Introduction
Industrial economics is usually defined as the study of the structure of markets, the economic performance of industries, the behaviour of both and the manner in which they interact.
The discipline did not emerge as a separate subject area until the inter-war period in the United States and in England.[9] Embryonic forms of industrial economics can be found in earlier economic theories, with the earliest example in the United Kingdom probably being The Economics of Industry by Alfred and Mary Paley Marshall (1879). Four decades later, a number of US economists, including Frank Knight (1921) and John Maurice Clark (1922), had succeeded in introducing some central concepts, such as specific forms of imperfect competition and the role of uncertainty and risk in the context of innovation.While industrial economics focuses on the aggregate analysis of sectors and industries, the theory of the firm is primarily concerned with the internal organisation of firms and firm behaviour. Until the end of the nineteenth century, questions relating to firm organisation were subsumed within the
1 As Hay and Morris remarked in their internationally known textbook on the subject, ‘people have been interested in the economic behaviour and performance of industries since the beginning of the industrial revolution, but the delineation of a specific area of economics under the title of industrial economics is a phenomenon of the last forty years’ (Hay and Morris 1979: 3).
theory of prices and value and were, at best, concerned with sector- or industry-level analysis (see Marshall and Marshall 1879): firms were “empty boxes” governed by cost curves (Clapham 1922). The concept of the internal organisation of a firm remained neglected, especially after Pigou and Robertson’s highly abstract neoclassical analysis effectively eliminated the Marshallian concern with the actual workings of the firm (Pigou and Robertson 1924). In a well-known survey of the theory of the firm, Kenneth Boulding (1942: 791) attributed early developments in the field to ‘extensive transformations’ in the basic theory of value in the 1930s.[10] At the same time, empirical studies, which were increasingly concerned with the separation of ownership from management (see Berle and Means 1932), highlighted the separate existence of firms from markets, and the importance of their internal forms of organisation for overall economic performance.
Since the inter-war period, industrial economics and the theory of the firm have constituted a significant part of applied microeconomics. This chapter seeks to provide a better understanding of Oxford’s contributions to the emergence and the institutionalisation of industrial economics as an academic discipline. It falls into four main parts: “Premises”, triggered by David Macgregor’s contribution and the Oxford Economists’ Research Group (OERG) (1921-1965); “Roots”, illustrated by the research on the Courtauld Inquiry and Philip Andrews’ contribution (1943-1947); “Institutionalisation”, evidenced by the creation of the Journal of Industrial Economics (1952-1968); and “Transformation”, exemplified by the shift of the discipline towards industrial organisation (1979-1991). Despite the prominent position of its researchers in their respective fields, Oxford’s leading role in the emergence of industrial economics is not attributable to any specific school of thought it produced, as could be argued was the case at Cambridge. Rather, the Oxford case stands out because of its contribution to the emergence and development of institutions that are still internationally central to the discipline.
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