David Colander writes:
   > Classical economists knew and used supply and demand... But their
focus was on supply forces and costs as determinants of value--demand
was a side issue, and given far less focus. Thus, they specifically said
that their major analysis did not cover non-reproducible goods where
demand forces were seen as central.  
   > With the introduction of marginal and  neoclassical ideas primarily
in the late 1800s, but which existed earlier in less well known work,
the focus shifted initially to demand, and then to supply and demand.>


But isn't the key point that the opportunity cost focus of neoclassical
analysis swept away the Ricardian insight that non-reproducible goods
("Land" in the broadest classical sense) are the free gifts of Nature,
with zero real or social costs of production? Yes, they command a price
because of their inherent fixity relative to demand. So price is an
essential rationing device. Nevertheless this price, or rent, is a pure
surplus whose value is community created, a value that is transferred to
those who hold the property rights.

In the neoclassical and entrepreneurial view, even the most valuable
land in Manhattan has an opportunity cost. Thus there is no surplus, and
the focus shifts conveniently from distributive justice to allocative
efficiency and a rationale for unconditional private property rights
over the free gifts of Nature.

Perhaps Henry George's Progress and Poverty (1879-80) was the high water
mark of the classical approach to supply and demand. He showed that rent
is an essential rationing device, rightly reflecting microeconomic
opportunity costs, but that from the social point of view it is not a
cost. 

Thus David Colander is right: how we approach supply and demand is a
matter of "the focus of analysis" - but, specifically, the
entrepreneurial vs the social focus. Today the social perspective
appears to have been diverted and marginalised by the entrepreneur's
(and our textbooks') focus on marginal opportunity cost as "the proper
scope of economics".

Roger Sandilands