Abstract
In his last major work, Intelligence and Democratic Action (1960), Knight recalled reading Ruskin who described Adam Smith as a half-bred, half-witted Scotsman who founded the dismal science of economics and encouraged the blasphemy of people hating God and despising God’s commandments whilst coveting their neighbour’s goods. Knight noted “This is a somewhat florid statement of what the world at large seems to think about us political economists” (Knight 1960, p. 96). Nowhere, perhaps, is the negative view of economists more clearly seen than in the area of welfare, and its connection to ethical considerations of economic life. Welfare in Knight’s work is approached somewhat differently from the way the subject is normally discussed today. Knight contended that there are two sets of policy problems in considering welfare, those arising because the system doesn’t work according to theoretical principles, and problems arising for just the opposite reason that they do work. Economic theory describes, he suggested, what superficially appears to be an ideal social order of “perfect cooperation” based on mutual advantage, achieving maximum possible efficiency in the use of available resources and rational choice, and so on and so forth. The classical economists had taught that free market equilibrium would create the most efficient allocation of resources. However, reality is not so ideal and free enterprise does not in truth imply an ideal social order.
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The Canadian singer-songwriter and poet, who has frequently been called the “bedsit bard”.
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The Social Security Act (Act of August 14, 1935) [H. R. 7260].
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Wilson held office from 1913 to 1921 and was followed by three Republican presidents, Harding (1921–23), Coolidge (1923–29) and Hoover (1929–33), who had been seen ultimately to lead the country into economic disaster.
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To clarify, in the discipline of International Relations this means something somewhat different from the popular conception of anarchy. In IR it refers to the absence of authorities above the state, because the nation state is considered to be the primary actor in international relations.
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A very useful study of the controversies can be found in E. J. Mishan, A Survey of Welfare Economics, 1939–59, The Economic Journal [Vol. 70, No. 278 (Jun., 1960)], pp. 197–265.
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Robbins thanks von Mises in his essay (Robbins, 1935, p. xvi), suggesting it was written under his influence.
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See, Lange, O. (1945) The scope and method of economics, Review of Economic Studies, 13, 19–32; Hicks, J.R. (1939), Value and Capital, Oxford: Clarendon; Kaldor, N. (1939) Welfare Propositions of Economics and Interpersonal Comparisons of Utility, Economic Journal, 49: 549–552. The interrelationship between the Robbins essay and these authors, and the welfare debate as a whole, is comprehensively discussed in the conference proceedings of the 75th anniversary of the essay, available at the LSE http://darp.lse.ac.uk/papersdb/LionelRobbinsConferenceProveedingsVolume.pdf.
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Little, I.M.D. (1957) A Critique of Welfare Economics. Oxford: Clarendon Press, p. 87.
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An excellent discussion on Pareto and the welfare debate can be found in Jeffrey M. Herbener, The Pareto Rule and Welfare Economics, Review of Austrian Economics 10, no. 1 (1997): 79–106.
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Vilfredo Pareto (1894) II massimo di utilità dato dalla libera concorrenza. Giornale degli Economisti 9(2): 48–66.
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Cowan, D. (2016). Welfare Economics. In: Frank H. Knight. Great Thinkers in Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-46211-4_7
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