When I first began the serious study of the history of economic thought, my presumption was that one should always start at the beginning. This was some thirty-five years ago and I have been finding so much interesting material that I have had a hard time getting past Adam Smith. The search for the beginning, of course, led me to the question of what do we mean by economic thought and how do we define it for the purpose of identifying its origin?.

I read your “…Historiography…” (Blaug 1990) with interest and profit. You were kind to me—probably too kind. But let me explore a point. Let's accept for the sake of the argument that in some instances a “rational reconstruction” can deviate from a “historical reconstruction.” Query: When I attributed to Smith the “canonical classical model” (Samuelson 1978), did I provide your readers with such an instance of deviation? No, I say. And your text does not adduce otherwise. Nor does Hollander's rhetoric (1980) in reaction to me. Actually, Hollander said: Yes, that model is in Smith but one has to work hard not to overlook it (particularly because its pieces are in scattered and unlikely places).

As Kenneth Arrow has pointed out in a recent paper, “David Ricardo was a peaceful man” (Arrow 1991, p. 70). Indeed he was—during his lifetime. I am not so sure he is resting peacefully given the further assertion that his system was “a bold attempt to determine values independent of demand considerations” (ibid., p. 75). Arrow adds, byway of qualification, that he does “not think, as some neo-Ricardians seem to, that there was in any sense an intended repudiation of the demand schedule”; rather Ricardo did not conceive of such a schedule even though “some of [his] analysis can only be made sensible on the basis of such a concept.”

The present note is a development of a paper I presented some four years ago at the 1987 meeting of the History of Economics Society (Caravale 1987), and that was later published in Rivista di Politico Economica in an expanded version (Caravale 1988). The aim of these two writings was to emphasize that—contrary to what is often maintained—demand conditions play a fundamental role in classical and classical-type theories. This role is different from that played by demand in neoclassical theories (where equilibrium prices are determined by demand and supply functions), and is so to speak “internal” to the theory of natural equilibrium since it is connected with the definition, for each situation, of the Smithian “point of effectual demand.” Before turning to the specific object of this note, let me recall very briefly the main points of the general thesis developed in the above-mentioned papers.

Historians of economics and philosophy have noted Georg Wilhelm Fredrich Hegel's debt to Adam Smith and have suggested that Hegel's analysis of civil society rests on a Smithian foundation. Laurence Dickey recognized that “Hegel's interest in the Scots coincided with the late eighteenth-century German interest in the relationship between socioeconomic processes in history and the development of civil institutions” (Dickey 1987, p. 194). Georg Lukacs emphasized that “it is highly probable that the study of Adam Smith was a turning-point in Hegel's evolution” (Lukacs 1976, p. 172). In his study of The Formation of the Economic Thought of Karl Marx, Ernest Mandel maintained that Marx discovered political economy and its importance to philosophy in his reading of Hegel. Says Mandel:

William Thornton's On Labour, Its Wrongful Claims and Rightful Dues, Its Actual Present and Possible Future was a contribution to the social debate of the 1860s. In the context of an attack on the vulgar wage-fund theory, which was wielded in popular discourse to emphasize the futility of trade unions, Thornton offered a more general assault on what he labelled “demand and supply.” John Stuart Mill had expected Thornton's book to play an important role in furthering his own campaign in support of trade union legalization, but the book received mixed reviews. Most critics missed the opportunity to respond to Thornton's social commentary, and focused instead on his analysis of demand and supply. The negative reviews found the theory wanting and, to John Stuart Mill's chagrin, dismissed the entire book. But the positive reviews were even more devastating from Mill's perspective. Not only did they ignore the social analysis, with which Mill was in agreement, but they seemed convinced that Thornton had demolished the demand and supply theory. Since Mill was then trying to consolidate the intellectual basis of the Liberal party on the foundation of classical political economy, this was hardly an outcome he could accept. The recantation article, which combined a sympathetic treatment of Thornton's social analysis with a criticism of his economic analysis, was the inevitable result (see Forget 1992).

“…a remarkably clever book, the result of close thought, much observation, and some research. Yet, after having read the book with attention, we are disposed to ask, why has it been written?” (The Athenaeum, May 1865).

W. Stanley Jevons's statistical study of periodicity has received much scrutiny (Aldrich 1987), but less attention has been given to his theoretical position on economic fluctuations, a circumstance which T. W. Hutchison justly finds surprising considering that “Jevons maintained that aggregate instability, and the distress it caused, presented profoundly serious problems, and devoted some of his most strenuous economic research to their explanation” (Hutchison 1988, p. 6). This paper takes up the challenge to examine the development of Jevons's thought on economic fluctuations from the early 1860s until his death in 1882.