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Young scholars reading this, have you studied the Pigou effect yet? Well, I know quite a bit about it since I was the one who came up with this ingenious theory that revolutionized economic thinking. Besides Karl Marx and Adam Smith, I believe that my theory of the 'Pigou effect' will have one of the most influential effects to the world of economics.

Basically, how I came up with the theory of the Pigou effect was when I was observing the 1893 depression which had one of the highest rate of unemployment in American history in my opinion. I think the unemployment rate was over 10 percent for almost half a decade. Many people were jobless and poor. And i thought that with little demand for the price of the good since no one could afforded it the price of goods must start to fall to attract more demand for the good. So I found out that as the rate of unemployment rises the prices of goods starts to fall. This meant that as the prices starts to plummet, consumers will have some spare cash for spending on other essentials. Since the fall in the price of goods spirals down, it increases the real value of people saving. To put it in layman’s terms, if a huge hurricane were to strike your city and everyone loses everything except you, you would start to value the things you own more highly since you are the only one that has anything. Leading you fell more rich and therefore causing you to spend more since the prices of goods are cheap. Which causes a rise demand of job since companies needs to start supplying more with the increase of demand. Which ends with the cycle of the employment rate to rise I predict. My genius theory of the 'Pigou effect' without a doubt will be proven right in many cases in the near future and will be crucial to the field of economics.

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“John Maynard Keynes.” John Maynard Keynes - New World Encyclopedia, www.newworldencyclopedia.org/entry/John_Maynard_Keynes.

“Pigou, Arthur Cecil.” International Encyclopedia of the Social Sciences, Encyclopedia.com, www.encyclopedia.com/people/social-sciences-and-law/economics-biographies/arthur-cecil-pigou.

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Hello, all! I am Arthur Pigou. I'm known by people as one of the greatest economists in history, but today, I will talk my life behind my economics achievements. I was born on 1877, in Ryde, Isle of Wight, which was the home of my mother. My father was a retired army officer, descended from a family that originally traded between India and China. My mother is from a family had won wealth in Irish administration earlier. Therefore, under the influences of my family, I won a scholarship to go to the Harrow School, the school that my father was from. In Harrow, I loved the school and I studied hard: I was both an outstanding athlete and student, which gained me entrance to the King's College, Cambridge. I ended my time at Harrow as the head of school.

However, when I first went to college, I was a history scholar instead of an economics student. It wasn't until my third year in college when I began studying economics, and that was only because the school required. I was lucky enough to study under Alfred Marshall,  and I was considered to be Marshall's most successful student. Marshal was the one that influenced my life the most; he inspired me in every way possible. In 1908, when I became a professor at Cambridge, I was seen as Marshall's replacement. I began lecturing on economics in 1901. I developed further disseminated and developed Alfred Marshall's ideas, which provided the basis theories for what today is known as the Cambridge School of Economics. I retired from being a professor in 1943.

I pioneered welfare economics because I was eager to help the society, by solving the biggest problem in the world: poverty. My most famous work is the book "The Economics of Welfare", in which I introduced the ideas of externalities, built on Alfred Marshall's theory. This theory was in disagreement with my friend John Maynard Keynes, and he rejected it all the time. However, despite our academic oppositions, we remained firm friends outside of the academic world.

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One of my proudest and most influential work is a book I wrote in 1920, called The Economics of Welfare. In my book, I introduced the idea of externalities and the pigouvian tax. In my time, not many people understood the concept of externalities, so let me explain it to you. Externalities are basically costs that are not internalized by a firm. For example, when a firm decides to produces automobiles, one might typically say that the costs of production are: the money to buy raw materials, the money to hire workers, and the money to run the machines used to build cars. However, this is not all. This automobile firm also produces negative externalities, or side effects to society, such as a build up of carbon dioxide to the air. These negative externalities not only affect its consumers, but it impacts the society as a whole.

My book also proposed a solution to the problem of negative externalities - the pigouvian tax (yes, I named it after myself). This tax that I proposed will only placed on firms that generate negative externalities, in order to counter the social cost that the firms bring to society. This makes sense, because the firms that is polluting our environment should also be the ones paying for the clean up.

Another important idea that I proposed was the Pigou Effect (yes, I named that after myself too). The Pigou Effect is a theory that I proposed in an article I for the Economic Journal, which was a popular academic journal at the time. The Pigou Effect states the following: As unemployment rises, prices of goods fall. When things are cheaper to buy, individuals perceive themselves as “richer” than before, so consumption rises. To meet the growing demand, firms employ more people. The growing employment makes up for the unemployment at the beginning of the cycle, and everything is back to normal again. As you can see, our economy can stabilize itself, which brings me to my next point: I heavily disagree with John Maynard Keynes, and his theory of Keynesian economics.

In Keynesian economics, Keynes believes that a government must intervene to stabilize the economy. In his Interventionist Government Policies, he advocated for the government to step in in times of recession, and create jobs for the people. This is untrue and unnecessary, because I think that in the long run, the economy will self stabilize, given in the Pigou Effect.