Frederick Lavington and Uncertainty in the Marshallian Tradition

Frederick Lavington (1881–1927) was a minor Marshallian economist. He began study at Cambridge as a mature student in 1908 (Groenewegen 2012: 100) and graduated from Cambridge in 1911 with a degree in Part II of the Economics and Politics Tripos; he worked in the British Board of Trade from 1912 to 1918, and became a lecturer in economics at Cambridge in 1918, but died early in 1927 (Groenewegen 2012: 99).

His work is of some interest in that he raised issues about fundamental uncertainty in relation to economic life, and may have anticipated Keynes to some limited extent.

Lavington’s most important work included the following:

Lavington, Frederick. 1911. “The Social Importance of Banking,” Economic Journal 21.81: 53–60.

Lavington, Frederick. 1912. “Uncertainty in its Relation to the Net Rate of Interest,” The Economic Journal 22.87: 398–409.

Lavington, Frederick. 1913. “The Social Interest in Speculation on the Stock Exchange,” The Economic Journal 23.89: 36–52.

Lavington, Frederick. 1921. The English Capital Market. Methuen & Co., London.

Lavington, Frederick. 1922. The Trade Cycle: An Account of the Causes Producing Rhythmical Changes in the Activity of Business. P. S. King, London.

Lavington, Frederick. 1925. “An Approach to the Theory of Business Risks I,” Economic Journal 35.138: 186–199.

Lavington, Frederick. 1926. “An Approach to the Theory of Business Risks II,” The Economic Journal 36.142: 192–203.

Lavington’s article “Uncertainty in its Relation to the Net Rate of Interest” (1912) has some interesting analysis of uncertainty in business life. Lavington defined uncertainty as a type of “ignorance” but also a form of “imperfect knowledge” (Lavington 1912: 400), so it is not clear that he understood the finer points of radical uncertainty. Nevertheless, Lavington also argued that uncertainty can badly affect investment and prevent capital investment happening (Lavington 1912: 401).

In a fascinating analysis, Lavington notes how societies can reduce uncertainty both through government interventions such as the provision of police services and law and order and by private market arrangements such as joint stock companies, speculators as intermediaries, and insurance companies (Lavington 1912: 401). Above all, business people deal with uncertainty by holding money as “reserve fund” to insure against an uncertain future (Lavington 1912: 401–402). As Keynes would have said, money can be held as a “hedge” against uncertainty, and this is an important insight.

In short, the work on uncertainty by Lavington can be seen as a sort of precursor to the later insights of Keynes.

BIBLIOGRAPHY
Groenewegen, Peter. 2012. The Minor Marshallians and Alfred Marshall: An Evaluation. Routledge, New York.

Lavington, Frederick. 1911. “The Social Importance of Banking,” Economic Journal 21.81: 53–60.

Lavington, F. 1912. “Uncertainty in its Relation to the Net Rate of Interest,” The Economic Journal 22.87: 398–409.

Lavington, Frederick. 1913. “The Social Interest in Speculation on the Stock Exchange,” The Economic Journal 23.89: 36–52.

Lavington, Frederick. 1921. The English Capital Market. Methuen & Co., London.

Lavington, Frederick. 1922. The Trade Cycle: An Account of the Causes Producing Rhythmical Changes in the Activity of Business. P. S. King, London.

Lavington, Frederick. 1926. “An Approach to the Theory of Business Risks,” The Economic Journal 36.142: 192–203.