Mason, your post is an excellent example of how one can go astray by 
eliminating the entrepreneur from one's thinking. What you call a 
"disembodied spirit" is a role that performs a distinct function of 
causing prices to be set, goods to be produced, and uncertainty to be 
borne. The theory of the entrepreneur, consisting of combining these 
aspects of market interaction in a role, developed more or less 
concurrently with the theory of the firm, which was Alfred Marshall's 
effort to mathematicize the profit-maximizing production decisions of 
his version of the entrepreneur (he called it the undertaker). Marshall 
and followers like Joan Robinson helped to develop the theory of the 
firm that is the basis for what appears today in micro textbooks. 
Concurrently, writers like Davenport, Wicksteed, Schumpeter and Knight 
were enriching the concept of the entrepreneur role. When the first 
principles textbooks that divided up micro and macro were written in the 
early fifties (or perhaps a bit earlier if one count's Boulding), the 
writers chose to emphasize the post-Marshallian development, which was 
easier to quantify, teach, and give tests on. Correspondingly, they 
contributed to a trend in which the work of the "entrepreneurists" was 
disregarded and, for subsequent generations of students, not part of 
their education.

A parcel of land has specific physical characteristics. However, its 
economic significance derives from appraisals of it by the entrepreneur 
role. To eliminate the entrepreneur from the picture is tantamount to 
asserting that economics is not about the interaction among distinctly 
human actors.

Also, the issues in doctrinal history regarding marginal product, 
tragedy of the commons, property rights, etc. were dealt with far sooner 
than 1948. It is reasonable to regard the period surrounding 1948 as one 
in which teaching the logical and even methodological solutions to the 
problems you describe began to be crowded out by the teaching of 
mathematical and statistical techniques of representing behavior. But 
you must look farther back in the history of thought for writings about 
the other issues you mention. Most specifically, the external effects 
approach to the tragedy of the commons is a mathematical approach but 
the idea itself was present in David Hume's draining of the meadow.

In the thread about whether dividing economics into micro and macro is a 
good idea, it would be wise to attempt an assessment of the effect of 
this crowing out. Unfortunately, to do so would require the assessors to 
learn the economics that was crowded out. My lament is that this is not 
gonna happen.

Gunning, J. Patrick (1993) "Entrepreneurists and Firmists: Knight vs. 
the Modern Theory of the Firm." Journal of the History of Economic 
Thought. 15 (1): 31-53.


On 7/18/2010 9:49 PM, mason gaffney wrote:
>
> In all this thread, including David Colander’s subthread, no one seems 
> to have noticed the importance of removing diminishing returns and/or 
> variable proportions from the field. In 1948 or so one began with a 
> parcel of land, the fixed input, and added variable inputs of “doses” 
> of labor and capital, which had “marginal products”. This introduced 
> one to marginal analysis.
>
> Better students learned that a marginal product is a systems concept. 
> Thus, if you add a 101^st stem to a grove of 100 avocado trees, the 
> marginal product is less than what you gather from the 101^st stem: it 
> is that less the loss of product from the original 100 stems, due to 
> crowding. One goes on to learn that “open range” or “open seas” 
> arrangements lead to overcrowding, since the 101^st interloper fails 
> to account for the losses due to crowding others. Later these poorer 
> students were surprised to learn about the alleged “tragedy of the 
> commons”, and saw it as a new idea.
>
> Meantime, rooting the analysis in something as basic and 
> understandable as a parcel of land was discouraged, and diminishing 
> returns became “variable proportions”. “Substitution” and “trade-offs” 
> became common lingo in our trade.
>
> Next step, though, was to remove specific inputs entirely. The unit of 
> analysis changed to “the firm”, a disembodied spirit that hired inputs 
> of any nature, most in elastic supply to the “firm” – and who cared 
> about the whole society, or the specifics of any input or institution? 
> Inputs were divided into fixed and variable, with not much clue as to 
> what was which, except one was short run and one was long.
>
> Thus micro by itself changed radically. Those interested in the older 
> concepts were sent to a little pen labeled “production economics”, a 
> narrow subspecialty for eccentrics and a few ag economists interest in 
> optimal mixtures of hog feed – and linear programming.
>
> In all this, our colleagues lost sight of the obvious micro causes of 
> the basic macro problem, unemployment and low wage rates. The obvious 
> micro cause is excessive substitution of land and capital for labor, 
> caused in turn by institutional biases like taxing labor income 
> heavier than income from land and capital. Macro supposedly deals with 
> fiscal policy, but only in the “aggregate”, where all taxes are the 
> same. Micro shunts tax policy into a minor specialty, public finance. 
> Please: it is time to end quibbling over micro and macro, end the 
> parlor games, and get serious about using economic analysis to enhance 
> human welfare and understanding.
>
> Mason Gaffney
>
> *From:* Societies for the History of Economics [mailto:[log in to unmask]] 
> *On Behalf Of *M June Flanders
> *Sent:* Sunday, July 18, 2010 12:45 PM
> *To:* [log in to unmask]
> *Subject:* Re: [SHOE] Question about micro vs macro classes
>
> I had not recollection of Kleins’ being at Michigan during the war 
> (there were practically no young men there then) and in his
>
> Nobel autobiography 
> http://nobelprize.org/nobel_prizes/economics/laureates/1980/klein-autobio.html
>
> he speaks of returning to America in 1948, joining the NBER and THEN 
> going to Michigan.
>
> On the other hand, I distinctly remember his being at Chicago in 1946, 
> which is consistent with what he says.
>
> Professor M June Flanders
>
> The Eitan Berglas School of Economics
>
> Tel Aviv University
>
> Tel Aviv Israel 69978
>
> Tel: +972.3.549.5625
>
> Fax +972.3.547.7316
>
> [log in to unmask] <mailto:[log in to unmask]>
>
> ------------------------------------------------------------------------
>
> *From:* Societies for the History of Economics [mailto:[log in to unmask]] 
> *On Behalf Of *Womack, John
> *Sent:* Sunday, July 18, 2010 8:53 PM
> *To:* [log in to unmask]
> *Subject:* Re: [SHOE] Question about micro vs macro classes
>
> About Michigan Economics and potential objects of anti-Communist 
> purges, the second article in JSTOR for micro and macro is Lawrence R. 
> Klein, "Remarks on the Theory of Aggregation," Econometrica, XIV, 4 
> (October 1946), 303-312.
>
> *From:* Societies for the History of Economics [mailto:[log in to unmask]] 
> *On Behalf Of *E. Roy Weintraub
> *Sent:* Sunday, July 18, 2010 12:34 PM
> *To:* [log in to unmask]
> *Subject:* Re: [SHOE] Question about micro vs macro classes
>
> On Sun, Jul 18, 2010 at 10:11 AM, M June Flanders <[log in to unmask] 
> <mailto:[log in to unmask]>> wrote:
>
> In response to Roy’s description of the attitudes towards Keynes, I 
> must say these were far from Universal. As I commented to Larry Boland 
> (off site), when I took a junior course in ‘national income and 
> employment’ (approximate title), at the University of Michigan in 
> 1945, the textbook was: /A general theory of employment, interest, and 
> money/ by J M Keynes. I don’t remember their being any 
> socialist/communist professors in the department then.
>
> Professor M June Flanders
>
> But that can't be accurate. The investigations of the U Mich Economics 
> faculty, and graduate students, a couple of years later in that 
> McCarthy period resulted I believe in the expulsion of several 
> students (e.g Sharpe) and the hostile minority faculty report on 
> Laurence Klein which led to his leaving the US ahead of the 
> investigation by a red-baiting Un-American activities committee of the 
> Michigan legislature. The tensions were apparently associated with the 
> increasing Keynesian presence in that department and the reactionary 
> backlash that it produced in some older members of the department. 
> This was the same period, recall, that saw the trustees of the U of 
> Illinois (led by "Red" Grange!) destroy the Champaign-Urbana 
> department (Modigliani et al.) as a bunch of commie radicals. There 
> are a number of published accounts of these matters.
>
> There really can't be any productive discussion of "macro" and 
> "Keynesianism" in the US in that late 1940s early 1950s period without 
> regard to the McCarthy chill on universities, and particularly 
> economics departments.
>
> -- 
> E. Roy Weintraub
> Professor of Economics
> Duke University
> www.econ.duke.edu/~erw/erw.homepage.html 
> <http://www.econ.duke.edu/%7Eerw/erw.homepage.html>
>
>
>
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-- 
Pat Gunning
Professor of Economics
Groton, Connecticut
http://www.nomadpress.com/gunning/welcome.htm