------ EH.NET BOOK REVIEW ------
Title: No Wealth but Life: Welfare Economics and the Welfare State in
Britain, 1880-1945

Published by EH.NET (September 2010)

Roger E. Backhouse and Tamotsu Nishizawa, editors, /No Wealth but Life:
Welfare Economics and the Welfare State in Britain, 1880-1945/. New York:
Cambridge University Press, 2010. xi + 244 pp. $85 (hardcover), ISBN:
978-0-521-19786-1.

Reviewed for EH.Net by Marianne Johnson, Department of Economics, University
of Wisconsin – Oshkosh.

/No Wealth but Life/, edited by Roger Backhouse and Tamotsu Nishizawa, is a
collection of essays that re-examine welfare economics within the context of
the simultaneous emergence of the modern welfare state.  The essays
themselves are based on a series of workshops that took place in 2005 and
2006 at Hitotsubashi University, with an introduction and postscript provided
by the editors.

Their primary argument is that the split between Pigouvian and Paretian
economic analysis is “a stylized account, based on selective memory,”
which has led historians to incorrectly treat the theoretical development of
welfare economics and the origination of the welfare state separately. The
essays in this collection therefore attempt to place welfare theory within
the historical and political context of the early twentieth century – a
difficult job as both the political-social history and the economic thought
of this period are incredibly complex and multifaceted. This may explain why
the essays are often more successful on their individual topics than on the
overarching theme. That said, the collection provides a wealth of economic
and historical detail on the rise of the British welfare state that will make
valuable reading to anyone interested in the period.

The book is divided into three sections, each containing three essays. The
first section deals with Cambridge economics and the welfare state, including
Peter Groenwegen’s essay on Marshall and a very interesting discussion of
Cambridge thinking on welfare and taxation by Martin Daunton. However, the
highlight of this group is Steven Medema’s consideration of Pigou’s
little-known pamphlet, “State Action and Laisser Faire.” Medema argues
that Pigou had a more sophisticated and complex view of state action than is
generally perceived from his /The Economics of Welfare/. In this pamphlet, we
see Pigou eschew the usual distinction between state action and laissez
faire, arguing that the market – and by extension its laissez faire
policies – are constructs of society, just as are governmental policies
that appear activist. Because of this dual nature of state action-inaction,
Pigou argued that the quality of governmental decision-making was important,
thus bringing Pigou much closer to the Public Choice economists than is
commonly perceived.

The essays of the second section take up the inter-relationships between
Oxford ethics and welfare thinking and include Yuichi Shionoya’s discussion
of the philosophical basis of Oxford welfare economics, Roger Backhouse’s
essay on Hobson, and Tamotsu Nishizawa’s contribution on the Japanese
economist Tokuzo Fukuda and his connections to Oxford. Though not providing a
school to rival Cambridge, Oxford economists made important contributions to
economic theory and practice in the early twentieth century. All three essays
do a nice job of bringing some of the features of Oxford thinking to the fore
– in particular, their emphasis on economists as players in the political
process. At times, however, it seems the authors are trying too hard to
differentiate Oxford from Cambridge, over-claiming some distinctions.
Furthermore, the last essay of this section seems out of place. I am not
convinced that pre-World War II Japan provides a logical place to examine the
influence of the British discussion on welfare economics.

The last section considers welfare economics in the policy arena, including
two essays on Beveridge, one by Maria Cristina Marcuzzo and one by Atsushi
Komine, as well as a discussion by Richard Toye on H.G. Wells. Komine
provides a nice history of Beveridge’s writings within the context of the
period. Individuals unfamiliar with Beveridge will get much out of the essay.
The correspondence between Beveridge and Keynes discussed by Marcuzzo
highlights the complexity in moving from economic theory to practice. By the
1940’s, Keynes and Beveridge were two of the most important figures of the
British policy debate. Marcuzzo’s selection and interpretation of their
letters take us through Beveridge’s difficulties with /The General Theory/
and the Keynes-Beveridge exchanges over unemployment and the social-economic
organization of Britain, giving a good flavor of the messiness of the period.
The exchanges also provide a glimpse into the academic world – one can
hardly imagine editors today taking time to school public policy officials in
economics for publication in leading journals.

Historians of economic thought have generally believed that the “welfare”
of welfare economics need not be the same “welfare” as that of the
welfare state. The editors argue the opposite, attempting to bring the two
together in these essays. While I am not convinced that the editors’ claims
of the neglect of the connection is as dire as portrayed, the essays make
important contributions to the history of the welfare state and are well
worth reading.

The introduction and postscript provide a solid historical context for the
essays and further develop shared subthemes, including, for example, the
practical-policy and the theoretical difficulties of utilitarianism as a
foundation for economics. In combination with the essays, the editors place
the dynamic and turbulent discussions of economic theory and policy of the
early twentieth century against the extreme narrowing of theory and that came
from the New Welfare Economics of Hicks and Kaldor after 1950. It is to the
credit of the editors and contributors that we feel we lost something from
this.

Marianne Johnson, Professor of Economics, University of Wisconsin –
Oshkosh, is a scholar of the history of public finance. She has focused on
Knut Wicksell and his influence on modern public finance and public policy.

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Geographic Location: Europe
Subject: Economic Planning and Policy, Government, Law and Regulation, Public
Finance, History of Economic Thought; Methodology
Time: 19th Century, 20th Century: Pre WWII