Expectations, according to Pigou, could be actual concerns regarding real factors, but could also themselves be a source of fluctuations independent from any other factors (Collard 1983). Pigou also believed that 'psychological causes' had the potential of persisting to the point that the system would be unable to attain equilibrium, and expectations may therefore be formed that address genuine uncertainties (Collard 1983). Forecasting errors, according to Pigou, were deserving of attention, due to their addictive and multiplicative effects (Collard 1983). Pigou believed that eliminating errors resulting from expectations, such as optimism or pessimism, could reduce industrial fluctuations by approximately 50% (Collard 1983). It is noted by Collard (1983) that Pigou's assessment of the effects that expectation has on the economy are more thorough than anything similar put forth by Marshall.
The opposition Pigou had against Keynes later developed into the formulation of the Pigou effect or real balance effect, which documented a strategy in which the problem of high unemployment would correct itself without reliance on economic policies put forth by Keynes (Pressman 1999).
Pigou also received criticism from feminist groups, as he was often regarded as a misogynist (Aslanbeigui 1997). Pigou held the belief that women were inferior on many levels, and recommended that they remain in the home. However, he also had concern for the double burden women faced, and called for legislated paid pregnancy leaves and regulated work conditions. Aslanbegui (1997) sought to study Pigou's views in the context in which he lived, the late Victorian era. This author concluded that the views held by Pigou were typical of a Victorian man desiring to preserve the patriarchal status quo, and that he was shy and felt disengaged from women. However, "Pigou was willing to accept many exceptions to the Victorian declaration that women were inferior (Aslanbeigui 1997, p.313)."
Pigou had some influence on the development of theories concerning disequilibrium. As explained by Aslanbeigui (1996, p.290), Pigou
Separated external...
In this context, it was easy to show that external economies were compatible with perfect competition. All they amounted to was shifts in the cost curves of the equilibrium firm.
Pigou's influence on the development of the long-run competitive theory of the firm was discussed by Aslanbeigui (1996). This author suggested that if the period off assessment of this theory is limited to the 1930s a time in which the theory of imperfect competition was established, it may be considered that "Pigou contributed to the destruction of the perfectly competitive apparatus (p.291)." Aslanbeigui (1996) also refers to the idea that the equilibrium firm of Pigou presented economic theory with 'firm as production function'. Beyond the 1930s, as explained by Aslanbeigui (1996), firm has been quite pigouvian in nature, as it emphasizes perfect competition in a framework that has both static and partial equilibrium.
Pigou has influenced several facets of current economic thought, policy and practice, including the analysis, and justification of government intervention in the marketplace (Pressman 1999). In addition, Pigou's views on social costs and the detrimental effects that production can have on the environment provided the basis for emerging fields like environmental economics (Pressman 1999).
Reference
Aslanbeigui, Nahid. 1996. The cost controversy: Pigovian economics in disequilibrium. The European Journal of the History of Economic Thought 3(2): 275-95.
Aslanbeigui, Nahid. 1997. Rethinking Pigou's misogyny. Eastern Economic Journal 23(3): 301-313.
Collard, David. 1983. Pigou on expectations and the cycle. The Economic Journal 93: 411-14.
Ledebur, Larry. 1960. The problem of social cost. The American Journal of Economics and Sociology 89: 874-88.
Morgenstern, Richard. 1996. Environmental taxes: is there a double dividend? Environment 38:3.
Pigou, Arthur. 1906. Protective and Preferential…
