The British Tariff Reform Controversy and the Genesis of Pigou's Wealth and Welfare, 1903–12

In the acrimonious British controversy over free trade in 1903–6, tariff reformers advocated protective and preferential tariffs to increase the revenue of the exchequer and unify the British Empire. Their arguments—generally informal and labile—were based on several premises: British welfare—not to be confused with material wealth—depended on economic productivity, the prosperity of the working class, and an economic policy that maintained a stable demand for labor, ensuring predictable sources of employment and income. A. C. Pigou, who entered the controversy as a zealous free trader, fashioned the piecemeal ideas of tariff reformers into an analytical framework, translating their polemical arguments into a theoretical discourse. In 1906, he applied this framework to the consequences of tariff reform for the British economy. In 1907, he used it to explore the economic impact of the Poor Laws. And in Wealth and Welfare (1912), he generalized the framework, constructing a systematic analysis of market failures and the conditions under which they might be repaired.