The Economics of Edwin Chadwick

The Economics of Edwin Chadwick

Incentives Matter

Robert B. Ekelund Jr and Edward O. Price III

The authors detail Sir Edwin Chadwick’s sophisticated conceptions of moral hazard, common pool problems, asymmetric information, and theory of competition, all of which differ starkly from those promulgated by Adam Smith and other classical economists. Also examined are Chadwick’s views on government versus market role in dealing with problems created by natural monopoly, and whether some or all market problems justify government regulation or alterations of property rights. The authors investigate Chadwick’s utilitarian approach to labor, business cycles, and economic growth, contrasting his modern view with those of his classical economic contemporaries.

Chapter 9: If Markets Fail: Chadwick and Contemporary Society

Robert B. Ekelund Jr and Edward O. Price III

Subjects: economics and finance, history of economic thought, law and economics, law - academic, law and economics


INTRODUCTION Edwin Chadwick was unquestionably a pioneer in addressing social and economic problems in a utilitarian manner. He has justly been lauded for his role in sanitation, labor, and educational reform. But in seeking ‘the greatest good for the greatest number’ Chadwick pushed the traditional (Smithian, classical) boundaries of both economic analysis and policy far beyond anything offered in the nineteenth century. There are first the amazing inventions of particular microanalytic concepts that would not rise above water until far into the twentieth century. The issues of moral hazard, product and personal liability placement, and the role of possibly welfare-lowering incentives within markets were discoveries of the highest order. (Naturally it would be a serious error to claim that he possessed a comprehensive contemporary understanding of these concepts.) Additionally, the integral role that technology played in markets – and in economic progress generally – was emphasized by Chadwick and almost completely neglected by mainstream classical economists. The attempt to meld economic theory and policy with an anecdotal statistical complement is also unique for his time and place, and is elevated to high art by him. Multiple regression, time series, and sophisticated statistical techniques were more than a century away, but Chadwick marshaled and massed all the anecdotal evidence he could for sanitation reform and so many other projects. Employing and integrating such tools into his research, Chadwick’s primary contributions were to an analysis of markets that failed, and rules and regulations that created common pool problems. He is primarily known in economic...

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