Scribd
Upload
247 views12 pages

A.C.Pigou: An British Economist, - Arthur Cecil Pigou - 1877-1959

Arthur Cecil Pigou was a British economist known for his contributions to welfare economics and defending neoclassical economics against Keynesian attacks. He developed the concept of externalities and argued negative externalities should be offset by a tax (Pigouvian tax) and positive externalities offset by a subsidy. The Pigou effect states that deflation increases employment and output through higher real wealth and consumption. Pigou made many influential works but was influenced by his teacher Alfred Marshall and remained friends with John Maynard Keynes despite philosophical differences.

Uploaded by

Tosheet Singh Thakuri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
247 views12 pages

A.C.Pigou: An British Economist, - Arthur Cecil Pigou - 1877-1959

Arthur Cecil Pigou was a British economist known for his contributions to welfare economics and defending neoclassical economics against Keynesian attacks. He developed the concept of externalities and argued negative externalities should be offset by a tax (Pigouvian tax) and positive externalities offset by a subsidy. The Pigou effect states that deflation increases employment and output through higher real wealth and consumption. Pigou made many influential works but was influenced by his teacher Alfred Marshall and remained friends with John Maynard Keynes despite philosophical differences.

Uploaded by

Tosheet Singh Thakuri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 12

A.C.

PIGOU
An British Economist,
------------------Arthur Cecil Pigou--------------------
1877-1959
INTRODUCTION
  The
British economist Arthur Cecil Pigou is best known for his basic
contributions to the theory of ‘welfare economics’ and for his defense
of neoclassic economics against the attacks of the Keynesian
school.
 “Pigou effect” or “real balance effect” is also an important theory
which was presented by A C Pigou himself.
 Defining wealth as the money supply divided by current price levels,
the Pigou effect states that when there is deflation of prices,
employment (and thus output) will be increased due to an increase in
wealth (and thus consumption). -
sourceweb
EARLY LIFE AND STUDIES
 Pigou was born in Ryde, England in 1877. He was a son of an
army officer. He always had a notable academic prowess as he
won a scholarship to Harrow school. Later he studied at
King’s Collage under Alfred Marshall and was considered as
one of his best student.
 Pigou was responsible for disseminating many of Marshall’s
ideas. Further more, he was the teacher and builder of the
School of Economics at the University of Cambridge.
PERSONAL LIFE - 1
 Pigou had some problems with the world war-1. He hated the
idea of loss of life during such wars. He remained at
Cambridge, but during the vacations was an ambulance driver
at the front for the Friend’s Ambulance Unit (volunteer
ambulance service), and insisted on undertaking jobs of
‘particular’ danger.
 He was consistently appointed in national commissions but
was a reluctant member. Later he withdrew from national
affairs and devoted himself to more academic economics.
PERSONAL LIFE - 2
 Pigou also enjoyed mountains and climbing. He introduced
climbing to many of his fellow friends, who became a better
climber than him. It was because Pigou was affected by a heart
illness in early 1930s.
 Later in his years, he became more reclusive, occasionally
leaving his room to give lectures or for a walk.
 He never married. But he had good friends especially in his
late years.
MOST NOTABLE WORKS
 He specifically studied under Alfred Marshall and focused on welfare
economics. He became intrigued by welfare economics, which
examines the overall benefit to society that comes from all the
decisions made.
 Pigou’s most influential work was ‘The Economics of Welfare’.  In it,
Pigou developed Marshall’s concept of externalities. Pigou argued
that negative externalities (causes external costs to third party)
should be offset by a tax, while positive externalities (benefits to
third party) should be offset by a subsidy.
1 . PIGOUVIAN TAX
A Pigouvian tax is a tax on any market activity that
generates negative externalities (causes external costs
to third party).
The purpose of the Pigouvian tax is to redistribute the
cost back to the producer or user of the negative
externality. A carbon emissions tax or a tax on plastic
bags are examples of Pigouvian taxes.
- named after Pigou himself
2 . PIGOUVIAN
SUBSIDY
Pigouvian subsidy is the subsidy on any market
activity having positive externality.
It has some relation with Pigouvian tax.
Behaviors or actions that are a benefit to the third
party (society) are called positive externalities. So, it
promotes such externalities which benefits society as
a whole.
- named after Pigou himself
PIGOU’S
EFFECT
The Pigou effect states that a
deflation in prices will result
in increase in
employment and
wealth, enabling the
economy
to return to its "natural rates.“
Alternatively, with the inflation of
prices, employment
and output will
be decreased, due to a decrease in
consumption. The
Pigou effect is
also known as the "real balance effect."
PIGOU AND OTHER NAMES
 Pigou was a great student of Alfred Marshall which is the
reason Pigou was influenced by Marshall’s work. Pigou is
known for development of Marshall’s concept of externality.
 Pigou was also a good friend of John Maynard Keynes.
Even though their ideals crashed with one another many
times, they still were good friends.
 He died in 7 March 1959 at age 81 at Cambridge, England.
BOOKS AND
PUBLICATIONS
 The Economics of Welfare
 Keynes's General Theory - A Retrospective View
 Socialism vs Capitalism
 Wealth and Welfare
 Theory of unemployment
• The Political Economy of War
• Exchange Value of Legal Tender Money
• Aspects of British Economic History
A PRICE AND
QUANTITY
GRAPH
Showing the negative
externalities covered by the
Pigouvian tax.

Negative Externalities =
Pigouvian Tax

You might also like