In the second volume of his Cours, published a hundred years ago, Vilfredo Pareto (1897, section 928) put forward what was probably the first mathematical model of the business cycle. Apart from Knut Wicksell's (1899) review of Pareto's book and Jess Benhabib's (1979) short article (partly based on Wicksell's comments), Pareto's model has gone unnoticed. According to the view advanced by Pareto in the 1890s, concepts from physics are essential, not only in the realm of static equilibrium, but also in the investigation of economic dynamics. The model follows a new presentation by Pareto of his equations of general equilibrium, where he attempted to take into account the influence of “inertia” (habit) by applying d'Alembert's principle of mechanics. He concludes that the solution to the consumption equations has a cyclical pattern and uses that to explain business cycles as oscillations in aggregate production driven by changes in consumption.

History, if viewed as a repository for more than anecdote or chronology, could produce a decisive transformation in the image of science by which we are now possessed (Kuhn, 1962a, p. 1).

Certain types of experimental findings serve as benchmarks, permanent facts about phenomena which any future theory must accommodate, and which in conjunction with comparable theoretical benchmarks, pretty permanently force us in one direction. … The remarkable fact about recent physical science is that it creates a new, collective, human artifact, by giving full range to three fundamental human interests, speculation, calculation, and experiment. By engaging in collaboration between the three, it enriches each in a way that would be impossible otherwise (Hacking, 1983, p. 248).

This paper addresses the question: How did the promising program set out in Leon Walras' mature writings come to be taken as laying the ground for a totally different line of problems in his later writings and in modern microeconomic theory? The study of Walras' mature work (see Walker, 1996) offers an instructive object lesson in the way in which an interesting line of enquiry leads gradually to analytical difficulties and then to “solutions” that evade issues and constitute a major diversion of analysis down roads not initially contemplated by its originator. This paper attempts to trace the development of that detour from the main road of economic analysis in Walras' mature work to the side road of abstract exercises in contemporary neowalrasian literature.

In The General Theory, John Maynard Keynes broke with the quantity theory of money, not just in working out a monetary theory of production but, as he says, in arguing the case for a monetary theory of value. Keynes writes (CW, 7, pp. xxii-xxiii):

A monetary economy, we shall find, is essentially one in which changing views about the future are capable of influencing the quantity of employment and not merely its direction. But our method of analyzing the economic behaviour of the present under the influence of changing ideas about the future is one which depends on the interaction of supply and demand, and is in this way linked up with our fundamental theory of value. We are thus led to a more general theory, which includes the classical theory with which we are familiar, as a special case.

The language of graphical analysis has an immediacy which has proven potent in the dissemination of economic ideas (Solow, 1987, p. 186). J. M. Keynes' General Theory of Employment, Interest and Money contained only one diagram (Keynes, 1936, p. 180), but J. R. Hicks' graphical IS/LM analysis contributed to the popularization of one interpretation of Keynes' message. Paul Samuelson's textbook used many graphs, which may account, in part, for its pedagogical irresistibility (Elzinga, 1992, p. 863). Two graphs, named after A. W. H. Phillips and Arthur Laffer respectively, became particularly influential in post-1960 policy debates. The “theoretical Phillips curve” (Phillips, 1953, p. 31; 1954, p. 308) was of interest mainly to specialists in optimal control theory; and Phillips' second empirical curve (Phillips, 1959) remained unpublished for almost four decades. Yet his first empirical curve (1958) led to policy implications which were accepted by virtually an entire scientific profession almost instantaneously, “with alacrity” (Friedman, 1977, p. 469). It appeared to fill a gap in the Keynesian neoclassical synthesis, and was rapidly adopted by the textbook writers (Samuelson, 1961, p. 383; Lipsey, 1963, p. 438). During the 1960s, it became widely accepted that ongoing inflation would be accompanied by a sustained reduction in unemployment. When inflation came to be associated with increasing rates of unemployment, this reflected adversely on the economics profession in general, and Keynesian economics in particular.

The Wealth of Nations (WN) is not a book from which we expect much enlightenment about class conflict. In spite of well-known passages referring to the diverging interests of workers, landlords and capitalists, the impression most have of WN is one of relative harmony among the classes. Nevertheless, Book III, “Of the different Progress of Opulence in different Nations,” which is the briefest and also the least studied of the five books comprising WN, provides considerable insight into the historical origin of conflict among social classes that derive from economic causes, and the circumstances under which conflict promises to become a characteristic feature of the economic process in any society.1 A re-examination of Adam Smith's theory of natural price in the context of the “stages of social history” developed in Book III, leads to interpreting the prospect for class conflict as a more integral and substantive part of WN than is generally recognized by historians of economic thought.