Francis Ysidro Edgeworth 1845-1926 PDF

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Edgeworth, Duke U.P., 2010, p. 1 FRANCIS YSIDRO EDGEWORTH 1845-1926 1. The Life Of the three major British economists belonging to the second generation of marginalists – Marshall, Edgeworth and Wicksteed – Edgeworth was beyond all doubt the most original and eccentric, actually bordering on the biz...

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FRANCIS YSIDRO EDGEWORTH 1845-1926

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The Life

Of the three major British economists belonging to the second generation of marginalists – Marshall, Edgeworth and Wicksteed – Edgeworth was beyond all doubt the most original and eccentric, actually bordering on the bizarre. His conception of the market and equilibrium has only recently found just evaluation and interpretation. In fact, some of Edgeworth’s fundamental ideas lie at the core of possibly the most innovative part of contemporary economic thought. It is of course a truism to say that no one can be fully understood in isolation from the social, cultural and family context that to a large extent produced the person. Indeed, if the principle were not so regularly ignored it would hardly be worth mentioning, but in the case of Edgeworth it takes on the force of absolute truth. Francis Ysidro – we will see the reason for this odd second name in a minute – Edgeworth was born of an extraordinary family at Edgeworthstown, in the county of Longford, Ireland on 8 February 1845

1.1 A famous /or grand or great?/ Anglo-Irish family In 1583 two of his ancestors, Edward and Francis Edgeworth, left Edgeworth (present-day Edgeware, the northern terminus of the London underground Northern Line) in Middlesex, emigrating to Ireland, where they made their fortune and married into the local aristocracy. Edgeworth’s grandfather, Richard Lovell (1744-1817), combined great culture with a flair for inventing mechanical instruments (tools??) and had a wide circle of friends including Erasmus Darwin (Charles Darwin’s grandfather), philosophers like Joseph Priestley (it was in his Essay on the Government of 1786 that Bentham found the phrase that made him famous, "the greatest happiness for the greatest number") and scientists like Boulton, Watt and Wedgwood. He brought up his eldest son according to the precepts of Jean-Jacques Rousseau’s Emile, and took him to be examined by Rousseau himself. He married four times and had twenty-two children: one of his daughters died at the age of ninety-two in 1897, a good hundred and forty-three years after her father’s birth!

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Another daughter, Maria Edgeworth (1767-1849), achieved fame as an author, producing literary works that often reflected critically on the landowning class (the class the Edgeworths belonged to) and the Church. She was a friend of economists like David Ricardo and Dugald Stewart, philosophers including the father of utilitarianism Jeremy Bentham and writers of the calibre of Walter Scott. With Ricardo she held important correspondence on potatoes and the Irish famines, advising the great English economist to go to Ireland and see for himself how things really stood rather than theorizing at a distance. In one of her short stories (still widely reprinted and read) a father explains to his children where the greatest virtues lie: "the most useful should come first, and you might, I believe, arrange them all by their degree of usefulness or utility". What determined utility lay in turn in "what contributes most to the happiness of the greatest number of people, and for the greatest length of time". Of her father, grandfather to our economist, Maria wrote that "he not only estimated what every object of fancy and taste would cost, but he accustomed himself to consider what the actual enjoyment of the indulgence would be. Carefully analysing his own feelings, he observed how much our real tastes are gratified by the purchase or pursuit of many things."1 Edgeworth’s father, Francis Beaufort (1809-1846), was educated at Trinity College, Cambridge, and was a great friend of William Hamilton, the leading Irish scientist of the age – "the Irish Lagrange, the Pascal and Descartes of his country. Like Leibniz, his mind could not be satisfied with study of one kind alone", as he was described by his son, who knew him well and probably acquired his mathematical culture from him, as well as a keen interest in the sciences. With Hamilton, Francis senior would eagerly discuss philosophy and poetry, and conceived the idea of marrying one of his sisters. When he was about to set off on a European tour, however, fate lead him to the steps of the British Museum, where the twenty-two-year-old Francis met Rosa Florentina Eroles, a sixteen-year-old Spanish girl, "plump, voluptuous and made for love", as Francis himself immediately wrote to his mother. In the space of barely three weeks the young couple were married and honeymooning in Florence (it proved a happy marriage) . Ysidro (his maternal grandfather was Catalan, hence the Spanish name) was their fifth and last child. Few important events stand out in Edgeworth’s life. Educated privately at Edgeworthstown until the age of seventeen, he studied literature first at Trinity College, Dublin (also alma mater to G.B. Shaw,2 a little younger than Francis, and later to 1

Maria Edgeworth 1820, ii, 422. On the positions Shaw held on political economy, see the references in the chapters on Wicksteed and Keynes. 2

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W.B.Yeats, James Joyce and Samuel Beckett), to go on to Literae Humaniores (classics, philosophy, and ancient history) at Balliol College, Oxford, where he had as tutor the great classicist Benjamin Jowett (1817-93), soon becoming one of his favorites. It may have been from Jowett, "who was always much interested in Political Economy and was occasionally teaching the subject at about that time, that he received his first impulse to the subject"3. Be that as it may, after Oxford he went to London to study law, qualifying as barrister-at-law in 1877. He never actually practiced the profession, however, but took to teaching literature, logic and philosophy until, having published the two works that were to remain his most important, in 1890 he was appointed to the chair of Economic and Statistical Science at King's College, London University. The following year, 1891, saw him nominated Drummond Professor of Political Economy at Oxford University. Together with the Cambridge chair, occupied by Marshall, this was the most prestigious in the United Kingdom: Edgeworth held it uninterruptedly for the following thirty years, until he retired in 1922. With Marshall at Cambridge (where he taught from 1885 to 1908) and Edgeworth at Oxford we have the essential picture of political economy in England in the fundamental period of construction and consolidation of neoclassical theory, from the optimists of the 1880s to the critics of the 1920s, when the first cracks crept across the marginalist edifice and, at the same time, new theoretical approaches began to emerge (Keynes, Sraffa, Hayek, and Hicks). The Oxford Chair was not the only source for Edgeworth’s thought and influence to find circulation, however. Even more important, perhaps, for the dissemination of his and various other thinkers’ ideas, was his work as editor first, from its foundation in 1890 until 1911, and then as joint editor (with Keynes) from 1919 until his death in 1926, of the Economic Journal, the official organ of the British Economic Association (which became the Royal Economic Society in 1902), the most important British economic journal, and one of the most important in the world: "INSERt here original quote per quarant'anni un fiume di schegge sbalzò dalla sua mente lucida a illuminare (e oscurare) le pagine dell'Economic Journal" (Keynes). In this role Edgeworth enjoyed considerable power in directing and controlling the dissemination of economic ideas, of vital importance for the progress (or regression) of the science. Here two significant episodes stand out, one positive, one negative, both involving an Italian economist. In 1895 Edgeworth, possibly under pressure from Marshall, held up publication in the Economic Journal of a paper by Enrico Barone where the Italian economist raised certain objections of Walrasian leaning against the theory of distribution set out by Wicksteed in his Essay on the Coordination of the Laws of Distribution, 3

Keynes 1933, p.255.

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published the year before.4 The other episode came later. Edgeworth had an excellent knowledge of Italian, and he was greatly impressed by a paper "Sulle relazioni fra costo and quantità prodotta" (On the relations between cost and quantity produced) published in 1925 in the "Annali di economia" of the Bocconi University of Milan by the then very young economist Piero Sraffa, warmly recommending publication of an English translation of the article in the journal he co-edited. This turned out to be one of his last significant editorial decisions: Edgeworth died on 13 February 1926. A few months later the article by Sraffa that Edgeworth had so wanted to see there was published in the December 1926 issue, thereby marking the dawn of an entirely new approach to economic theory.5 The old economist had been able to appreciate the originality of the new, faithful to his task of fostering scientific progress to the very last. But what is there to be said of Edgeworth the man? 1.2 The man Of him, Marshall, a contemporary of his who knew him well, said alluding to his mixed family origins: "Francis is a charming fellow, but you must be careful with Ysidro."6 The complexity of his personality was superbly evoked by Keynes, who was well acquainted with him (also through their co-editing of the Economic Journal) although he had never known the young Edgeworth: "He was kind, affectionate, modest, self-depreciatory, humorous, with a sharp and candid eye for human nature; he was also reserved, angular, complicated, proud, and touchy, elaborately polite, courteous to the point of artificiality, absolutely unbending and unyielding in himself to the pressure of the outside world."7 Again, Keynes concluded his biographical essay on Edgeworth with a splendid, poetic image: "It is narrated that in his boyhood at Edgeworthstown he would read Homer seated aloft in a heron's nest. So, as it were, he dwelt always, not too much concerned with the earth."8 He showed the refined, recherché style of the Spanish gentleman in his social relations and dress (the latter being of hardly any interest to the academics of Oxford and Cambridge, then as now). In conversation, too, his style was rare and odd. For example, one evening when T.E. Lawrence (1888-1935, better known as "Lawrence of Arabia") had just returned to Oxford from London, Edgeworth asked him: "Was it very caliginous in the Metropolis?". To which Lawrence (who also had a classical background and was a 4

See the chapters on Walras and Wicksteed, and in particular the note on Barone on p.??? See the chapter on Sraffa. 6 Quoted by Keynes 1933, p.265. 7 Keynes 1933, p.265. 8 Keynes 1933, p. 266. 5

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considerable linguist), gravely replied in the same rhetorical register: "Somewhat caliginous, but not altogether inspissated". He was not always entirely lucid in his lectures, but the theoretical passion was never lacking. Harrod, a pupil of his at Oxford and subsequently a leading economist, remembered him thus: "At a critical moment one could gauge that his feelings were overcoming him. One such was when, after many hours of lecturing and after many passages of digression with quotations from the classics and analogies from physics, he at last made the supply curve intersect the demand curve on the blackboard. One knew it was a great moment. He wagged his beard and muttered inaudible things into it. He seemed to be in a kind of ecstasy. And so it was on the mention of Keynes. I once told him that Keynes was staying in Christ Church [the Oxford College of which Harrod was a member]. "Ah," he said, "you have the pure milk of economics with you…" and, flinging his arms above his head, he proceeded with an inarticulate eulogy."9 Strikingly original, and strikingly remote from our contemporary sensibility – but perhaps even more fascinating for this very reason – is his style of writing, where "quotations from the Greek tread on the heels of the differential calculus, and the philistine reader can scarcely tell whether it is a line of Homer or a mathematical abstraction which is in course of integration."10. The closing lines of his first major work, the New and Old Methods of Ethics, which he published at the age of thirty-two, are a significant example of the style he was never to abandon: Where the great body of moral sciences is already gone before, from all sides ascending, under a master's guidance, towards one serene commanding height, thither aspires this argument, a straggler coming up, non passibus aequis, and by a devious route. A devious route, and verging to the untrodden method which was fancifully delineated in the previous section; so far at least as the mathematical handling of pleasures is divined to be conducive to a genuinely physical ethic, prooimia autou tou nomou (greek text: shall we put it just in modern transliteration, or, as I would prefer, leave it the original greek text as well? To give the flavour…: even at Edgeworth’s times, not everybody could understand the greek). Over and above form and style, however, what exactly does the originality of Edgeworth’s work consist in? And where did his quest begin? 1.3 The work 9

Harrod 1951, p.373. On Roy Harrod (1900-1978), Oxford economist and philosopher, see also the references in the chapter on Keynes. 10 Keynes 1933, p. 257.

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At the heart of Edgeworth’s thought were two closely connected issues – twin issues, we might say, that were ultimately one and the same: distribution and exchange. The problem Edgeworth set himself was to track down, through the exchange of goods between individuals and between groups or coalitions of individuals, that final distribution between subjects of the goods existing (in limited quantity) at a certain point of time. In other words, it is the problem of finding the equilibrium that means the greatest happiness for the greatest number of people. It is at one and the same time a matter of ethics and of economics: of ethics in that it concerns the happiness of society (universal happiness), and of economics in that it concerns the happiness of the individual (individual happiness). The problem was by no means new, nor was the general philosophical and, in particular, ethical approach Edgeworth set out from, namely utilitarianism, which he had literally picked up at home, as we saw before in connection with two texts by his aunt Maria Edgeworth. Nor, indeed, was there anything particularly new about the link between utilitarianism and political economy, already to be seen in Jevons11 and various other neoclassical economists. What is decidedly new is the finetuned definition Edgeworth gives of the connection – and the distinction – between ethics and economics, but it is above all in the conception of the market and equilibrium, and in the analytic tools he devised to tackle this fundamental question of the social sciences, that his true originality lies. Like almost all the great economists before him – Adam Smith to name but one, or, among his contemporaries, Marshall and Wicksteed – Edgeworth came to economics through ethics. After the publication of New and Old Methods of Ethics in 1877, containing both a critique and, as we shall see, further development of the utilitarian philosophy, Edgeworth met Jevons personally – Keynes, let us recall, saw Edgeworth, together with Wicksteed and Foxwell, as an "offspring" of Jevons – and went on to meet Marshall, who had like him been "a favourite of Jowett's" at Oxford. In Jevons’s Theory of Political Economy, the second edition of which came out in 1879, the year of the meeting with Jevons, Edgeworth found not only the technical tool-kit of marginalist economic theory, but also a general view with a marked utilitarian bent that immediately struck a sympathetic chord. As for Marshall (who had published the Pure Theory of Domestic Value and the Economics of Industry in the same year, 1879), what struck Edgeworth was the attention paid to the exchange relations that obtain between individuals in the real markets. As Edgeworth himself put it:

11

See the chapter on Jevons.

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Quote to be inserted (6 lines) .12 Together with the works of Jevons and Marshall, Walras’s Eléments d'économie politique pure also helped fill in the foundations of Edgeworth’s economic education. Here, above all, Edgeworth discovered a highly mechanistic, rational vision of market functioning and the determination of prices. Indeed, illustrating the Walrasian conception of the market Edgeworth was to write: You might suppose each dealer to write down his demand, how much of an article he would take at each price, without attempting to conceal his requirements; and these data having been furnished to a sort of market-machine, the price to be passionlessly evaluated.13 So we have Jevons, Marshall and Walras; market, competition and price: these were the authors, and these the notions that Edgeworth’s economic reflections started from. Common to Jevons and Walras (Marshall’s position being more nuanced) was the idea of price as a natural fact – the datum/given/ upon which to base market analysis. For these authors competition was that condition of the market in which agents make decisions on the basis of prices (as well as their preferences, or utility functions). Moreover, it was the movements of prices, and thus of the quantities in demand and supply (or, as in Marshall, of the quantities and thus of the prices) that brought the system to equilibrium. Here the role of the agents in determining prices, and with them equilibrium in the market and the economic system, proved totally subordinate, the agents being passive price-takers in the markets, their subjective preferences and differences finding expression only subsequently, when they decide whether to buy or sell and how much to buy or sell, on the basis of the prices objectively and independently determined by the market. Furthermore, every single agent is conceived as a monad "with no doors or windows": pursuing their own interests alone, they take no interest in the others, neither communicating, nor cooperating, nor entering into any sort of collusion with them (in the conditions considered here of perfect Walrasian competition). Now, Edgeworth had a totally new and different conception of the market and equilibrium. He reversed the logical path so far followed by economic theory from the other end. Instead of postulating the existence of prices (and thus perfect competition), he 12

The original title of the article by Marshall cited by Edgeworth is "The Old Generation of Economists and the New", published in the Quarterly Journal of Economics in 1896. 13 Mathematical Psychics, p.30. Compare this text by Edgeworth with the text by Walras on the market as calculating machine, quoted above (pp.???-???).

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sets his sights somewhat higher, beginning with the "abstract definition of economic man", and working his way with deductive reasoning to the result – the “fact”, that is, of the price. Moreover, Edgeworth did not see prices as the result of the impersonal play of market forces, beyond the individuals playing their part, but rather as the product of their personal bargaining activity, characterized by "incalculable and often disreputable incidents", agreements and collusions between the participants, meetings and separations. For Edgeworth, economic activity is "a dance in which youths and maidens move in unison; harmoniously, but subject to a change of partner"14, a voyage of discovery, an unending quest. With another striking image, which contemporary economic thought “stole” from him, Edgeworth pictured the economy as a group of islands, separated by the sea at high tide, joined by land at low tide. Thus, by exchanging and communicating among themselves ...