Bearing Fruit as Well as Light

Abstract

This chapter takes a look at Pigou's welfare economics, particularly through his most famous work, Wealth and Welfare, which began circulating in 1912. This book marked the formal start of Pigou's work on the economics of welfare and, arguably, the birth of the field of welfare economics. Pigou's welfare economics was concerned with analyzing and correcting imperfections in the market that resulted in suboptimal levels of societal wellbeing. This premise—the idea that the market was not self-regulating—meant that much of the ameliorative potential of Pigou's welfare economics depended on the actions of a competent administrator located outside the market. Amid a surging public respect for science and a burgeoning pressure for government to take a more active role in the economy, Pigou's work not only made a major theoretical contribution, it was also able to provide a rigorous justification for state action at a propitious time.