Author(s): A. C. Pigou

Non-Fiction

Originally published in 1921, The Economics of Welfare lays down the foundations for the Neo- Classical approach to welfare economics. As an ardent utilitarian, Pigou was concerned with the Bentham principle of affecting the greatest happiness for the greatest number' and in this landmark work explores the relationship between measures of national income and its distribution in order to understand how wealth and welfare are related. Pigou's seminal work extends Marshall's concept of externalities by developing a theoretical framework in which the interest of the individual and that of society diverge. He, controversially, argues that the resolution of such an occurrence requires government intervention in the form of a tax of an amount equivalent to the costs of the harm to others. Conversely governments should subsidize those who generate positive externalities, in the amount that others benefit. The proposition that technical externalities require government regulation and taxation to prevent less-than-optimal market outcomes was intensely debated after the publication of Pigou's seminal work. Today Pigovian tax is most commonly applied to Environmental issues. This re-issued classic contains a new introduction by Nahid Aslanbeigui and Guy Oakes who explore the impact that this classic text has had on the study of modern welfare economics and the resolution of externalities today.