To Lawrence:  
  
I may not have been sufficiently precise. When I say  
that the principal goal of the neoclassical economists  
was to evaluate interventionist arguments, I do not  
mean that the neoclassicals (or Austrians) are  
interventionists or non-interventionists. My argument  
is that methodologically individualism is required to  
evaluate most arguments relating to intervention,  
whether they are for or against it.  
  
  
To Alan:  
  
I assume that you are writing about the Marshallian  
theory of the firm. I am not a Marshall scholar so I  
cannot attest to his intentions. But I learned the  
micro theory and I teach it as an imaginary construct  
that we use because of the complexity of market  
interaction. It helps us comprehend competition and  
how, under certain conditions, _individual action_  
causes consumer wants to be satisfied (economic  
efficiency or the invisible hand). Its advantage over  
general equilibrium theory is that in teaching it, we  
are inclined to refer to incentives as opposed to  
dependent variables or simultaneous equations. I  
suppose that there is a danger in misleading gullible  
students into thinking that u-shaped costs curves are  
drawn in the corporate board room.  
  
As I recall, the idea of a representative firm was  
attacked very early as being unrealistic. But that  
attack misses the point, except in the sense that the  
model may have been improperly used to characterize  
real production.  
  
Pigou and followers began to use Marshallian firm  
theory to defend interventionist arguments - for  
example, in the _monopolistic competition revolution_.  
This was a misapplicationm, as became evident several  
decades after Coase's 1937 _The Nature of the Firm_.  
Coase depicted the firm as an employment compact among  
independent agents. This led ultimately to the new  
institutionalist theory of the firm, which is about as  
individualistic as one can get. The "modern theory"  
has also been used in the evaluation of  
interventionist arguments, particularly with respect  
to antitrust and regulation. There is a sense in which  
it re-revolutionized the theory of intervention in  
order to correct for monopoly. (It has other uses in  
business administration and business history.)  
  
Pat Gunning