An Economist's Invisible Hand

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Date Submitted: 09/08/2011 09:28 AM

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NOVEMBER 28, 2009

An Economist's Invisible Hand

Arthur Cecil Pigou, overlooked for decades, provides a guide to the financial crisis

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At the Heavenly Models home for deceased economists, an award is being presented to the resident whose work best explains financial crises, global warming, and other pressing issues of today. The favored candidates include John Maynard Keynes, the patron saint of stimulus programs; Hyman Minsky, an American disciple of Mr. Keynes who warned about the dangers of financial deregulation; and Milton Friedman, the late Chicago economist. (Mr. Friedman's free market principles are out of vogue, but Federal Reserve Chairman Ben Bernanke recently took his advice on how to prevent depressions by pumping money into the economy.)

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Ramsey and Muspratt Collection

Arthur Cecil Pigou in 1943.



The winner's name, however, turns out to be much less familiar: Arthur Cecil Pigou (pronounced "Arthur See-sil Pig-oo"). Stepping from the wings, a strapping Englishman with fair, wavy hair and a luxuriant moustache, smiles awkwardly and accepts his prize. A contemporary of Mr. Keynes at Cambridge University, Mr. Pigou was, for a long time, the forgotten man of economics. In the years leading up to his death, in 1959, he was a reclusive figure, rarely venturing from his rooms at King's College. His novel ideas on taxing polluters and making health insurance compulsory were met with indifference: Keynesianism was all the rage.

Today Mr. Pigou's intellectual legacy is being rediscovered, and, unlike those of Messrs....