Cambridge theories of welfare economics

This chapter reports on the emergence of Cambridge theories of welfare economics from the 1870s to the mid-twentieth century. In regard to welfare ideas developed in the last quarter of the nineteenth century, consideration is given to Sidgwick’s concept of social costs, Foxwell’s suggestions for the organization of a free market system, Marshall’s notion of consumer surplus, as complemented by his views on public education and self-help as means of improving society’s welfare, and Neville Keynes’s views on the relationship between ethics and positive economics. With respect to welfare ideas developed in the early twentieth century, consideration is given to Pigou’s definitive characterization of the economics of welfare and Maynard Keynes’s broad contributions to welfare, centred on his theory of effective demand. Lastly, Robertson’s mid-twentieth century defence of cardinal utility, as the most suitable approach to a practical welfare policy, is reviewed.