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Faculty of Economics


A Brief History of the Faculty

Economists have been flourishing in Cambridge University for a long time. Robert Malthus, active two hundred years ago, was described by Keynes as 'the first of the Cambridge economists'. But it was in 1903 that the Professor of Political Economy, Alfred Marshall succeeded in establishing what was to become the Economics Tripos as an undergraduate degree course and thereby established the Faculty of Economics and Politics. By then Marshall had already published his great Principles of Economics in which he set out for the first time the geometric analysis of supply and demand, incorporating the systematic treatment of different time periods. He went on to develop the quantity theory of money in an attempt to understand the macro-economy. In 1907 Marshall's professorship was taken by Arthur Pigou who developed the foundations of modern public economics in his The Economics of Welfare, published in 1920.

Between the Wars, the Faculty was extraordinarily innovative, witnessing the birth of modern macro-economics and a revolution in micro-economics. The dominant figure was Marshall's pupil John Maynard Keynes who, throughout his life, moved fruitfully between academic thought and public policy. His analysis of the role of monetary and fiscal policy in determining the level of employment has enhanced public policy making ever since, as have the international institutions he caused to be established after the Second World War. Joan Robinson published The Economics of Imperfect Competition in 1933. Working with both on these problems were, among others, Denis Robertson, Richard Kahn, Austin Robinson, Maurice Dobb and Piero Sraffa.

The economic demands of the Second World War provided the stimulus for Richard Stone and James Meade to develop the basis of modern national accounting. Both were subsequently to be awarded Nobel Prizes for this and other work. With Keynes, Stone established the Department of Applied Economics (DAE) in 1945, as a research wing for the Faculty, with financial support from the University. From its inception, the DAE proved to be a remarkable nursery for economists who have achieved subsequent distinction in academic and public life. On the 5th November 2004, the DAE ceased to exist as a separate entity from the Faculty of Economics. This is purely an organisational change, as the same work, the same people, with the same spirit, continue as part of the Faculty

Many distinguished scholars have worked in the Faculty and contributed to its intellectual life in recent decades, among them Nicholas Kaldor and Frank Hahn. The present Faculty continues its long established interest in public economics, macro-economics, business strategy, and the problems of economic measurement. Sir James Mirrlees was awarded the Nobel Prize in 1996 for his work on optimal taxation and the theory of incentives, and Amartya Sen was awarded the Nobel Prize in 1998 for his work on welfare economics and income distribution. Sir Partha Dasgupta has been President of the Royal Economic Society and President of the European Economic Association.

Another tradition upheld by current Faculty members is that of involvement in public policy. The Faculty of Economics remains committed to keeping economics useful.

A Brief History of the Department of Applied Economics (1945-2004)

John Maynard Keynes initially proposed the establishment of a Department of Applied Economics (DAE) in November 1939, but the war intervened and it did not come into being until 1945. The first Director was Sir Richard Stone, the winner of the 1984 Nobel Prize in Economics. The DAE had a policy of encouraging senior researchers and faculty teaching officers to launch research projects that not only contribute to knowledge, but also provided experience for a pool of young, talented and energetic researchers.