The following points highlight the four main contributions of F.Y. Edgeworth to economics. The contributions are: 1. Mathematical Economic Analysis 2. Static and Dynamic Analysis 3. Indifference and Contract Curves 4. Three Dimensional Utility.
1. Mathematical Economic Analysis:
Edgeworth never attempted a complete treatise on economics, as he was not keenly interested in this subject as Wicksteed, Sidgewick and Marshall. He optimistically started with the mathematical economic theory and always worked with caution. He criticised the old doctrines and felt that economists regarding their doctrines had avoided some fundamental aspects.
He asked them to cultivate open mindedness, candour and sympathy, the absence of which had aggravated the most serious mistakes in this subject in the past. J.S. Mill stated: Even after practical, judgements had been given, there would always remain the room for a modest doubt regarding practical conclusions”. Edgeworth also believed that “an academic teacher could not be expected to examine closely all the branches of the subject. This was the reason for his mathematical interpretation of economic theories.
2. Static and Dynamic Analysis:
Edgeworth discriminated between static and dynamic analysis. He charged against contemporary equilibrium theories and found them dangerously vague for want of this distinction. Edgeworth also criticised the obscure dynamics of Walras for suggesting the way by which economic equilibrium is reached. He said that there was no such general dynamic theory which might mark the exact position of equilibrium. “We know only the statistical properties of the position”.
3. Indifference and Contract Curves:
Edgeworth has given two different ideas – Indifference curve and Contract curves. The indifference curves, perhaps the name was taken from Jevons’s Law of Indifference. Contract curves, he developed just to explain the exchange between two individuals under the barter system.
His improvement in the theory of consumer’s behaviour, that the utility is not a function of only one commodity, but it is of both or all the commodities, is remarkable and occupies an important place in the history of economic thought.
4. Three Dimensional Utility:
In the economic analysis, utility has been measured only by two dimensions – time and intensity. Edgeworth suggested that economists should apply three-dimensional utility; Ethics being the third dimension, as mentioned in Benthemian Utilitarianism.
Edgeworth gave mathematical treatment to the theories of monopoly and international trade. He wrote on railway rates and taxation also. He did much more in statistics. He developed the Law of Error: the Law of Great Numbers and the Law of Co-relation. At one place he observed, “If the Greeks had been acquainted with the Law of Error, they would have erected an altar to it”.
His pure theory of monopoly also includes the discussion on duopoly. Due to the influence of Marshallian notions, and his mathematical treatment with the economic theories, Edgeworth, despite his remarkable contribution could never be regarded as a Leader of his branch of investigations.