Francis Ysidro EdgeworthFBA (8 February 1845 – 13 February 1926) was an Anglo-Irish philosopher and political economist who made significant contributions to the methods of statistics during the 1880s. From 1891 onward, he was appointed the founding or of The Economic Journal.
His most original and creative book on economics was Mathematical Psychics: An Essay on the Application of Mathematics to the Moral Sciences, published in 1881 at the beginning of his long career in the subject. The book was notoriously difficult to read. He frequently referenced literary sources and interspersed the writing with passages in a number of languages, including Latin, French and Ancient Greek. The mathematics was similarly difficult, and a number of his creative applications of mathematics to economic or moral issues were judged as incomprehensible. However, one of the most influential economists of the time, Alfred Marshall, commented in his review of Mathematical Psychics:
This book shows clear signs of genius, and is a promise of great things to come... His readers may sometimes wish that he had kept his work by him a little longer till he had worked it out a little more fully, and obtained that simplicity which comes only through long labour. But taking it as what it claims to be, 'a tentative study', we can only admire its brilliancy, force, and originality.
Whatever else readers of this book may think about it, they would probably all agree that it is a very remarkable one.... There can be no doubt that in the style of his composition Mr. Edgeworth does not do justice to his matter. His style, if not obscure, is implicit, so that the reader is left to puzzle out every important sentence like an enigma.
The Royal Statistical Society awarded him the Guy Medal in 1907. Edgeworth served as the president of the Royal Statistical Society, 1912–14. In 1928, Arthur Lyon Bowley published a book entitled and devoted to F. Y. Edgeworth's Contributions to Mathematical Statistics.
Contributions to economics
Papers relating to political economy, 1925
In Mathematical Psychics (1881), his most famous and original book, he criticised Jevons's theory of barterexchange, showing that under a system of "recontracting" there will be, in fact, many solutions, an "indeterminacy of contract". Edgeworth's "range of final settlements" was later resurrected by Martin Shubik (1959) as the game-theoretic concept of "the core".
As the number of agents in an economy increases, the degree of indeterminacy is reduced.
In the limit case of an infinite number of agents (perfect competition), contract becomes fully determinate and identical to the 'equilibrium' of economists. The only way of resolving this indeterminacy of contract would be to appeal to the utilitarian principle of maximising the sum of the utilities of traders over the range of final settlements. Incidentally, it was in this 1881 book that Edgeworth introduced into economics the generalised utility function, U (x, y, z, ...), and drew the first 'indifference curve'.
He was the first one to use offer curves and community indifference curves to illustrate its main propositions, including the "optimal tariff".
Taxation of a good may actually result in a decrease in price.
He set the utilitarian foundations for highly progressive taxation, arguing that the optimal distribution of taxes should be such that 'the marginal disutility incurred by each taxpayer should be the same' (Edgeworth, 1897).
In 1897, in an article on monopoly pricing, Edgeworth criticised Cournot's exact solution to the duopoly problem with quantity adjustments as well as Bertrand's "instantly competitive" result in a duopoly model with price adjustment. At the same time, Edgeworth showed how price competition between two firms with capacity constraints and/or rising marginal cost curves resulted in indeterminacy. This gave rise to the Bertrand–Edgeworth model of oligopoly.
Marginal productivity theory
Edgeworth criticised the marginal productivity theory in several articles (1904, 1911), and tried to refine the neo-classical theory of distribution on a more solid basis. Although his work in questions of war finance during World War I was original, they were a bit too theoretical and did not achieve the practical influence he had hoped.
Though Edgeworth's economic ideas were original and in depth, his contemporaries frequently complained of his manner of expression for lack of clarity. He was prone to verbosity and coining obscure words without providing definition for the reader.
F. Y. Edgeworth (1925) Papers relating to political economy 3 vols. Available online at Gallica
Philip Mirowski (ed.) (1994). Edgeworth's Writings on Chance, Economic Hazard, and Statistics, Rowman & Littlefield.
Charles R. McCann Jr. (ed.) (1966) F.Y. Edgeworth: Writings in Probability, Statistics and Economics, 3 vols. Cheltenham, Glos.: Elgar.
Peter Newman (ed.) (2003) F.Y. Edgeworth : Mathematical psychics, and further papers on political economy Oxford University Press.
"Mr. Mathew Arnold on Bishop Butler's Doctrine of Self-Love", 1876, Mind
"Review of Gustav Cassel's Theory of Social Economy", 1920, EJ
"Review of Bowley's Change in Distribution of National Income", 1920, JRSS
"Review of the Webbs' History of Trade Unionism", 1920, EJ
"Molecular Statistics", Part I (1921), Part II (1922), JRSS
"On the Genesis of the Law of Eror", 1921, PhilMag
"The Philosophy of Chance", 1922, Mind
"The Mathematical Economics of Professor Amoroso", 1922, EJ
"Equal Pay to Men and Women for Equal Work", 1922, EJ
"Review of Keynes's Treatise on Probability", 1922, JRSS
"Review of Pigou's Political Economy of War", 1922, EJ
"Statistics of Examinations", 1923, JRSS
"On the Use of Medians for Reducing Observations Relating to Several Quantities", 1923, Phil Mag
"Mr. Correa Walsh on the Calculation of Index Numbers", 1923, JRSS
"Index Numbers According to Mr. Walsh", 1923, EJ
"Women's Wages in Relation to Economic Welfare", 1923, EJ
Also available as: Edgeworth, F.Y. (1995), "Women's Wages in Relation to Economic Welfare", in Humphries, Jane, Gender and economics, Aldershot, England Brookfield, Vermont, USA: Edward Elgar, pp. 99–112, ISBN9781852788438.
"Review of Marshall's Money, Cr and Commerce", 1923, EJ
"Review of The Labour Party's Aim", 1923, EJ
"Review of Bowley's Mathematical Groundwork", 1924, EJ
"Review of Fisher's Economic Position of the Married Woman", 1924, EJ
"Untried Methods of Representing Frequency", 1924, JRSS
Papers Relating to Political Economy, 3 volumes, 1925.
"The Plurality of Index-Numbers", 1925, EJ
"The Element of Probability in Index-Numbers", 1925, JRSS
"The Revised Doctrine of Marginal Social Product", 1925, EJ
"Review of J.M. Clark's Overhead Costs", 1925, EJ.
^Barbe (2010), p. 85: "The year 1877 was a productive year for Edgeworth in earning titles. He acquired the degree of Master of Arts from Oxford and was called to the bar by the Inner Temple. This means that he had successfully completed his studies at the professional level. However, by then he had decided not to pursue a legal career."
^Stigler, Stephen M. (1978), "Francis Ysidro Edgeworth, Statistician", Journal of the Royal Statistical Society, Series A, 141 (3): 287–322, JSTOR2344804. See in particular Section 3, "Edgeworth's Style", pp. 292–293.