater qualification of utilitarianism, but more forcefully through the contribution of the British idealist movement, which partly emerged in opposition to utilitarianism, starting with the work of Thomas Hill Green in Oxford and followed by that of Francis Herbert Bradley, Bernard Bosanquet, and others (Mander 2011).

This broad transformation in the liberal perspective on society during the mid- to late Victorian era was closely related to developments in the British academic world, with questions about the welfare of the social aggregate starting to be considered as a field of inquiry that was as legitimate as the study of the production of wealth had been until then. Perhaps partly because of their direct link with British idealism, leading scholars from Oxford tended to adopt a strategy of direct action and involvement in politics for the government of the whole. Leading scholars from Cambridge, however, tended to feel more at home by engaging in a theoretical discourse on welfare that derived from a blend of mature utilitarian and marginalist ideas, complemented by a fair deal of ethics, history, and, occasionally, epistemology (Backhouse and Nishizawa 2010: 1-14). The work that emerged from this collective endeavour focused essentially on actual failures and unaccounted effects of the market mechanism, with distinct attention to the proper means by which such failures can be corrected (Groenewegen 1995: 302-342, 531-569; Maloney 1991: 165-185; Myint 1948: 120-141).

This chapter discusses the theories of welfare economics that emerged over three periods, each developing under the stewardship of the incumbent Cambridge Professor of Political Economy: the late nineteenth century, under Alfred Marshall’s stewardship (1884-1908); the early twentieth century, under Arthur Cecil Pigous stewardship (1908-1943); and the mid-twentieth century, under Dennis Holme Robertson’s stewardship (1944-1957). Each of these three periods will now be examined in successive sections.