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In his recent editorial, Tim Alborn describes himself as an outsider to 
HES, apparently because he is not an economist. If I understand him 
correctly, he would like to "historicize" "economics." That is, he would 
like to trace the history of the word -- to trace it "back to the times 
and places when people actually used the term." As an example, he traces 
the late 19th century and early 20th century British usage, particularly 
that of the people in England at the time when Marshall and Keynes were 
staking out their professional domain vis-a-vis the popular business 
press "The Economist." I would like to share with you a totally 
different approach to the study of economics. As seasoned members of 
this list might expect, it is an approach that focuses on the concept of 
economics as _a set of invariant ideas_ as opposed to a word that may 
have different meanings in different contexts and at different periods 
of time. 
 
        In recent months, I have again been reading through Ludwig von Mises's 
_Human Action_. Mises presented an image of the history of economic 
thought that differs markedly from the usual HES history. Here I will 
describe this and provide some embellishment. I will try to be brief but 
the complexity of the subject requires some elaboration. 
        According to Mises, economics began with Cantillon, Hume, and Smith, 
who recognized MARKET INTERDEPENDENCE and who tried to explain it 
in a way that no previous scholars had done. Their explanations were 
based on the assumption that market participants act in their self 
interests. They saw market interdependence as a kind of order, or 
regularity of interdependent markets and prices. This order was the 
outcome of the separate actions of numerous market participants, each 
pursuing his own interest. This, Mises believed, was the beginning of a 
_new science_ of economics and ultimately of a new science of human 
action and interaction, which he, writing in the mid 20th century, 
labeled praxeology. 
        Let me digress from Mises for a moment and mention what most readers on 
this list know quite well. It is the influence of Malthus's _Principle 
of Population_ on the early work of Darwin and Wallace in the study of 
the origin and evolution of species. Malthus's principle of population 
may not at first seem like it was part of economics, as conceived by 
Mises. It appears to be dominated by the animal instincts of a need to 
procreate and of a need to eat. However, the idea of competition was 
taken from economics (i.e., from economics, as defined by Mises). One 
might argue that the evolutionists learned the concept of competition 
from Malthus who, in turn, learned it from the early economists, who had 
studied human interaction and its consequences. The evolutionists went 
on to apply the idea to non-human beings. Competition among non-human 
beings obviously has a meaning that is different from that used in 
economics (and also in war and politics). In economics, it refers to 
interaction among individuals who we assume have the capacity to choose 
(to _act_, in Mises's terms). 
        Getting back to economics, the first major revolution, as Mises saw it, 
was that of the subjective theory of price. Jevons and Menger especially 
but also Walras explained market interdependence by referring to the 
self-interested actions of many individuals. Thus, they followed the 
earlier classical economists in this. However, their insight was to 
recognize that all market participants ultimately aimed at the 
satisfaction of the subjective wants of consumers, though not 
intentionally, and in the case of resource supply, not directly. (Mises 
believed that this insight was the consequence of economists having 
solved the "paradox of value" -- why the price of diamonds is higher 
than the price of water, although water is more highly valued by 
consumers.) 
        The "revolutionary" thinking was most evident in the Austrian writings 
of Menger, Bohm Bawerk, and Weiser. It later came to be reflected in the 
work of J. B. Clark and P. Wicksteed. But as I have recently discovered, 
there is a chapter in the history that Mises did not write. The early 
Austrian theory of value immigrated quickly to the U.S. The early 1890s 
saw the publication of numerous papers on the subject. The result of 
this seems to have been the emergence of three post-revolutionaries: F. 
Hawley, F. Fetter, and H. Davenport. Mises (and other neo-Austrians who 
followed him, with minor exceptions) have only recognized Fetter. But 
Fetter was the least important of the three in my view. The contribution 
of Hawley and Davenport to this history was that they redefined the 
concept of the entrepreneur. In their hands, the entrepreneur became a 
characteristic of all market participants, the driving force of the 
market, a _function_ that represents all of the action that is properly 
called "economic." To these two Americans, the study of market 
interdependence was the study of entrepreneurship, the aim of which was 
to earn profit. This aim could be accomplished only if actions had the 
goal, at least indirectly, of satisfying consumer wants. In addition to 
a desire for gain, some _person_ had to estimate the potential for gain 
from alternative uses of the possible factors of production, someone had 
to arrange a set of commitments before individuals would cooperate in a 
joint undertaking, someone had to take charge, and someone had to bear 
the uncertainty associated with possible error or with changes that 
result from the complexity of the problem of predicting how other people 
(consumers and other suppliers) will act. All actors, even employees and 
savers, act entrepreneurially, Davenport said. However, the actions of 
the entrepreneurship that ultimately adopted the role of the employers 
were, with some exceptions, more important. F. Knight later emphasized 
some of these characteristics -- especially the requirement that 
entrepreneurship must appraise factors and bear intersubjective 
uncertainty. 
        American economists were the most acute observers and writers on the 
entrepreneur. However, they did not realize the full _methodological_ 
implications of the notion that the market interdependence is entirely 
the consequence of _entrepreneurship_. Perhaps they would have, if 
their voices had not been drowned out by the empiricists, 
mathematicians, and institutionalists. In any case, the first person to 
recognize the methodological implications was Mises. But this is getting 
too close to the present. So I will quit. 
        My aim in this brief essay has been to try to point out that economics 
is a distinct subject. It is distinct from natural science and 
evolutionary biology. It developed during the same time frame as natural 
science. But it differs from it by virtue of its assumptions that, 
unlike the phenomena of natural science,  the phenomena of economics -- 
the human actors -- can choose. Because of this, its methods are, at 
some level, different from the methods of natural science. Economics 
also helped to launch evolutionary biology, which is the study of 
phenomena that do not choose yet form interdependent orders. It follows 
that when we study the history of economics (as a set of ideas and not 
as a word), we must study the use of methods that are not used in 
natural science or in evolutionary biology. Further contemplation will 
show that the methods that are unique to economics (and the study of 
action generally) can be derived from the assumption that human beings 
can choose. 
        I could go on to make a case that the ideas of the early economists 
later led to the development of sociology and political science. I could 
also discuss the propensity of professional economists to disregard the 
subjectivist revolution and to emulate the natural sciences and, of 
late, evolutionary biology. And I could say more about why modern 
professional historians of economics have chosen to ignore the distinct 
character of economics. But this is enough for now. 
 
Selected References 
 
Clark, J. B. (1899a). The Distribution of Wealth: A Theory of Wages, 
Interest and Profits. Macmillan, New York. 
 
Davenport, Herbert J. (1914). Economics of Enterprise. Macmillan, New 
York. 
 
Fetter, Frank, Economic Principles, Vol. 1, New York: Century Co., 1915. 
 
Hawley, F.B. (1900) Enterprise and Profit. Quarterly Journal of 
Economics. November. 
 
Knight, F. (1921), Risk, Uncertainty, and Profit, New York: Houghton 
Mifflin. 
 
Malthus, Thomas R., Essay in Population, 1798. 
 
Menger, Carl (1871, German). Principles of Economics. Translated by 
James Dingwall and Bert Hoselitz (1981). New York University Press, New 
York. 
 
von Mises, Ludwig (1966). Human Action: A Treatise on Economics. Henry 
Regnery Company, Chicago. 
 
Wicksteed, Philip D., The Common Sense of Political Economy, London: 
Land Humphries, 1933.(originally published in 1910) 
 
-- 
Pat Gunning 
http://www.showtower.com.tw/~gunning/welcome 
http://web.nchulc.edu.tw/~gunning/pat/welcome 
 
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