The Palgrave Companion to Oxford Economics

This chapter reviews Oxford economists’ contributions to development economics from around 1950 to the 2010s. It shows the enormous range of contributions to analysis and policy by Oxford development economists, evolving with the changes in the global and developing country context. Throughout, there were broad two schools of thought, one tending to favour a neoclassical approach using traditional economic concepts, and the other more critical of these concepts and more multidisciplinary. Both were firmly grounded in empirical research and each made important contributions and influenced policy, interacting with national and global development institutions. By the end of the period, the role of development economics was diminishing with the increasing heterogeneity in the developing world while problems, constraints and opportunities became more universal, encompassing developed as well as developing countries. Oxford economists are moving towards a more universal approach, but institutions have yet to catch up.

This chapter assesses Oxford’s contributions to the emergence and institutionalisation of industrial economics as an academic discipline. Based on the analysis of primary sources (interviews, unpublished documents, archives, academic journals and teaching programmes), it charts and evaluates the gradual and, at times, conflictual process of the institutionalisation of industrial economics at Oxford from the 1920s to the 1980s. We show that Oxford’s contribution to industrial economics was not attributable to any specific school of thought, as could be argued was the case for Cambridge. This was mainly due to the lack of emblematic figures at Oxford and/or the relative isolation of successive individuals elected to the Drummond Chair. Yet, it is argued that Oxford produced a unified methodological body and a unique approach to industrial economics based on an empirical approach to the firm and to organisations.

Economic history is a distifnctive empirical strand of economics, which has been studied and taught at Oxford since the 1860s. Innovation has been provided by a succession of able scholars, and continuity by a stable syllabus in both modern history and social studies. Enduring themes are household welfare, production and exchange, agriculture and population, history of economic thought, government and the economy, and the determinants of economic growth. In the last three decades, the focus has shifted from undergraduate teaching to taught Master’s courses and doctoral research, and from British history to a more international perspective. The discipline began by splitting away from economics but the two approaches are converging again.

In this chapter, we survey the origins and evolution of the economics component of the Philosophy, Politics and Economics (PPE) degree at Oxford and its interaction with the development of what we call “Oxford Economics” from 1920 onwards. We examine the nature and characteristics, and the function and structure of this degree component in the context of the research activities of those engaged in its teaching, and discuss the impact of those who taught economics in its framework on economics per se and on their students.

The Oxford Institute of Statistics was established in 1935 with funding from the Rockefeller Foundation, and with Jacob Marschak as Director. However, in 1938 Marschak left for the United States and was eventually replaced by Arthur Bowley, on a part-time basis. The Institute reached the zenith of its activities during the Second World War, under the intellectual direction of Michał Kalecki as the leading independent source of comment and evaluation of British government financial and economic policy. But there always existed a tension in the Institute between its economic and policy research, the statistical research that was of relevance beyond economics, and economic research at Nuffield College, Oxford. Bowley’s successor in 1945, David Champernowne, stayed for only three years as Director, after which the Institute depended on the enthusiasm and projects of individual researchers, until 1962, when it was transformed into the Institute of Economics and Statistics.

This chapter provides an overview of William Forster Lloyd’s various contributions to political economy in the following areas: poor laws and population growth, the problems of commonly held property (or ‘the tragedy of the commons’), marginal utility, behavioural economics and animal intelligence. It argues that Lloyd was strongly in favour of providing support for poor relief, anticipated the law of diminishing marginal utility, and developed in embryo some of the concepts found in contemporary behavioural economics. The neglect of his work across much of the nineteenth century and then the rediscovery of different aspects of it in the twentieth century first by E.R.A. Seligman and then later by Garrett Hardin are also considered.

Bonamy Price was Drummond Professor of Political Economy at Oxford for nearly 20 years from 1868 until his death in 1888. He published several collections of lectures and a notable volume of articles covering churchmanship, constitutional questions, education and political economy. Having taught mathematics and classics at Rugby School, he applied for the chair of Greek at Edinburgh before gaining the Drummond Chair in a hard-fought election. Price was a sceptic of applying a scientific method to a subject where he thought enlightened common sense should prevail. Whilst a prospective reformer of tradition in Oxford tuition, he left no great mark on its teaching. Yet he was often quoted as an authority as well as for the independence of his thought in the Parliament of his day.

James Edwin Thorold Rogers is a largely forgotten member of the English Historical School of economists, historian and politician who was closely associated with Oxford, first as an undergraduate and then as the holder on two separate occasions of the prestigious Drummond Professorship of Political Economy. Rogers’ most important work was the multi-volume A History of Agriculture and Prices in England, which appeared between 1866 and 1902. Despite the achievement represented by A History, Rogers did not attain the recognition he may have perhaps deserved in his lifetime or subsequently. Various reasons can be identified which help to explain this, among them Rogers’ fiery character, his tendency of belittling the work of other economists, and his failure to make any significant contributions to economic theory.

This chapter, after discussing Edgeworth’s association with Oxford and the nature of his approach to economics, examines his early work in moral philosophy, which is important in understanding his economics. Edgeworth’s contribution to the theory of exchange, involving his introduction of the contract curve and his eponymous ‘box diagram’, is then explained. This is shown to lead to his ‘social contract’ justification of utilitarianism. Edgeworth’s later work on monopoly, taxation and international trade is then discussed. His view of the central role of exchange in economics is stressed throughout.

David Hutchison Macgregor was a member of the pantheon of British economists during the first half of the twentieth century. During that time, he was Oxford’s Drummond Professor of Political Economy for more than two decades. As a protégé of Alfred Marshall, he advanced Marshall’s industrial economics, particularly with his 1906 masterpiece, Industrial Combination. This volume examined ‘vast enterprises’, including trusts and cartels, a subject which Marshall admittedly struggled with in his Principles. Though Keynes and Pigou were Marshall’s most famous students, Macgregor was certainly one of his favourites as well as being amongst the most accomplished.

Roy Harrod is regarded as one of the founders of growth theory as a result of the Harrod–Domar model. He also made a host of significant other contributions, making him one of the most important Oxford economists of the twentieth century. Harrod was also the biographer of John Maynard Keynes, publishing the first full-length biography of Keynes in 1951.

This chapter surveys the contributions of Robert Lowe Hall to Oxford pedagogy, Oxford economics and economic policy making in Britain. After arriving from Australia as a Rhodes Scholar to study at Oxford, he gained a First in Philosophy, Politics and Economics, and stayed on in Britain to work as an Oxford don, becoming a member of the Oxford Economists’ Research Group and co-authoring an influential paper with Charles Hitch. Hall undertook work for the British government during the Second World War, and afterwards became Director of the Economic Section in the UK Cabinet Office and later Chief Economic Adviser to the Treasury. After a decade in the House of Lords, he became a spokesperson for the Social Democratic Party. Hall also served as Chairman of the National Institute of Economic and Social Research, President of the Royal Economic Society and Principal of Hertford College, Oxford.

Thomas Balogh was one of the UK’s most controversial political economists. By the age of 26, he had worked for the central banks of Germany, France and the USA, but was a fierce critic of the Bank of England. Born in Budapest, he was ‘taken up’ by Keynes in 1930, yet had a furious row with him in 1945 over Bretton Woods. He advised numerous governments and established the first ‘policy unit’ in Downing Street. Balogh argued throughout his life that most of the work of academic economists was at best pseudo-science and at worst dangerous. In ways that foreshadow the views of many of today’s heterodox economists, he advocated a more institutional and historical approach to economics. This chapter assesses the importance of Balogh’s work, discusses his multiple contributions to economic policy, and presents a lively picture of this talented and controversial economist.

One prodigal Oxford economist overlooked for the Nobel Prize in Economics was surely Colin Clark. He made contributions in many fields, including national income accounting, development economics, public finance, transport economics, location economics, agricultural economics, the history of ideas and the economic consequences of population growth. Clark pursued these interests during the time he was Director of the Agricultural Economics Research Institute in Oxford. While his imaginative approach to estimating Britain’s national income in the 1930s was recognised by Keynes, it did not impress Whitehall officialdom. It may, apart from the attraction of Australia itself, have been a factor in Clark’s decision to take a high-level advisory job in Queensland. His brilliance as an economic statistician was to work with poor and obscure data yet still generate meaningful findings. However, this reputation was sullied in later years over the population growth debate as a result of Clark’s use of inadequate data and lack of statistical refinement. His standing among economists was further diminished by his relish for drawing unfashionable conclusions about public policy.

Hrothgar John Habakkuk was predominantly a historian of English landed society who tackled the major issue of why the peasantry declined and large landowners dominated. Alongside this consistent interest, he opened up a major topic of the distinctive features of technology in Britain and the United States in the nineteenth century which he explained by factor endowments. His interest in demography pointed to what has since become the dominant view that the increase in the English population during the Industrial Revolution depended on changes in the birth rate driven by changes in marriage. Despite his considerable achievements, Habakkuk was uneasy with the rise of the ‘new economic history’ or cliometrics and turned to an administrative career as head of a college and Vice-Chancellor at Oxford.

This chapter provides a detailed account of Ian Little’s life, including a review of his many academic contributions. It records in particular Ian’s graduation from an uncritical view of the State in developing countries, fashionable at the time, to the view that the State is often the source of many problems. Ian’s works on theoretical welfare economics, project evaluation, trade and development and India’s economic development are explained and evaluated.

Although Terence Gorman was the greatest Irish economist of the twentieth century, he was totally unknown to the general public. He was the purest of pure theorists, whose life was devoted to scholarship and teaching, and whose work of forbidding technical difficulty was incomprehensible to most of his contemporaries. Yet, paradoxically, he was always concerned with applied issues, and the tools and theorems he developed, notably those dealing with aggregation, separability, duality and hedonic models, have had a lasting influence on empirical work.

In his memoirs, Max Corden describes his period at Oxford as ‘The Very Best Years’. During that time, he produced three major books and many articles on topics as varied as effective protection, the normative theory of trade policy and the so-called Dutch Disease. He also established an influential graduate seminar in international economics and inspired many students. While at Oxford, his research focus shifted from trade theory to international macroeconomics and he has made major contributions subsequently in this field to current account imbalances, the choice of exchange rate regime and international policy coordination.

This chapter describes the contribution of Derek Robinson to academic labour economics and to public policy. His detailed research on local labour markets made an important early contribution to our understanding of the market imperfections which allowed employers significant discretion from external constraints—they were not simply wage takers. Robinson described how unions flourished in such environments, particularly in internal labour markets. Himself a committed trade unionist, he nevertheless believed that reform of industrial relations was needed. This motivated much of his work for the UK government. His central role in devising and implementing the incomes policy of the Heath administration in the early 1970s represented the high point of Robinson’s public service. He believed that incomes policies need not just be short-term measures to dampen inflationary pressures but potentially engines for change in wage-setting institutions and in attitudes to pay differentials.

David Hendry has made—and continues to make—major contributions to the econometrics of empirical economic modelling, economic forecasting, econometrics software, and economic policy. This chapter reviews his contributions by topic, emphasizing the overlaps between different strands in his research and the importance of real-world problems in motivating and benefiting from that research.

Avner Offer’s work includes the history of property politics in England before the Great War; the impact of the international food economy on politics and strategy in Britain, the British Empire and Germany before and during that War; analysis of the experience of affluence and its impact on social mores and well-being in the United Kingdom and the United States since 1950; and a study of abstract economic theory and its influence on political ideologies and economic organisation in the West since the late 1960s. In his model building, he sees motivation through the lens of a quest for self-esteem and approbation and views institutions as devices to control and constrain commitment across time. Much of his work can be read as a defence of social democracy, and an analysis of how welfare can be destroyed by political and economic calculations inducing inequality and conflict.

Professor Sir Paul Collier is one of the leading development economists of the post-war generation. Studying under Max Corden at Oxford in the 1970s, his earliest research was in international trade theory. This was a foundation for later work on the economics of labour markets and natural resources in East Africa. Subsequently, he has been part of the re-engagement of development economics with other social sciences, and in particular political science, with influential work on the economics of civil wars, fragile States, aid effectiveness, and urbanisation. Apart from a period of time as research director at the World Bank, most of his career has been spent at Oxford, where he founded the Centre for the Study of African Economies.

In the last three decades, research in international economics has seen unprecedented innovation in terms of both theory and empirics. This has established the centrality of trade, within and between countries, to overall economic performance. Anthony J. Venables has been a crucial contributor to this wave of innovation. His legacy contained in his books and papers spans three broad areas: international trade, economic geography and economic development. In particular, he made significant contributions to the body of work that led to Paul Krugman’s Nobel Prize in 2008 for research on new trade theory and the so-called new economic geography. This chapter follows Venables’ academic trajectory through Cambridge, Essex, Oxford, Southampton and LSE, before his final return to Oxford in recent years.

Paul Klemperer is a British economist born in 1956 who was an undergraduate at Cambridge University and did his graduate studies at Stanford University, where he obtained a PhD in 1986. He took up a post at St Catherine’s College, Oxford, in 1984, moving to Nuffield College in 1995 when he became the Edgeworth Professor of Economics in 1995. In his early years, his research focused on oligopoly theory, with his main contributions being on switching costs. From 1995, his interests moved on to auction theory and he became involved in applying his ideas to auction design, both as part of a team in the 2000 3G auction in the United Kingdom and later applying his own multi-product auction model to deal with the Bank of England’s auctions of loans to banks with different qualities of collateral assets in the wake of the 2008 financial crisis.

John Vickers is an expert on competition, oligopoly and regulation. Alone or with others, he has written many seminal research papers on various aspects of these related areas of industrial organization, and contributed highly influential work on patent races, privatization and banking, among other topics. He has also served as Chief Economist of the Bank of England and Director General of the Office of Fair Trading, and followed his tenure of Oxford’s senior Professorship of Economics (the Drummond) with the Wardenship of All Souls College.