Arthur Cecil Pigou on Speculation: A Marshallian Analysis of Institutions and Economic Welfare

Riko Stevens
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Riko Stevens: Business School, The University of Western Australia, http://www.web.uwa.edu.au/person/riko.stevens

No 21-15, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: This paper examines the theory of speculation in the work of prominent Cambridge School economist Arthur Cecil Pigou (1877-1959). Although his treatment of speculation has been examined insofar as it relates to his theory of the business cycle, Pigou’s microeconomic analysis of speculation has received very little attention from historians of economic thought. This study contributes to the literature by providing an exposition and interpretation of Pigou’s treatment of the subject of speculation with particular reference to organised markets. It sheds light on an aspect of Pigou’s theory of speculation that has been overlooked in the secondary literature— namely, that Pigou’s assessment of the welfare consequences of speculation depends crucially upon the nature of the institutional context within which that activity takes place. Recognising this aspect of Pigou’s analysis of speculation not only provides a more faithful representation of his views on the subject but it also allows us to identify some of the more fruitful insights contained therein. In this connection, it is argued that Pigou’s treatment of the subject of speculation yields considerable insight into how best to interpret Alfred Marshall’s views on the subject—a matter which has constituted an important unresolved question in the secondary literature.

Keywords: economic welfare; institutions; organised markets; Pigou; speculation; stock exchanges (search for similar items in EconPapers)
JEL-codes: B13 D84 E44 G10 G41 P48 (search for similar items in EconPapers)
Pages: 35
Date: 2021
New Economics Papers: this item is included in nep-his, nep-hpe and nep-mac
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