Kelvin John Lancaster (10 December 1924 – 23 July 1999) was an Australian
mathematical economist and
John Bates Clark
John Bates Clark (January 26, 1847 – March 21, 1938) was an American neoclassical economist. He was one of the pioneers of the marginalist revolution and opponent to the Institutionalist school of economics, and spent most of his career as ...
professor of economics at
Columbia University
Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
. He is best known for the development of the
Theory of the Second Best
In welfare economics, the theory of the second best (also known as the general theory of second best or the second best theorem) concerns the situation when one or more optimality conditions cannot be satisfied. The economists Richard Lipsey and ...
with
Richard Lipsey
Richard George Lipsey, (born August 28, 1928) is a Canadian academic and economist. He is best known for his work on the economics of the second-best, a theory that demonstrated that piecemeal establishing of individual first best conditions w ...
. Lancaster was also active in developing the calculus of
qualitative economics
Qualitative economics is the representation and analysis of information about the direction of change (+, -, or 0) in some economic variable(s) as related to change of some other economic variable(s). For the non-zero case, what makes the change ...
, formulating the
household production function Consumers often choose not directly from the commodities that they purchase but from commodities they transform into goods through a household production function. It is these goods that they value. The idea was originally proposed by Gary Becker, ...
, and applying the
hedonic model to the estimation of
housing prices.
In a 1966 paper, Lancaster developed what he called a "new theory of consumer demand", in which the then standard
microeconomic demand theory was modified by stipulating that what consumers are seeking to acquire is not goods themselves (e.g. cars or train journeys) but the characteristics they contain (e.g. transport from A to B, display of fashion sense). As Palda (2013) explains
The second evolution in spatial economics was due to Kelvin Lancaster. His insight was that the basic qualities that consumers seek could be manipulated by combining different products. Hotelling had not considered this possibility. He had been content to accept that one good provided one underlying feature that could be measured in characteristics space. Lancaster saw the matter in greater breadth. Dinner was not just food on a table. It was an attempt to manipulate the basic constituents of flavor and nutrition into a satisfying gastronomic experience. Being a good cook meant knowing that taste had several dimensions including sweet, salty, sour, and savory. For a meal to be agreeable, it had to combine these elements of flavor and it also had to be easily digested, suggesting that nutritional dimensions such as greasiness, protein content, and temperature had to figure into the cook’s understanding. These basic culinary entities could each be thought of as lying on a left-right scale, or space. The ideal meal, then, sought to combine these features by varying each one as precisely as possible.
This theory provides a convenient account of the difference between less developed (so called "primitive") consumption economies, in which there are fewer goods than characteristics, and more developed ("sophisticated") consumption economies, in which there are more goods than characteristics, so that consumers can secure any combination of characteristics they desire, subject only to budget constraints. It also provides a way of predicting demand for new commodities, so long as they do not embody any new characteristics.
According to economist
Jagdish Bhagwati
Jagdish Natwarlal Bhagwati (born July 26, 1934) is an Indian-born naturalized American economist and one of the most influential trade theorists of his generation.
He is a University Professor of economics and law at Columbia University and a Sen ...
, "He was widely regarded as a potential recipient of the Nobel Prize, for the notable impact that had been made by his contributions to the theory of second best and the integration of variety into economic theory. He joins the list of extraordinary economists such as
Joan Robinson
Joan Violet Robinson (''née'' Maurice; 31 October 1903 – 5 August 1983) was a British economist well known for her wide-ranging contributions to economic theory. She was a central figure in what became known as post-Keynesian economics.
B ...
,
Roy Harrod
Sir Henry Roy Forbes Harrod (13 February 1900 – 8 March 1978) was an English economist. He is best known for writing '' The Life of John Maynard Keynes'' (1951) and for the development of the Harrod–Domar model, which he and Evsey Domar dev ...
, and
Mancur Olson whom death deprived of this singular honor."
Lancaster attended
Sydney Boys High School
, motto_translation = With Truth and Courage
, established =
, location = Cleveland Street, Moore Park, Sydney, New South Wales
, country = Australia
, coordinates =
, pu ...
, graduating in 1940.
[http://www.shsobu.org.au/wp-content/uploads/professors.pdf ]
References
External links
Obituaryin the
New York Times
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
Talking About a Revolutionby
Paul Krugman
Paul Robin Krugman ( ; born February 28, 1953) is an American economist, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for ''The New York Times''. In 2008, Krugman was ...
{{DEFAULTSORT:Lancaster, Kelvin
1924 births
1999 deaths
Alumni of University of London Worldwide
Alumni of the University of London
Columbia University faculty
University of Sydney alumni
20th-century American economists
Fellows of the Econometric Society
Distinguished Fellows of the American Economic Association