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Roy W. has beaten me to the punch with his mention of the  
Morgan and Morrison book on modelling, which I highly  
recommend to those interested in the relation between models,  
theories and empirical data. The book also has several excellent  
case studies in the historical explanation of model building in  
economics and the natural sciences. 
 
The conversation on this thread has moved quickly from the  
historical question of when the notion of perfect knowledge was first  
employed to other issues (some of which were, of course, included  
in the original posting). While I don't think that historical and  
philosophical questions are unrelated, it seems to me that  
providing a philosophical justification for the place of the perfect  
knowledge assumption in economic theory is not the same as  
providing a historical account of how the notion came to be  
adopted, and how it was used not only by its initial users but by  
later economists. 
 
For example, let's presume that the notion of "perfect knowledge"  
enters economics in the first part of the twentieth century and that  
Knight played an important role in its adoption. Now, Knight  
provides a philosophical justification for the adoption of the  
assumption which is quite similar to that suggested by others in  
this thread, both in what Patrick Gunning calls its "simplifying" and  
its "counterfactual" aspects. But there is more to Knight's adoption  
and propogation of the assumption than its philosophical and  
economic arguments. Knight layers these arguments on top of  
notions of knowledge emerging in the early 20th century in  
psychology, combines them with his interests in causality and  
probability theory, axiomatizes them because of his background in  
the sciences, and aims them at both his economic and ideological  
opponents. Understanding Knight's use of the term "perfect  
knowledge", therefore, requires a "thick" explanation. I would  
presume that a similarly thick explanation would be required to  
explain later uses of the assumption (although I would agree with  
Robert and Patrick that, in any scientific discipline, assumptions  
become codified and normalized and therefore their use becomes  
less problematic to the practitioner). 
 
So I would frame the questions this way: can we explain how the  
"perfect knowledge" assumption was employed during the early  
20th century, why it came to be employed in that way, how its new  
role was different than the role of previous notions of human  
knowledge in economic theory, and how its role evolved? 
 
Hints of answers to these questions have already been suggested  
in this conversation thread. I'll mention the ones I remember, plus a  
few others: new understandings of what it means to do science; a  
raging battle over economic theory on many fronts with unclear  
battle lines; interest in the relation between cognitive psychology,  
the theory of knowledge, and economic action; new mathematical  
techniques; the emergence of American Pragmatism; and an  
increased role for economists in public service. 
 
Ross Emmett 
 
 
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