The life of the late Edith Penrose was extraordinary in many ways. For readers of the International Review of Applied Economics, the main interest may be in The Theory of the Growth of the Firm – her book that has grown in importance over time (E. Penrose Citation1959). But as well as Edith’s writings, her life too was fascinating, and wonderfully captured in Angela Penrose’s book, No Ordinary Woman (A. Penrose 2018).
Angela is Edith Penrose’s daughter in law; indeed:
In the week Angela Penrose was given The Theory of the Growth of the Firm to read as part of her Philosophy, Politics and Economics degree course at Oxford she met her future husband, Perran Penrose, the son of the author, Edith Penrose.Footnote1
Edith Penrose’s life gives a bird’s eye view of much of the 20th Century including the rise of fascism in the 1930s, the Second World War, McCarthyism in America, the struggles against colonialism and imperialism, and then the challenges of economic development. This is seen through the eyes of a great economist in every sense of that term – one whose focus was absolutely on improving people’s lives, and analysing emergent issues such as the oil sector, the rise of multinational enterprises, and the role of patents always through that lens of human wellbeing.
The 1930s
Economics was not one of the five Nobel Prizes established by Alfred Nobel’s will in 1895. However, in 1968 an award was established by an endowment from Sweden’s central bank, Sveriges Riksbank, to commemorate the bank’s 300th anniversary. Officially the ‘Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel’, this is generally referred to as the Nobel Prize in Economics, and is awarded by the Nobel Foundation. Indeed, when the organisation Promoting Economic Pluralism introduced a ‘Not the Nobel Prize’ for economics, to be able to recognise economists with a more pluralistic approach to the topic, the Nobel Foundation threatened to sue. (Full disclosure: I was a founding Director of Promoting Economic Pluralism, and it was my idea to call our award ‘Not the Nobel Prize’.)
There is an obvious question as to why Edith Penrose was not awarded this Nobel Prize in Economics when it was introduced in 1968 – or at least, why she was not awarded it in the 1970s, 1980s or 1990s, in recognition of her pathbreaking work. I will return to this question at the end of this review article, but there is a related point to make about the gender balance – or lack of it – amongst the recipients since 1968 (with three women recipients, and ninety men), which is that Edith married David Denhardt when they were both undergraduates at Berkeley in the 1930s, and:
… even though Edith was a free-spirited student activist, choosing a husband at that time was effectively choosing a life. As the wife of a district attorney in a small American town she would be expected to support her husband throughout his career. Everything we know about them as a couple tells us she would have done, but David Denhardt was killed as he sought election to office on the first rung of that career.
This fact – of women often not having careers, due to societal pressure to prioritise domestic and child-rearing duties – explains at least in part the gender imbalance in all Nobel Prize categories. But the imbalance is worst in economics, a point to which we return to below.
In terms of Edith Penrose’s biography illuminating much of the 20th Century from the 1930s onwards, she travelled to Europe ‘as the Second World War broke out’, to work alongside Ernest Francis Penrose, or ‘Pen’ as he was known, who became her second husband (p. 2):
For nine decisive years the career and destiny of Edith and her husband Pen were intricately linked to that of John Winant; firstly whilst he was Director of the International Labour Organization in Geneva and Montreal, then in London throughout the Second World War where he was the American Ambassador to the United Kingdom, and finally as the US representative to the Economic and Social Council of the embryonic United Nations (UN) in New York. Here Edith assisted Eleanor Roosevelt in her historic role as chair of the Human Rights Commission as it drew up the Universal Declaration of Human Rights.
In Edith’s last year at Berkely she attended lectures by Pen who had arrived in 1935, and during her last semester, ‘the summer of 1936, she also began working for him as an assistant, typing letters, organising courses, and helping with research’. (p. 19)
2. The Second World War
In 1938, Pen had moved from Berkely to work as an economic advisor to the International Labour Organisation (ILO) in Geneva, and in 1939 he recruited Edith to work with him at the ILO. On 7 August 1940, because of the Nazi advance and fall of France, Edith and Pen were in a contingent of ILO staff who were moved to New York (via Portugal), and then on to Montreal where forty ILO staff became located. Then in July 1941 Edith and Pen were recruited to the American Embassy in London, where they worked for almost five years. Edith’s work included a report on Food Control in Great Britain, which concluded that:
The purpose of food control in wartime is first to obtain an even and adequate flow of food into the channels of distribution and secondly to distribute these foods equitably to all individuals and to all classes in the community. The task is immense and the pitfalls many, but on the whole British food control has been successful in accomplishing these ends. Most striking perhaps is the number of things generally considered administratively impracticable which, when attempted, have proved extraordinarily successful. The first requisite of any Ministry of Food is courage.
After the war, Edith and Pen returned to New York to work with the Economic and Social Council (ECOSOC) of the United Nations (p. 99), with Edith working particularly to support Eleanor Roosevelt, including in Eleanor Roosevelt’s role as chair of the UN Commission on Human Rights (p. 108).
In January 1947 Pen resigned from the UN to become a member of the Institute for Advanced Study at Princeton – well known to anyone who saw the 2023 film Oppenheimer (about the development of the atomic bomb during the Second World War, led by Oppenheimer, who went on lead the Institute, with the film including a memorable scene with Oppenheimer talking there with Albert Einstein):
The seven-month appointment was an essential bridge until September when he took up the position of the B. Howell Griswold, Jr. Professor of Geography and International Relations at John Hopkins University. … The Institute for Advanced Study purports to be ‘one of the few institutions in the world where the pursuit of knowledge for its own sake is the ultimate raison d’être’. Research is never contracted or directed but eminent faculty members guide and mentor scholars. It became a refuge for scientists and academics fleeing Nazi Germany, including Albert Einstein who was professor of mathematics at the Institute until 1945 and continued to research there until his death in 1955. As Pen began his research J. Robert Oppenheimer was taking up the post of director.
Edith signed on to do a master’s degree at the Department of Political Economy at John Hopkins, which ‘was relatively small with only seven full-time faculty members but it had developed one of the best reputations in the USA’ (p. 110), and in May 1948 ‘she submitted her essay Discussion of Patents in Economic Doctrine for the degree of Master of Arts’ (p. 115). For her doctorate, Edith described ‘the evolution of the patent system and the development of the International Convention for the Protection of Industrial Property and its provisions on patents’ (p. 117):
Signatories of the convention are bound to treat all applications for patents the same as they would their own nationals and to award priority to the first application of a patent regardless of where that patent was filed. The central argument of the thesis, analysing the economic costs and gains resulting from the rules imposed by the convention, is complex. Edith concludes that special problems arise by the international extension of the patent system and most countries lose more than they gain by accepting to abide by the rules. Questioning the alleged positive benefits of the system to social welfare she recommended the complete exemption of non-industrialized nations from the international agreement.
Edith received her degree of Doctor of Philosophy and went on to publish her thesis as a book, The Economics of the International Patent System, in 1951.
Edith became a research associate of the Department of Political Economy in 1950 and a lecturer in political economy in 1951 (p. 118), and ‘began the research that contributed to her book The Theory of the Growth of the Firm’ (p. 120).
3. McCarthyism
Edith and Pen had, thus, both settled at John Hopkins, and all was set for them ‘to go from strength to strength in their academic careers; they appeared to be on track to achieve all they had hoped for’ (p. 120). But:
That their hopes turned to despair, as Pen expressed it later, was due to the prevailing political climate in the USA at the time and its effect on academic institutions and freedoms. As the Second World War ended, the Cold War intensified. Anti-communism increased within the USA … The ‘Second Red Scare’, lasting roughly from 1950 to 1956, characterized by heightened political repression against communists, and the campaign spreading fear of their influence within American institutions, increasingly overshadowed Edith and Pen’s years at John Hopkins.
Again, anyone who saw the 2023 film Oppenheim will recognise this, with Oppenheim going from national hero for having led the development of the atomic bomb, to being persecuted as ‘anti-American’ under the McCarthyist era for his supposed political views. One academic at John Hopkins, Owen Lattimore, was particularly badly persecuted, and amongst other things was indicted by government lawyers for being a ‘follower of the Communist line’ and ‘promoting Communist interests’, to which his lawyers responded:
The indictment is not limited to those who shift with Russia as it shifts its policy. It touches any writer whose opinion ever coincides with Russian policy at any time. Covering a period of fifteen years, as it does, and including events long antedating the cold war, it would force every British and American statesman to admit that he was a follower of the Communist line in the sense used in the indictment.
Edith later wrote:
When all of this arose, I went to his defence and even took on the job of secretary of the Defence Fund … the kind of thing I’ve never done before in my life. I did not know then whether the charges of sympathizing etc were true or not. I felt however, that even if they were true, the attack on him was unjustified and the obvious attempt at entrapment repugnant to all sense of fair play. He denied the accusations. I have known him seven years and saw no reason to doubt his word. But I did a) read the more controversial books he has written; b) read files of correspondence etc; and c) read the full record of the hearings. I came to the conclusion that he was no communist or ‘sympathizer’ in any doctrinaire sense of ‘fellow traveller’ … Sometimes he said things I would wholeheartedly disagree with. It became clear to me, however, that here was a wide-ranging, not-always fully informed, sometimes wrong, sometimes superficially journalistic, but often original and clearly independent minded man. I could also see how easily a careful selection from the incredible mass of words he produced … could build up a case for nearly anything. It is my sincere conviction that no one who fairly and objectively read Lattimore’s major works and a random selection of his minor ones could possibly call him a fellow traveller.
The FBI initiated a search against all the contributors to the defence fund that they could track down, including Edith. The case against Lattimore was eventually dropped, as was the FBI search to find incriminating evidence against Edith or any of the contributors to the defence fund. However, Lattimore had been suspended by John Hopkins during the McCarthyite witch hunt against him, and ‘his return to John Hopkins was neither smooth nor triumphant’, and he moved to the University of Leeds in England to establish a department of Chinese Studies, where he and his wife remained until 1972. (p. 140)
In 1953, Edith and Pen were called to testify before the Senate committee charged with investigating subversives, chaired by Senator Jenner:
They came under intense pressure to provide names and were asked questions about activities in the University of California in the late 1930s. They claimed a lack of knowledge of these activities and were assured that there would be no publicity about the session. They were asked by a journalist on the Baltimore Sun about their experience but refused to comment.
As a result of McCarthyism in America, Edith and Pen ‘began to believe they could not continue in the USA’ (p. 137), and Pen arranged for a sabbatical leave in Australia on which Edith joined him, following which he wrote that:
This journey has emphatically confirmed my sharp revulsion from the American ‘way of life’, notably in the last five or six years during which the whole society has been infected with the poison of witch-hunting and shocking revelations of the fundamental weakness of American culture have come to light, or rather have become evident on a greater scale than one formerly expected.
Following their return to John Hopkins, the Canadian diplomat E. Herbert Norman was accused by the US government of being a Soviet agent, and he ‘committed suicide, leaving a note asserting his innocence, saying the forces against him were too formidable’ (p. 148).
One week before the death of Norman, the distinguished Japanese economist Schigeto Tsuru, then lecturing at Harvard on a US-Japan intellectual exchange programme, was subpoenaed … partly because he had known Norman well as a student. (p. 148)
‘Pen was outraged’ (p. 148), writing that:
My emotions were so aroused by the Norman case and the Tsuru case that I could scarcely control them enough to express myself calmly and coherently. But now I must master them enough to write some effective public protests. There is hardly anything I cling to so tenaciously as the hope that we can leave this country permanently as soon as possible… I don’t wish to spend my last days as a U.S. citizen. The events of the last seven years have thoroughly alienated me from this country. The most abominable injustices and outrages are committed without significant public protest.
In 1957 Edith and Pen took leave of absence from John Hopkins to teach economics in Baghdad. Edith ‘received the copy of the appendix for The Theory of the Growth of the Firm … and planned to proofread it on the ship’ (p. 151). They taught in Baghdad through to 1958, with Edith ‘becoming increasingly interested in the relationship of the oil companies with the government’, and also writing an article on ‘The Role of Economic Analysis in Political Decisions’, in which:
She poses the question, what can the economist contribute to the questions of great political moment which will have far-reaching economic consequences? Her answer is that any political journalist can complain that government revenues are not spent quickly enough, but the ‘economist knows that money is never the real problem, but rather the availability of real resources and productive services, including labor, entrepreneurial, and managerial services’ [E. Penrose Citation1958]. The economist understands that the rate of economic advance is restricted by the scarcest of the necessary resources and his contribution is the organization of the use of productive services. Her observations of Iraq were drawing on her insights in The Theory of the Growth of the Firm.
In this 1958 article, Edith argues that an economist may well find that people:
… with the ability to undertake the organization of economic activity are in very short supply indeed. And such skills are needed as much as for state undertakings as for private undertakings. In no country are large and complex firms organized in a short period of time, because an efficient ‘organism’ of this kind is not created on an engineer’s drawing board – it must grow, and this growth takes time. I am inclined to accept the view that the greatest obstacle to rapid economic development is the magnitude of the organizational problem and the shortage of men with appropriate training and skill to do it.
In the summer of 1958, Edith and Pen visited Oxford, during which the Iraqi regime was overthrown in what is variously described as a coup d’état or revolution, with the royal family executed.
Uncertain whether they could return to Iraq Pen applied in August for a job with the UN in Libya, and his papers were submitted to the US government by the Office of Personnel of the United Nations Technical Assistance Recruitment Services, with a request for urgent action. This set in motion an investigation by the FBI which unearthed Pen and Edith’s involvement with the Lattimore defence fund and the fact they had testified before the Jenner Committee in 1953. FBI agents gained access to the reports of these hearings even though they were supposedly held in secret. The final report sent to the Civil Service Commission responsible for assessing the reliability of applicants for the International Employees Loyalty Board contained Pen’s testimony from those hearings and other testimony from colleagues past and present, neighbours, and employers. The FBI also discovered than in April 1936 Edith Penrose had been a speaker at a university anti-war rally, sharing a platform with a communist and a socialist. In January 1959 the Civil Service Commission indicated that the UN was no longer considering Pen for employment.Footnote2 (p. 163)
After a brief return to Iraq, Edith was invited to Cambridge to be interviewed for a lectureship, which is one of the stranger episodes of Edith’s life, and indeed in the life of the Faculty of Economics at Cambridge – and they have had a few.
The correspondence Edith had had with the administration in Cambridge had led her to believe they intended to offer her the post. Austin Robinson had been sent a proof copy of The Theory of the Growth of the Firm; Joan Robinson had encouraged her application and she felt optimistic. But she did not get the post. Explanatory myths have been created – perhaps Austin did not want to appoint a woman – but Edith herself believed that Cambridge had wanted someone with a greater knowledge of the British economy and familiarity with British industry. (p. 166)
Robin Marris was then a lecturer at Cambridge and reported this:
My administrative task was carried out after teaching hours in the department office, which was then located in Downing Street. Naturally it was my habit to read any other interesting documents concerning faculty affairs which might happen to be lying around. In 1958 one such was a full set of the galley proofs of The Growth of the Firm [sic]. Obviously I was immediately attracted. I took all the sheets home for the night and by the time I surreptitiously replaced them the next day, I had read every one. It turned out that the reason the proofs were in the office was that the department appointments committee had decided to offer Edith a Cambridge lectureship, subject to interview. The interview duly occurred; there is no record of what transpired, except that no appointment was made. A bad day for Cambridge but in my opinion a good day for Edith, who I think would have been suffocated there.
The bad day for Cambridge turned out to be a good day for London, as the LSE and SOAS created a joint post for Edith in 1960.
4. The theory of the growth of the firm
Chapter 10 of Angela Penrose’s book on Edith is the only one not written by her – it is on The Theory of the Growth of the Firm, and so Angela asked her son Jago Penrose, an economist, to write it. Jago’s chapter is an excellent discussion of Edith’s book. He points out that Edith began with her own, fresh definitions:
The business firm, as we have defined it, is both an administrative organisation and a collection of productive resources; its general purpose is to organise the use of its ‘own’ resources together with other resources acquired from outside the firm for the production and the sale of goods and services at a profit; its physical resources yield services essential for the execution of the plans of its personnel, whose activities are bound together by the administrative framework within which they are carried out.
Jago Penrose argues that:
One of the most powerful implications of Edith’s theory is that knowledge creation is a key driver of economic growth, and that this process takes place within firms. Moreover, as firms grow so the ‘smaller is the extent to which the allocation of productive resources to different uses and over time is directly governed by market forces and the greater is the scope for conscious planning of economic activity’ (E. Penrose Citation1959, p. 51). The composition of the firm sector is therefore a key determinant of the nature of an economy’s development. In the last chapter of her book Edith discusses the implications for growth of an economy dominated by big business, concluding, ultimately, that the quality and strength of that growth ‘rests on the conditions that are not self-perpetuating, but may be destroyed by collusion, by the extension of financial control, and by the struggle to resolve the contradictions in a system where competition is at once the god and the devil, where the growth of firms may be efficient, and where their consequent size, though not in itself inefficient, may create an industrial structure which impedes its own continued growth’ (E. Penrose Citation1959, p. 265)
Jago Penrose concludes by arguing that:
The conviction that firms control, create, and manage resources within an administrative structure overseen by flawed but motivated people and that firms affect their environment and can influence the institutional structure within which they operate governed Edith’s thinking throughout her career. It informed her work on the oil industry, multinational firms – particularly those operating in developing countries – and … her thinking on economic development.
5. Edith Penrose’s other contributions to economics
As indicated above, Edith Penrose not only made major contributions in a range of areas – including the growth of the firm, patents, the oil industry, multinational companies, and development economics, but also her basic approach, combining theory and practice, and taking due account of history, institutions, and human behaviour, informed her work in all these areas, which made her contributions so relevant and powerful. Edith Penrose acknowledged this to some extent in the preface to a collections of her essays:
At first glance it might seem that the three subjects dealt with in the essays written over the last twenty years could hardly be more diverse … Oddly enough, however, these subjects are connected by the same type of historical logic that characterizes the diversification of an industrial firm: the logic in the simple principle that one thing leads to another.
This was what made the creation of a post for her at SOAS, initially shared with the LSE, so inspired. That readership in economics went on to be a full Chair in 1964, based solely at SOAS (p. 197). In her 1965 inaugural lecture as professor of economics, she referred to ‘the economics of development’ as what she had been teaching, and which was ‘being established as a discipline in its own right against a background of increasing academic and governmental interest in development issues’ (p. 190).
Despite her pathbreaking work in establishing development economics as a discipline, Edith Penrose remains best known for her work on the growth of the firm. The huge rise in influence of her 1959 book over the subsequent decades is due in part to the growth of management and business schools within academia, where real world analyses of firms is vitally important. It is thus not surprising that after seventeen years at SOAS, Edith was recruited to INSEAD, where she worked from 1977 to 1984, before retiring to England near Cambridge.
6. Why was Edith Penrose not awarded the Nobel Prize for economics?
Given her pathbreaking contributions, why was Edith Penrose not awarded what is known as the Nobel Prize for Economics? As noted in Section 2 above, there is a distinct gender balance against women in all the Nobel Prize subject areas, which reflects the gender imbalance in society, the economy and employment more generally, including historically. In this regard, Edith’s life is a striking example, since as discussed above she looked set to take on the role of housewife, supporting her husband and his political ambitions, had it not been for his death, which resulted in her pursuing a career as an economist.
Beyond that general issue, of the gender imbalance in recipients of the Nobel Prize across subject areas, there is the question of why that imbalance is worse in economics than for any other subject area. It may be that the rather abstract approach of mainstream economics – which dominates the award – tends to be more off-putting for women than for men. Whatever the exact cause, it appears to have two effects: firstly, more men than women study economics, and secondly, of those women who do study economics, a higher proportion tend to choose areas of economics away from the mainstream, such as economic history, labour economics, or development economics. And the prize has tended to be awarded to those working in the mainstream, rather than in these other areas. Thus, when the prize was finally awarded to a woman, in 2009, it was to Elinor Ostrom, ‘for her analysis of economic governance, especially the commons’ – far from the mainstream.
And then there is the specific question, of why Edith Penrose was not awarded the prize, quite apart from the above factors. We will never know for sure; it will remain as mysterious as why she was not appointed to the post in Cambridge. But certainly, what is seen as her main contribution, namely The Theory of the Growth of the Firm, did not fit into mainstream economic analysis.
She simply sidestepped the issue of how her work related to the mainstream … It was strategic to depict her agenda as a focus on the growth of the firm rather than its static equilibrium, as a complement to the conventional theory, not an alternative grounded in a critique. In this way Edith avoided the potential costs of a Promethean quest to lead economists towards the grail of a more relevant and dynamic theory. She settled instead for mapping out a part of the story, while letting the boys continue to play with the theory of the firm, tweaking and twisting and grinding out solutions to their hearts content: a pluralistic compromise. But as feminist economics emphasizes the realistic and relevant is seldom the high ground of economics.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1. This is from the back inside cover of Penrose (Citation2018).
2. http://foia.fbi.gov/privacy_systems/63fr8659.htm cited in Levallois (Citation2009).
References
- Best, Michael, and Jane Humphries. 2001. “Edith Penrose: A Feminist Economist?” paper presented to the Penrosian Legacy, INSEAD, 11–12.
- Levallois, C. 2009. “Why Were Biological Analogies in Economics ‘A Bad Thing’? Edith Penrose’s Battles Against Social Darwinism and McCarthyism, Science in Context.” 163. [as cited in Penrose (2018) , p. 295, note 13].
- Penrose, Angela. 2018. No Ordinary Woman: The Life of Edith Penrose. Oxford, UK: Oxford University Press.
- Penrose, Edith. 1958, June. “The Role of Economic Analysis in Political Decisions.” In Bulletin of the College of Arts and Sciences, Vol. 3. Baghdad.
- Penrose, Edith. 1959. The Theory of the Growth of the Firm. Oxford, UK: Oxford University Press.
- Penrose, Edith. 1971. The Growth of Firms, Middle East Oil, and Other Essays. London, UK: Frank Cass.