Henderson, Alexander (1914–1954)

Abstract

Described by J.R. Hicks as one of the most brilliant students in Cambridge in the 1930s, Henderson’s professional career was cut short by a long spell of war service (1940–45) and by his early death at the age of 39. He held professorial appointments at the University of Manchester (1949–50) and Carnegie Institute of Technology, Pittsburgh (1951–4). His major journal articles were in the field of microeconomics, the best known being a note in the Review of Economic Studies (1941) which markedly influenced Hicks’s well known exposition of the meaning and measurement of consumer’s surplus. Of more lasting interest, perhaps, is his development of public utility pricing theory in respect of the case where marginal cost pricing theory would require a public enterprise to make a loss. He argued that as a loss would have to be covered by a tax, the problem became one of choosing the ‘best’ tax or combination of taxes. Taxes were labelled ‘good’ if (a) they ensured that once an investment in a public enterprise had taken place it would be used by all who would be willing to pay the marginal cost; (b) they ensured that an investment would not be undertaken if its cost exceeded consumers’ surplus; and (c) they would place the burden where political preferences would wish it to be put, meaning that if the distribution of income was optimal before the investment were undertaken, any tax should be levied on the users of the product of the investment. Applying these criteria he was able to make some trenchant criticisms of established views of the financing of public enterprise investment, notably concerning the two-part tariff system. He wrote on population problems, international trade and took part in the somewhat arid debate on the welfare effects of direct versus indirect taxes during the 1940s. He also co-authored with Charnes and Cooper (1953) one of the best known earlier texts on the application of linear programming to economic problems.