Hicks, Robbins, and the Demise of Pigovian Welfare Economics: Rectification and Amplification

Abstract

It is to be welcomed that Nahid Aslanbeigui in her article On The Demise of Pigovian Economics, which recently appeared in this journal [2], drew attention to the merits of Pigou's work in the fields of welfare and employment theory. It again evinces the thorough knowledge of Pigou noticeable in her enlightening comparison between his and Marshall's opinions on important issues of economic policy [1]. Her paper testifies to the belief that Pigou's ideas tend to be underrated nowadays, while they are in fact still relevant to modern debates. Her discussion offers valuable insights. The part dealing with welfare is concerned with the emergence in Britain during the thirties of the new welfare economics in the Paretian style that was to supersede the prevailing Marshallian tradition, with Pigou as foremost representative. Aslanbeigui sketches four methodological by Hicks and Robbins on Pigou, which she holds responsible for the decline of Pigovian welfare [2, 621-22]. She rightly centers on these authors as the principal figures in this transition, but her outline is in several aspects unsatisfactory, incomplete, too simplified and marred by some errors and misrepresentations. This paper aims to present a more adequate account of the topics she discusses and their significance for the transformation of welfare economics, emphasizing the distinct contributions of Hicks and Robbins to this process and comparing them in greater detail than Aslanbeigui does with the ideas held by Pigou. In addition, as a second purpose, it examines how the opinions of the main actors on the issues involved developed beyond the period covered by Aslanbeigui. The problems touched on by her are treated in this way in sections II, III and IV on the concept of material welfare and ordinalism, aggregate concepts, and interpersonal comparisons of utility respectively. It appears that of the four attacks described by Aslanbeigui only the one on interpersonal comparisons was relevant to the decline of Pigou's welfare economics. A subsequent section shows how later on Hicks's and Robbins's appreciation of the welfare has evolved and diverged. The concluding section comments briefly on Aslanbeigui's evaluation of the replacement of Pigovian by Paretian welfare economics.'