William Henry Beveridge (1879–1963)

Abstract

William Beveridge made at least three significant contributions to economics. Regarding his contributions to modern economic analysis, Beveridge set out a coherent diagnosis of industrial fluctuations based on empirical data and the latest theories on trade cycles. Regarding his contributions to professionalisation in economics, Beveridge helped form an international group at LSE and exhibited enthusiasm for (unsuccessful) attempts to create a renewed political economy. Beveridge served as the driving force for creating innovative ideas and was also the representative of a new type of economic thought: ‘management in bureaucracy’. In a sense, he served as a bridge, connecting the three different schools of economics (Oxford idealism, Cambridge practicality and LSE scientism and internationalism), which could in turn be sublimated into universal welfare ideas.

This research was in part supported by grants from JSPS. KAKENHI (15H03330 and 16H03603).

1 Introduction

This chapter deals with William Henry Beveridge (1879–1963). Generally, he has rightly been regarded as one of the founders of the modern welfare state. However, in most cases, as typically described by Robbins (1971: 158) and Hayek (1994: 83), he is often viewed as an amateur economist who made almost no contributions to the economic discipline. This chapter challenges the latter part of this view by re-evaluating Beveridge’s contributions as an LSE economist from three standpoints. After briefly sketching his life in Section 2, the rest of the chapter addresses several key areas that challenge the view of Beveridge as insignificant as an economist. Section 3 examines his contributions to economic analysis in two regards, namely empirical works, and the modern theory of unemployment. Section 4 focuses on his involvement in the ‘professionalization’ of modern economics by paying special attention to LSE personnel affairs and the Association of University Teachers of Economics (AUTE), an academic society. Section 5 attempts to understand Beveridge’s evolving yet coherent ideas in the intellectual history of economics from three perspectives, personal exchanges, a new type of economic idea and sublimated welfare ideas. Lastly, Section 6 reconsiders Beveridge’s contributions as well his status as an LSE economist and concludes by considering his influence as a whole.

2 A Biographical Sketch

This section mostly depends on The Economist (1963), The Times (1963), Beveridge (1953) and Harris (1977, 1997, 2008).

William Henry Beveridge was born in Rangpur, Bengal, on 5 March 1879. His father, Henry, was a judge in the Indian Civil Service, and his mother, Annette (née Akroyd), was a volunteer social worker. His parents were also experts on Hindi and Persian texts. Growing up in an atmosphere of both the modest and intellectual middle class within the British Empire during the late Victorian era, W. Beveridge was educated at the prestigious Charterhouse School. He later attended Balliol College, Oxford, a sanctuary of British idealism. Although he took first place in both Classical and Mathematical Moderations, he was still unsure of which path to take. Should he continue within academia, or should he turn to law for which he proved his exceptional abilities when he obtained the Stowell Civil Law Fellowship at University College, Oxford, that his father had highly recommended? In the end, he chose a rather rare vocation for men at that time and chose to become a social worker in the East End of London. Beveridge was scouted by Samuel Barnett for the position of sub-warden of Toynbee Hall, a university settlement house, where the young elite and people from the slums lived communally and were expected to influence each other. Instead of being touched by emotion or charity, Beveridge sought to identify realistic remedies to abolish casual labour, which was considered the primary cause of poverty typically observed in and around the London docks.

However, this part of Beveridge’s career lasted for only three years. In 1906, he accepted a position as lead writer for the Morning Post, a rather conservative daily newspaper. Gradually, he became recognised as an expert on unemployment problems and was subsequently asked by lifelong friend Beatrice Webb to testify to the Royal Commission on the Poor Laws and Relief of Distress in October 1907. He worked to advance his career and his next position was that of a permanent civil servant at the Board of Trade, the President of which was then Winston Churchill. While serving in this capacity, Beveridge was put in charge of the Labour Exchanges Act 1909 and National Insurance Act 1911, among others. Once the First World War broke out, he switched to the Ministry of Munitions, and later the Ministry of Food, where he became Permanent Secretary in 1919. Towards the end of his term in Whitehall, Beveridge caused two commotions. The first was to remonstrate against wrong figures in his salary as it was not £1500 but rather £1750 annually.¹ When Beveridge retired from the Ministry of Food, the Treasury asserted his salary as £1500, but Beveridge claimed it as £1750, the amount the Treasury finally agreed to. This episode tells us both about his deep concern over his salary as the basis of his living expenses and why he frequently changed jobs in pursuit of higher remuneration. The other was to claim a full pension payout for a ten-year officer before retirement.² Taken together, these two episodes indicate that he was clearly focused on his salary, and that he perhaps realised why a comprehensive but not overlapping system for pensions became necessary for all.

From there, Beveridge continued to play an active part in academia, government and political circles, much like another prominent contemporary economist, John Maynard Keynes. However, there was a clear difference between the two: a sense of distance from business groups. Keynes was closely connected with both monetary and commodity markets and displayed a formidable talent as an investor, dealing with stocks, debts, futures, famous paintings and rare second-hand books, for himself, his friends, his academic institutions (King’s College and the Royal Economic Society) and the companies who employed his services. On the other hand, Beveridge invested just twice in his entire life (Beveridge 1953: 93, 216) and had no assets to increase, no time to invest and no targets to spend his dividends on.

Disappointed with his life in Whitehall, Beveridge stopped working for the Ministry of Food and accepted an offer to become Director of LSE upon the request of the Webbs in 1919, with a salary of £2000. Beveridge and his Secretary (Janet Mair), later Lady Beveridge, were often accused of running a dictatorship rather than a Directorship.³ Early in LSE’s development, their style was, however, useful: using sizeable external grants, Beveridge drastically changed LSE from a tiny local college in London into a great international university at the centre of the business and academic worlds in the UK. But that same style, no longer applied to the later stage of his Directorship. Between the late 1920s and the first half of the 1930s, Beveridge faced growing criticism from almost every member of LSE. Professors such as Harold Laski, Lionel Robbins, Friedrich Hayek, other staff, students and even Beatrice Webb complained of his authoritarian ways. Eventually, Beveridge was forced to resign from the Directorship, leaving LSE to become Master of University College, Oxford, in 1937.

Although his personality left him sometimes unlikeable, Beveridge’s competence in his specialised fields, including unemployment benefits and workmen’s compensation, kept him well known and led to governmental appointments such as Chair of the Unemployment Insurance Statutory Committee and as Commissioner for Man-Power Survey. Naturally, when the government sought a proper candidate to draft plans for workmen’s compensation and social insurance,⁴ Beveridge was appointed Chair of an Inter-Departmental Committee on Social Insurance in 1941. This Committee was transformed into a broader body charged with developing a comprehensive post-war programme. The result was the White Paper, Social Insurance and Allied Services (the ‘Beveridge Report’) (Beveridge 1942), that would serve as a blueprint for the British welfare state. It was a symbolic effort of ‘the other war’ (Beveridge 1953: 273) and conceived as an imaginary plan to motivate common people by way of presenting a positive post-war vision, this in contrast to Churchill’s Battle of Britain, a real plan for armed men.

Having been frustrated by the Beveridge Report, Churchill ignored most of its recommendations and instead published a different White Paper, Social Insurance (UK Government 1944a). In addition, the government, in a rush due to a forthcoming private report from Beveridge, decided to issue a White Paper on maintaining high levels of employment (UK Government 1944b). A few months later, Beveridge published his own report, entitled Full Employment in a Free Society (Beveridge 1944). After the publication of his two reports, Beveridge published a third private report, proposing a plan to deal with the modern and complex lives faced by ordinary people following the war, including voluntary action (Beveridge 1948). Additionally, he frequently discussed war and post-war problems in the 1940s (see Beveridge 1945).

Enthusiasm for the Beveridge Report gave Beveridge the popularity needed to win a parliamentary by-election in 1944, although this also meant that he would lose his salaries of £1000 and £1800 as Chair of the Unemployment Insurance Statutory Committee and Master of University College, respectively. He was an M.P. for only ten months when he lost the next election at the same time as Churchill left office in July 1945. However, Beveridge accepted a proposal from the Liberal Party to become a member of the House of Lords in 1946. In the latter part of his career, Beveridge, now Baron Beveridge of Tuggal, mainly focused on two social problems: world peace, and the rebirth of community in urban life. Despite his hard work and devotion, his remedies for these two problems did not amount to specific solutions. In the final stage of his life, finding himself dependent on the very pension system he created, Beveridge became lonely. He lost his sister, Jeanette, in 1958 and his wife in 1959. His best friend and Jeanette’s husband, R.H. Tawney, a Christian socialist and former Professor of Economic History at LSE, died in 1962. Beveridge described himself at this time as ‘a busy and rather unhappy old man’.⁵

Lord Beveridge died on 16 March 1963, at his Oxford home at the age of 84. His last words, ‘I have a thousand things to do’ (as quoted in the Oxford Mail, 18 March 1963: 7), remind us of his busy and earnest life and his dedication to public service. A further example of this dedication was his selection of the title of his autobiography, Power and Influence (Beveridge 1953). Influence here means ‘changing the actions of others by persuasion’ and ‘appeal[ing] to reason or to emotions other than fear or greed’ (ibid.: 3). The title also reflected his belief in liberal European values and his opposition to dictatorial and excessive pecuniary powers.

3 Contributions to Modern Economic Analysis

Beveridge’s analytical contributions to modern economics are divided into two primary areas. The first attempts to derive from empirical data general laws of macroeconomic phenomena, in particular movements in prices and wages. The second attempts to create a new epoch by creating a modern theory of unemployment, which stimulated subsequent scholars as a first step to the modern treatment of the unemployable, the unemployed and unemployment itself.

3.1 Empirical Works

Regarding the first contribution, collecting historical and current data easily connected with Beveridge’s promotion of ‘ideal’ social sciences, including economics, which we will address later in Section 3. Beveridge was continually interested in empirical analysis from 1914 to 1960 (Beveridge 1914a, 1960a). While he considered this to be his life’s work (Beveridge 1939), it was never fully realised in a sufficient way. However, his contemporaries acknowledged his vigorous engagement in empirical works. For example, Beveridge served as the President of the Royal Statistical Society (RSS) from 1941 to 1943. He also established the Association of Incorporated Statisticians Limited,⁶ later renamed the Institute of Statisticians, and served as its President from its inception in 1949 to his death in 1963.

Clive Granger, an eminent econometrician and a Nobel Laureate in Economic Sciences in 2003, places great value on Beveridge’s empirical works concerning medieval and early modern Europe. He wrote that Beveridge (1922) provided ‘not only the most sophisticated piece of analysis of economic historical data but also the most extensive calculation in the field of time-series analysis before the war’ (Granger and Hughes 1971: 413). More recently, Baillie (1996: 44) describes the Wheat Price Index in Beveridge (1921a) as ‘well-known’, while Korotayev and Tsirel (2010: 1) explain that Beveridge’s 1922 article is an ‘important Kondratieff predecessor’, as it discovered that one of the long-term cycles of wheat prices had an ‘average periodicity of 54 years’.

While perhaps rather naively, Beveridge’s zeal in his attempts to collect data is in fact one element of the foundation for subsequent developments in econometrics and statistics.

3.2 Modern Theory of Unemployment

Beveridge’s second major and most conspicuous contribution to economics was creating a modern theory of unemployment.⁷ It was so inspiring that countless scholars have explored this theme based on Beveridge’s comprehensive analysis. Unemployment: A Problem of Industry (Beveridge 1909) is considered his magnum opus.⁸ It sold well and became one of the Tripos textbooks in Cambridge. At first, he transformed the unemployment problem from the nineteenth-century type of exceptional irregularity in casual labour and personal defects (such as laziness) into the twentieth-century one that incorporated issues such as regular fluctuations in industry and macroeconomic phenomena. Pigou (1913: 253), one of the earliest works on unemployment by an orthodox economist, observed that Unemployment was the ‘most elaborate British book’ and ‘a work deserving study by all interested in the subject’. The ‘friction of the labour market’ (Beveridge 1909: 81), owing to distance, ignorance or custom, results in casual labour and the reserve of labour. As a result, Beveridge advocated the decasualisation of labour by way of nationwide Labour Exchanges.

Beginning in the middle of the 1920s, Beveridge elevated his own ideas on unemployment. However, due to firmly established hostile views such as Robbins (1971: 158) and Hayek (1994: 83), it is currently widely accepted that Beveridge had little understanding of economic theories. On the contrary, he recognised the deficiencies in the latest theories on industrial fluctuations. To obtain a doctoral thesis, Beveridge published a revised book (Beveridge 1930), and it included a portion of his 1909 work as well as a newly written section. In this section, he critically pointed out that Hawtrey’s credit cycle had a crucial ambiguity as to how switching points (peaks or troughs) of the trade cycle should be explained (ibid.: 331). On a related point, Beveridge rejected the Treasury View,⁹ stating that, ‘Clearly the dogma…is untenable’ (ibid.: 414). Dennis Robertson came to the view that Unemployment was a masterpiece comparable to Smith’s Wealth of Nations and Bagehot’s Lombard Street thanks to its exquisite blend of abstract theory and empirical evidence (Robertson 1931: 74). In his Causes and Cures of Unemployment, which appeared in 1931, Beveridge suggested that his ideas were evolving. For example, he added historical explanations from the 1920s and pointed out the special characteristic of labour, noting that the price of it should not fall below a subsistence level, and accordingly, the minimum wage legislation contained in the Trade Boards Act 1909 was justified.

The antipathy towards Beveridge’s Directorship of LSE among many of its staff was partly related to his own distaste for pure theorists. Thus, it might have been natural for him to reject Keynes’s General Theory when he judged that its concepts, such as involuntary unemployment, were disconnected from reality.¹⁰ However, it was also the case that Beveridge later accepted the General Theory after leaving LSE. Through an intimate exchange of letters and conversations with Keynes, he became convinced that they could apply such theory to economic policies to resolve unemployment. In turn, Keynes admitted that Beveridge’s historical works fitted well with his own theory that fluctuations in investment were the prime mover in the cycle.¹¹

Even while in the process of absorbing Keynes’s demand-side macroeconomics, Beveridge advanced his own theory of unemployment in three respects. First, he uniquely defined full employment¹² as ‘more vacant jobs than unemployed men’ (Beveridge 1944: 19). It was also such unemployment that did not last past the coverage of ‘unemployment insurance without risk of demoralization’ (ibid.: 20). His approach included both macroeconomics (vacancies) and microeconomics (demoralisation). Second, this characteristic brought a starting point for investigating the so-called UV curve (an inverse relation between unemployed workers and job vacancies) and job search theory: ‘The number of vacancies…always exceeds considerably the number filled by them and the difference is greater in good than in bad years’ (ibid.: 88). Beveridge’s previous works and Full Employment in a Free Society provided a basis for later developed theories such as the UV curve and related topics. Thanks to both Malinvaud (1987) and Blanchard and Diamond (1989), this curve is now called the Beveridge curve, an acknowledgement of Beveridge’s important contributions to this field.¹³ Third, structural unemployment was clearly defined by Beveridge as follows: ‘[T]he unemployment arising in particular industries or localities through a change of demand so great…as affecting the main economic structure of a country’ (Beveridge 1944: 409). These three points are supplemental to the Keynesian approach to macroeconomics.

Based on a comprehensive diagnosis, Beveridge advocated a package of three remedies for unemployment. The first was to sustain effective demand (ibid.: 29), similar to orthodox Keynesian theories. However, the concrete measure ‘by socialization of effective demand’¹⁴ (ibid.: 191), rather than by a usual deficit budget, was much closer to the position advocated by Keynes himself. The second was to control the location of industry to avoid the misdirection of demand. The third was to mobilise insufficient or ill-guided movements of labour by organising the labour market more efficiently (ibid.: 125). Here, Beveridge’s earlier supply-side diagnosis remained, though weighted differently, even after absorbing Keynes’s demand-side macroeconomics. Beveridge’s three remedies represented a comprehensive set of practical solutions in accordance with the observed diverse causes of unemployment.

By collecting empirical data and by absorbing the latest theories on trade cycles, Beveridge suggested a coherent diagnosis in order to, in turn, lessen the negative impact of industrial fluctuations by way of discretionary policies. The diagnosis seems eclectic, but it still applies to the complicated reality of modern economies.

4 Contributions to Professionalisation in Economics

Beveridge’s second primary contribution was to promote the ‘professionalization’¹⁵ of economics in Britain. Since 1885, Alfred Marshall had advanced the discipline by way of establishing an academic journal and a society, writing a textbook and finally, creating an Economics ‘Tripos’ at Cambridge (see Komine 2014: 80–81). After the Second World War, American universities promoted economics in the light of social engineering and rigorous mathematical models. These two movements have received significant attention (see, for example, Coats and Coats 1970; Tribe 1992). However, little attention has been given to the fact that between the wars, Beveridge attempted (and failed) to establish another direction for economics and the wider social sciences. His attempts inside and outside of LSE should not be forgotten, as they imply the possibility of diverse potential in economic thinking.

4.1 LSE: Personnel Affairs

As the new Director at LSE beginning in 1919, Beveridge had expanded the School’s buildings by using major grants and establishing vibrant, autonomous academic bodies by offering high salaries (with educational allowances) (Beveridge 1953: 170). Two of his first appointments at LSE were Hugh Dalton and Harold Laski. Dalton was an influential pupil of Pigou’s and later served as a Labour politician. He played a key role in bridging both the Cambridge School with LSE as well as connecting academic with political circles. Laski was a Labour activist and distinguished political scientist, and in the 1930s became one of the driving forces behind the purging of Beveridge from the Directorship. In addition, Lionel Robbins, previously an LSE undergraduate, became an assistant to Beveridge, a job he gained on Dalton’s recommendation. He was later a lecturer, and finally a Professor at LSE and became a supervisor to Beveridge when he revised Unemployment and submitted it as a doctoral degree in 1930. Initially assisted by Beveridge and Dalton, Robbins became more independent particularly after Hayek came to London in 1931: their seminars became a symbol of LSE’s openness and internationalism in contrast to Cambridge insularity. Before the publication of Keynes’s General Theory, LSE attracted numerous promising economists, including Hicks, Kaldor, Lerner, Allen and Coase, among others (see Robbins 1971: 131). By creating an attractive academic environment, Beveridge encouraged the formation of a competitive nexus to counter the Cambridge School. The Cambridge members, including Keynes and Robertson, were in turn affected by Austrian and Swedish ideas directly or indirectly through young scholars coming and going between London and Cambridge.

Apart from the above, Beveridge consciously intended to create another direction for the academic development of economics, which linked up with his pursuit of an ideal version of the discipline (see Komine 2016). He established three goals to realise this ideal economics (Beveridge 1921b, 1937, 1953: 247).

The first goal was to establish economics as an inductive science, this a reflection of Beveridge’s belief in the scientific method. His efforts at LSE, which ultimately proved fruitless, are understandable when we examine the direct influence of Beatrice Webb.¹⁶ Like Jevons, Beveridge attempted to make political economy more ‘scientific’. Nevertheless, what it meant to be ‘scientific’ differed between the two: Jevons demanded that economics should be both strict (or rigorous) and exact by introducing mathematics into economic thinking. In contrast, Beveridge suggested only exactness, that is, to obtain accurate empirical data and predict subsequent phenomena exactly, rather than being strict, that is, to abstractly produce consistent and logical models in theory. As he himself put it (Beveridge 1953: 175), he just followed Beatrice Webb’s concept of ideal sciences, which was based on observation and analysis of the facts.

The second goal was to support new professions such as public administrators and business managers. Beveridge believed that they should absorb specific knowledge concerning modern economies and political phenomena in order to make private interests and public purposes compatible. The third goal was to place economic science as a central subject in the liberal arts. In the event of severe depressions and political crises, having a deep understanding of political and economic conditions was a necessary element of survival for everyone.

Based on the above goals, Beveridge helped promote closer ties between different academic fields, this despite a trend at the time towards specialisation and compartmentalisation within British universities (see Coats 1993: 376). Economics and political science were not sufficient to complete the circle: a third group was necessary, ‘forming a bridge between the natural and the social sciences’ (Beveridge 1960b: 88). According to a report submitted by Beveridge in July 1925 to the Trustees of the Laura Spelman Rockefeller Memorial (see Harris 1997: 280, fn. 8), in addition to expanding or establishing a new professorship, course, department or degree, such as in law, commerce, business administration or modern languages, Beveridge attempted to create new professorships in anthropology, social biology, physiology, economic psychology, public health, geography, agriculture and meteorology, among others. Of particular interest was the attempt to establish a Chair of Social Biology, with this encompassing genetics, population, vital statistics, heredity, eugenics and dysgenics. As a result of Beveridge’s 1925 report, a new subject entitled ‘Biological Factors in Social Evolution’¹⁷ was added to the Department of Sociology at LSE, with Beveridge inviting Lancelot Hogben to serve as the Chair of Social Biology in 1930. Despite Beveridge’s enthusiasm, the Department was not a success and Hogben left LSE in 1936 (see Beveridge 1953: 250). Moreover, social biology (the Chair, the Department and the subject) was completely removed from LSE¹⁸ immediately after Beveridge left the School. In this sense, his attempt to make economics an inductive science had failed.

Beveridge’s enthusiasm for establishing a new approach within the social sciences, in which economics and political science were still at the centre but related subjects supported the core, bore fruit in the form of employing two eminent scholars, Bronisław Malinowski and T.H. Marshall. The former accepted the position of Chair of Anthropology in 1927 while the latter was employed as assistant lecturer in social works in 1925¹⁹ on Keynes’s recommendation (Marshall had been Keynes’s pupil at Cambridge).²⁰ While Beveridge could not establish a new direction for the economics profession, founded on the greater use of empirical studies and closer links with kindred subjects, he did help to advance diverse disciplines such as anthropology and sociology.

4.2 Association of University Teachers of Economics (AUTE)

Outside LSE, the creation of the AUTE symbolised Beveridge’s zeal for the economics profession. The Association attempted to challenge the cliquish nature of existing academic bodies such as the Royal Economic Society (RES)²¹ and Keynes’s Political Economy Club. Initially, it was open to a relatively diverse membership, with its first annual conference being held in January 1924 at Balliol College, Oxford, Beveridge’s alma mater. The second annual conference was held at Trinity College, Cambridge, in January 1925. Beveridge presided over a meeting at Cambridge aimed at drafting a constitution for the Association. Its aim was to afford to members the opportunity to meet and exchange ideas, including methods of teaching. Its membership was open to teachers of economics, economic history, sociology, commerce and ‘kindred’ subjects (see Economic Journal1925: 154). Beveridge was at the centre of the dissemination movements in the economics profession, this underlined by his election as an executive member of the AUTE at four consecutive conferences (in 1925, 1926, 1927, and 1930).²² The main academic subjects referred to in the AUTE’s constitution were similar to those contained in LSE’s curriculum.

However, Beveridge’s efforts petered out after 1930. Although Hogben presented a paper on biological aspects of the population in 1931, Beveridge did not appear to attend the conference. That same year, the constitution of the Association was amended to put university teachers at a slight advantage over others. In 1932, the organisation was renamed the AUTE; it was originally called the Association of Teachers of Economics. Beveridge seemed to have lost his leadership role during the early 1930s, whereas young economists, such as Robbins, Robertson, Henderson, Kaldor and others became more active. Therefore, not only at LSE but also at AUTE, Beveridge found that he could not stand in the way of more ‘academic’ economists, who oriented themselves more towards the ‘purification’ of the subject.

Overall, then, it can be argued that Beveridge contributed to the process of creating modern economics in two respects. First, in the 1920s, by collecting significant funds and capable scholars, he laid the foundation of an international intellectual group at LSE, differentiated from the Cambridge School. Second, until the first half of the 1930s, by taking what might be considered by some as an unpopular position in terms of trying to promote closer links between economics and other disciplines in the social sciences, Beveridge showed to younger generations a renewed political economy, based on empirical and natural elements. In this respect, his efforts should be regarded as a halfway point between Marshall’s initiation and development of the Tripos at Cambridge and the American domination of economics in the post-Second World War era.

5 Contributions to Evolving Economic Ideas

Beveridge contributed to the formation and the evolution of modern economic ideas in three specific areas. First, through personal exchanges with eminent scholars, he served as the driving force behind advancing innovative ideas. Second, he devised a new, dominant type of economic idea, or ‘management in bureaucracy’. Lastly, he played a role in being a node in the gathering together of three schools of economics, namely Oxford idealism, Cambridge practicality or utilitarianism and LSE scientism and internationalism, and sublimated them into his ideas for the welfare state.

5.1 Personal Exchanges

As a distinguished scholar, Beveridge had numerous intellectual colleagues, including economists. Among them, we examine four eminent professional economists.

The first was A.C. Pigou, Beveridge’s ‘old friend and fellow economist’ (Beveridge 1953: 293). As noted in Section 3, Pigou was greatly influenced by Beveridge’s first book on unemployment. Further, this influence possibly played into Pigou’s strong desire to create a new welfare economics. The Beveridge Papers at LSE hold at least eleven communications²³ between the two men from 1925 to 1941. They include a letter (dated 2 November 1925) about an expression of Beveridge’s sympathy concerning Pigou’s heart condition and a letter (dated 28 May 1930) where Beveridge thanks Pigou for his recommendation regarding the Cassel professorship in Commerce at LSE.²⁴ Pigou, in his review of Beveridge’s autobiography, Power and Influence, admired his outstanding and ‘sterling service’ (Pigou 1954: 76) as a public administrator and innovative thinker, underlining the mutual respect between the two.

Beveridge noted that John Maynard Keynes was another influential economist and an unforgettable friend. He wrote that ‘Maynard Keynes’s place is secure in history as one of the original constructive and imaginative of minds of his or any other generation’.²⁵ Curiously, in 1914, both Beveridge and Keynes had criticised Pigou’s dichotomy between the plasticity of wages in theory and the impact of a wage cut in practice,²⁶ a critique which may perhaps be interpreted as one of the first steps on the long road to the Keynesian Revolution. They remained in close contact during their wartime efforts in Whitehall and, after the war,²⁷ at Executive Meetings both at the London and Cambridge Economic Service (Cord 2017: 311) and at the RES. When Keynes’s General Theory was published, Beveridge at first rejected it, as mentioned in Section 3. Beatrice Webb, a mutual friend of the two, found Keynes ‘very depressed about the reception of his book, and the hopeless disunity of opinion among abstract economists’.²⁸ As such, both Beveridge and Keynes shared a certain hopelessness concerning orthodox economics. Partly due to this, Beveridge changed his opinion about the General Theory at some point during 1938.

Eventually, Beveridge became an enthusiastic supporter of Keynesian economics and policies. In terms of theory, one of the reasons he changed his position was that he came to realise that social security and full employment policies should (and could) be compatible after the post-war era. Another reason is that Beveridge and Keynes became much closer during the Second World War. In September 1939, they organised a critical group against the government, called ‘the Old Dogs’, consisting of five veterans²⁹ of wartime management. Meanwhile, in March 1940, at Keynes’s initiative, Beveridge was elected President of the RES to follow Pigou.³⁰ Finally, from March 1942, they frequently corresponded regarding the Beveridge Report.³¹ When Beveridge published the Report and got married in December 1942, Keynes presented him with a rare book by William Petty, published in 1691, adding in his note to, ‘Sir William Beveridge this book by the founder of his (and my) craft’ (Keynes quoted in J. Beveridge 1954: 127). The expression ‘his (and my) craft’ indicates a strong sense of collegiality.

Next, while Lionel Robbins wrote that Beveridge ‘presented almost an archetype of the human tragedy’ (Robbins 1971: 136), there are two areas in which their collaboration or influence should not be ignored. First, epoch-making Robbins (1932) was closely connected with Beveridge’s discourse. Its primary targets for attack were both Cannan’s definition of economics from the viewpoint of wealth and Beveridge’s naive positivism. In addition, Robbins’s definition from scarcity lacked any macroeconomic basis such as the causes of unemployment, the trend of the standard of living, the fall in birth rate or fluctuations in the rate of interest.³² Second, the two LSE scholars collaborated on the matter of federalism (Komine 2017), a partnership between nations, and division of labour between a nation and a supranational institution, to escape the likelihood of war. Indeed, this emphasis on federalism represented internationalism or renewed liberalism at LSE.

While less well known, Roy Harrod and Beveridge shared a mutual respect. After reading Beveridge’s LSE farewell address of 24 June 1937 (Beveridge 1937), Harrod wrote that ‘Beveridge is one of the best men now in this place [Oxford]’.³³ Beveridge, in turn, identified Harrod as the candidate best placed for nomination and then election to the British Academy in 1946.³⁴ Two factors can explain this mutual respect. First, they shared the same methodological approach to the social sciences,³⁵ meaning induction based on the presumption of the quasi-uniformity of social phenomena. Second, they shared the belief that experts’ knowledge in economic analysis should be transformed into the political arena. In 1942, Churchill employed Harrod as a member of S Branch, the Prime Minister’s Statistical Section, with the highest salary (£1300 a year).³⁶ Beveridge made a campaign speech for Harrod on 26 June 1942, who stood as an unsuccessful Liberal candidate in Huddersfield (Beveridge 1953: 345).

5.2 A New Type of Economic Idea

In the history of economic ideas, we can identify representative or dominant types: these types are revealed if we examine economists’ attention to the principal motives by important economic entities at that time. From the ancient period to the medieval era, governance, fairness and appropriateness were popular themes for discussion. After the political and economic revolutions of more modern times, various concepts (such as self-interest, sympathy, emulation, luxury and industry) emerged and became dominant. Soon, the growth of wealth also brought about its maldistribution. Accordingly, solidarity and association appeared, at the same time as economic progress and evolution were important themes. Entrepreneurs and bankers became recognised as indispensable elements in the capitalist system, as well as traditional classes, such as landowners, capitalists and workers.

However, as governmental roles expanded and the State began to mediate between workers and employers, a new type of economic idea emerged: management in bureaucracy. Until the nineteenth century, poverty, obedience and anonymity were required of British civil servants, based on their moral values and a sense of public spirit. Since the early twentieth century, however, more active roles were required of them, based in part on scientific knowledge. Thus, management founded on economic intelligence became important. Beveridge, for instance, envisioned that Labour Exchanges could artificially match the supply of and the demand for employment. Following this, he was appointed to the Board of Trade in 1909 to oversee the work of the Labour Exchanges. Beveridge, as well as Hawtrey (Treasury), Keynes (India Office), Henderson and Layton (the Board of Trade) and Josiah Stamp (Inland Revenue), embodied the new type of economic idea. They all had plans to facilitate an expanded managed economy and were aware of the advantages and disadvantages of capitalism. As a result, they gravitated towards liberalism.

In this respect, the concept of an Economic General Staff (EGS) is important. An EGS is an expert body working in government which can advise the Cabinet on important and technical economic matters. It was Beveridge (1923/1924) who originated the concept and disseminated it. Borrowing from this, Keynes slightly altered its proposed characteristics and presented it to the prime minister in 1929.³⁷ The Macmillan Committee on Finance and Industry and the Economic Advisory Council were, though unsatisfactory, products of Beveridge’s and Keynes’s combined efforts. For over twenty years, Beveridge adhered to the notion of those who would work within an EGS as having a dual function, that of public officials and professional economists, like himself. He wrote in 1944 that, ‘the central machinery of Government in Britain at last includes an organ capable of expert study of general economic problems, as the basis of orderly foreseeing treatment of them’ (Beveridge 1944: 259). For Beveridge, the creation of an EGS was an essential device for cutting through the Gordian knot ‘of decrepitude, ineptitude and shortsightedness embodied in…politicians!’ (Booth and Pack 1985: 162). The EGS was an organ through which economic expertise could and should be used within the political arena.

5.3 Welfare Ideas

After his debut as an unemployment expert in the 1900s, Beveridge engaged in examining labour problems, including social insurance. In the 1940s, he completed his welfare vision by publishing two trilogies. The first was made up of social security (Beveridge 1942), full employment (Beveridge 1944) and voluntary action (Beveridge 1948), the themes being individuals’ political rights, economic rights and social duties, respectively. The second trilogy examined with freedom from want (Beveridge 1942), freedom from idleness or unemployment (Beveridge 1944), and freedom from war or fear of war (Beveridge 1945), with individual security being an overarching theme.

Beveridge’s body of work can be better understood when we consider it as a package of visions concerning the evolution of politics, economy and society (Komine 2010). Beveridge’s approach made it possible to combine three schools of thoughts in Britain. First, young Beveridge was influenced by British idealism or romanticism at Balliol College, Oxford, where T.H. Green’s teachings prevailed. Edward Caird, Master of Balliol, challenged Beveridge to ‘discover why, with so much wealth in Britain, there continues to be so much poverty and how poverty can be cured’ (Beveridge 1953: 9). Beveridge held on to this idealism throughout his life and was reflected in his advocacy of a ‘unified nation’ (or a world federation) for peace after the Second World War.³⁸ Beveridge wrote that ‘The world today is a graveyard of millions … But the human spirit does not die. From all these graves some day human kindness will return to humankind’ (ibid.: 362). Once Beveridge reached middle age, he was affected by LSE scientism and internationalism, the roots of which could be traced back to Beatrice Webb’s methodological approach to the social sciences, and was enhanced by Robbins’s academic circle from the late 1920s. Beveridge attempted to establish a unique scientific approach to social phenomena, yet that has been almost completely ignored. The vestiges of his attempts arguably remain around the core of economic science, in the form of appointments to professorships to anthropology, social institutions, sociology and others. Finally, the elder Beveridge helped develop a more practical approach to economics in the form of the Cambridge School, particularly concerning Keynesian economics. In the end, Beveridge sympathised with the Cambridge approach, and, in doing so, admitted that discretionary and practical policies are necessary to remove the numerous defects of market failure. After 1938, he recognised that elements of the Cambridge approach could be incorporated into his own system of understanding political, economic and social phenomena. Thus, after thinking about social security, he could consider the issue of full employment.

In this way, Beveridge synthesised the three schools of thoughts. This is also one of the reasons he could, based on observing reality and for the purposes of the future, offer a comprehensive vision of welfare for all in the post-war era. Moreover, Beveridge’s ideas on politics, economy and society had a significant impact on subsequent thinkers on welfare at LSE, two of whom turned out to be among the most prominent scholars on the subject.

T.H. Marshall (1893–1981) supported the welfare state in the light of a key concept of citizenship. In a series of lectures in 1949, he pointed to the historical and logical development of three parts of citizenship. First, the civil element is composed of ‘the rights necessary for individual freedom’ (Marshall 1950: 10), including the right to own property, which developed in the eighteenth century. Next, the political element means ‘the right to participate in the exercise of political power’ (ibid.: 11), which grew in the nineteenth century. Third, the social element covers ‘the whole range from the right to a modicum of economic welfare and security to the right to share to the full in the social heritage’ (ibid.), which emerged in the twentieth century. The welfare state after the Second World War, emerging from a conflict between capitalistic growth and democratic equality, helped to unify not only Britain but also other advanced nations with the universal national minimum (subsistence income) principle. However, after the Golden Age of Capitalism, Marshall came to consider ‘the Hyphenated Society’ (Marshall 1981: 102, 123), a composite social structure of democratic-welfare-capitalism, in which the three elements sometimes coexisted in a stable manner and sometimes in an unstable manner. Here, welfare ideas can (but often fail to) connect democratic egalitarianism and inequality in capitalism.

Richard Titmuss (1907–1973) identified three types of social policy. First, the residual welfare model presumes that there are two natural channels of welfare supply: the private market and the family. Social policy is (exceptionally) necessary when the two channels are broken. Second, the industrial achievement-performance model states that social needs should be met on the basis of merit, work performance and productivity. Third, the institutional-redistributive model asserts that universal services are automatically provided through a major integrated institution. At the same time, Titmuss highlighted three types of welfare supply: social welfare, occupational welfare and fiscal welfare (Titmuss 1965: 16). He discussed an overlapping structure of welfare provision, but by distinguishing the social market from the economic market, he defended the institutional-redistributive model.

Beveridge, Marshall and Titmuss shared a similar type of thinking, which can be referred to as ‘LSE welfare ideas’. They regarded a continuation of modern capitalism as a matter of course, sought an absolute minimum level of welfare for all citizens, and clarified universal policies applicable at the national level. Additionally, they defended the welfare state and envisioned a welfare society in which the three parts of market, community and State could coexist as independent but well-balanced elements.

6 Conclusion

William Beveridge made significant contributions to the economic discipline in a variety of areas. In Section 3, by identifying his contributions to modern economic analysis, we concluded that Beveridge, based on empirical data and the latest theories on trade cycles, completed a coherent diagnosis of industrial fluctuations and resulting unemployment in modern capitalism. In Section 4, we examined his contributions to professionalisation in economics and found that Beveridge founded an international intellectual group at LSE and exhibited enthusiasm for (albeit unsuccessful) attempts to create a renewed political economy. In Section 5, we studied his contributions to evolving economic ideas, reaching the conclusion that Beveridge served as the driving force to create innovative ideas by his personal exchanges with eminent scholars such as Pigou, Keynes, Robbins and Harrod. In addition, he was the representative of a new type of economic thought: management in bureaucracy. In a sense, he served as a bridge, connecting the three different schools of economics (Oxford idealism, Cambridge practicality, and LSE scientism and internationalism), which could in turn be sublimated into universal welfare ideas.

Beveridge was significant not only in the light of political and social thought, as Harris (1997) explains, but also from the perspective of economic thought. These three perspectives are not mutually exclusive but rather are complementary. The first and second pillars depend on the third (economic ideas), while the third presumes the first and second pillars. Beveridge’s ultimate aim was that of human security for all citizens both nationally and internationally. To realise this, three objectives were needed: peaceful, diligent and affluent society, the opposite of war, freedom from idleness and freedom from want, respectively. Such a broad viewpoint was possible when Beveridge analysed the conditions necessary to smooth market functions, while taking political reality and social rights into serious consideration; it was also possible for the man who deepened exchanges with renowned Cambridge, LSE and Oxford economists and attempted to transform his ideas for professionalisation in economics into reality inside and outside LSE.

Beveridge was recognised as an eminent economist by some of his contemporaries and direct acquaintances. In and of itself, one implication is that we should reconsider the real meaning what it means to be an ‘economist’.