In 1952, the then Head of the Economics Department at Melbourne, Wilfred Prest, suggested to Corden that he should go to the UK to do postgraduate studies at the London School of Economics (LSE) and apply for a British Council scholarship.
Corden notes in (2018: 92) that he wrote in haste on his application form that his research area was to be transport economics.
Corden first encountered James Meade through reading his books, especially The Balance of Payments (Meade 1951) and A Geometry of International Trade (Meade 1952).
When he arrived at LSE, Corden immediately requested Meade for his PhD supervisor. Thanks in part to his published paper, Meade accepted this request. Transport economics was dropped swiftly in favour of international economics, a most serendipitous choice. Corden (2018: 97-102) makes it clear that Meade made a lasting impression on him, both as a person and as an economist. During this period, Meade was writing his second volume on The Theory of International Economic Policy: Trade and Welfare (Meade 1955), and Corden read the proofs of it.Given his immigrant background, it is perhaps unsurprising that Corden's choice for his thesis topic was related to the economics of immigration: the title was “Population Increase and Foreign Trade”. It was much influenced by the writings of Harry Johnson on the effects of growth on the terms of trade, and by Meade's work.[176]
While he was at LSE, Corden became interested in issues surrounding protection, especially sparked by his reading of the 1929 Brigden Report on the cost of protection in Australia. He published two papers on the topic, both of which made an impact. The first, Corden (1957), presents what is now the standard treatment of the welfare cost of a tariff in a small country using a diagram which combines domestic demand and supply curves for the importable and highlights the deadweight loss in the form of the well-known Harberger triangles. The second paper, Corden (1957), uses a neat diagram to first make a simple, but important, point about trade policy: a production subsidy is a superior instrument to a tariff if the objective is to achieve a given level of industry output or employment.
The underlying assumption here is that there is a positive externality associated with production, that is, there is a divergence between the marginal private and social cost of production. This is a nice example of the theory of domestic distortions. The central insight is that any policy intervention should be targeted as close as possible to the source of the distortion. Corden then proceeds to drop the small-country assumption and considers the impact of varying the terms of trade. In the latter case, he shows that the goal of protecting a given sector requires a combination of policy instruments, namely an optimum tariff with a production subsidy. The optimum tariff is needed to deal with varying terms of trade and the subsidy to ensure that output or employment is at the desired level.[177] Harry Johnson did much to publicise these two papers among the international economics fraternity.One feature of these two papers which would become typical of Corden's approach to economics is the clever use of diagrams. As he put it: ‘I'm naturally inclined to diagrams... The fact is everybody loves them when you do them, provided they are simple' (Corden in Coleman 2006: 386).
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