This paper seeks an answer to the following question: By what process did the utility concept in economics evolve from its Benthamite to its modern form? Jeremy Bentham applied his principle of utility to ethical, legal, and constitutional issues, and only after more than a century of adaptation did it become the dominant explanation for consumer choice. The paper identifies fitness for mathematical analysis as the underlying principle of selection for this evolutionary success, exemplified in particular by the mutations of utility between Bentham and W. S. Jevons, and between Jevons and Alfred Marshall.

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).

Financial economics was born in the 1960s. It took less than two decades for the new discipline’s main theoretical results to become established, creating what is considered to be mainstream financial economics. Less than thirty years later, a new field of research called “econophysics” was created. This field aims to reinvent modern financial theory and, indirectly, financial economics.

This article proposes to study, by an historical analysis, to what extent econophysics today could constitute one of the major theoretical challenges to financial economics. It shows how these two fields have historical similarities, and analyzes how these similarities call the future evolution of financial theory into question.

Economics in the 1960s was host to a number of dissenting movements challenging the profession's mainstream theories. As this mainstream changed in the 1970s, the dissenters also underwent a transformation of their own. By the late 1970s the dispersed dissenting voices had congregated to form groups of neo-Austrians, post-Keynesians, neo-Marxists and radical economists. Retrospectively, the 1970s appear as a period of intense negotiation among dissenters as they erected theoretical and methodological boundaries and institutions (associations, journals, seminars) that would come to define them. They were constructing not just conditions for carrying on their work but also a narrative perception of who they were, what they stood for and what was the nature of the profession they inhabited, which I hereafter call “identity” or “self-image.” The dispersed critiques were being redrawn into new sociological unities inside the profession. This paper aims to track one of the routes that brought dispersed critique into an organized and self-conscious grouping, self-identified as Post Keynesian economics. The broad question addressed is how did the Post Keynesians construct their identity?

Ronald Coase's 1960 article, “The Problem of Social Cost,” has been one of the most influential works in the development of welfare economics since A. C. Pigou's The Economics of Welfare. Principally, the article made the definition and distribution of property rights a central issue when discussing the efficiency problems of negative externalities. Coase's approach has given rise to most of the economics of tort law and alternative liability rules. It has also led to the development of the “property rights” approach to environmental economics that has found prominence as an alternative to traditional Pigovian analysis.

Austrian capital theory tried to capture the intuitive and basically undeniable importance that time plays in economic life, but arguably was diverted down a blind alley with Eugen von Böhm-Bawerk’s average period of production, a purely physical measure of ‘roundaboutness’—the length of the production process. For the general case, such a measure is a chimera. But the intuition is strong, and the idea survived and reappeared at various points in the history of capital theory. Almost unknown to economists, an alternative value measure of roundaboutness has existed at least since John Hicks’s formulation of his average period (AP) in 1939, which, coincidentally, was exactly the same measure discovered by the financial actuary Frederick Macaulay in 1938, called by him “Duration” (D). Macaulay’s D, more richly interpreted as Hicks’s AP, is a measure that more appropriately captures what it was that the Austrians struggled to express over many years in their capital theory and in their analysis of the business cycle.

There is great variety within contemporary economics. As Coats (2000) points out, not only are there several schools of thought that would conventionally be labeled “heterodox,” there are numerous economists whose work is in a significant sense unorthodox or unconventional. How, then, can a dividing line be drawn between dissent within orthodoxy and dissent from orthodoxy? The suggestion I make here is that a heterodox school of thought has to satisfy three criteria.

The laissez-faire welfare theory of classical economics was very much concerned with demonstrating the optimality of the competitive market system, or, more generally, the harmony between individual and social interests. Under the influence of J. S. Mill and Henry Sidgwick, however, this view gradually began to erode. Sidgwick (1901), for example, pointed to a number of factors, including what we now call externalities, that can cause individually-optimal behavior to diverge from the social optimum, and suggested that these potentially call for governmental corrective measures. Alfred Marshall carried this discussion a bit further, but it was through A. C. Pigou's analysis—particularly in The Economics of Welfare (1932)—that the theory of market failure, and the need for government correction of these failures, reached full flower. His work formed the foundation for “modern” welfare economics. The contrast between the “old” and the “modern” welfare economics was pointed out by James Buchanan:

The Coase theorem has occupied a prominent place in economic discourse for the last half-century. The debate over the theorem and the uses to which it has been put are important moments in the history of modern economics, and the analysis of them by the historians of economics sheds light on certain of the tensions in contemporary historiography. This article discusses several aspects of the intellectual history of the Coase theorem, arguing that the study of this history illustrates the necessity of a pluralistic approach, and that attempts to write history from a singular historiographic perspective leave us with histories that are both misleading and incomplete.

The paper examines assertions that Adam Smith was in some sense a Christian, and examines how much current opinion ignores his biography and the dangerous religious context of eighteenth-century Scotland. Zealots regularly intervened against suspected heresy, which created an atmosphere of intimidation. Adam Smith’s biography shows that he too was intimidated, and avoided scandals that would upset his very religious mother, for whom he felt a special protective bond, and that he hid his private skepticism to ensure that nothing he published would provoke the zealots. A close reading of his Works shows how he amended them consistently as he grew older to modify their religious content, particularly after his mother died in 1784, and up to just before he died in 1790.

The significance of Haavelmo’s “The Probability Approach in Econometrics” (1944), the foundational document of modern econometrics, has been interpreted in widely different ways. Some regard it as a blueprint for a provocative (but ultimately unsuccessful) program dominated by the need for a priori theoretical identification of econometric models. Others focus more on statistical adequacy than on theoretical identification. They see its deepest insights as unduly neglected. The present article uses bibliometric techniques and a close reading of econometrics articles and textbooks to trace the way in which the economics profession received, interpreted, and transmitted Haavelmo’s ideas. A key irony is that the first group calls for a reform of econometric thinking that goes several steps beyond Haavelmo’s initial vision; the second group argues that essentially what the first group advocates was already in Haavelmo’s “Probability Approach” from the beginning.

Schumpeter's theory of entrepreneurship and innovation has been repeatedly interpreted in terms of a conceptual dualism, shifting from an early model of personal entrepreneurship in newly founded enterprises to a late model of research and development in large enterprises, responding to changes in the productive organization of capitalism. Due to theoretical inconsistencies, Schumpeter thus seemingly altered his argument on the role of entrepreneurship in economic development (Freeman et al. 1982, pp. 41–42). In countering these allegations, it has been put forward that Schumpeter's instrumental methodology would allow for settling historical experiences and theoretical reasoning on different analytical levels. Accordingly, the substantial validity of the Schumpeterian approach would remain independent from variable historical settings (Frank 1998, pp. 505–506). Adding to these methodological considerations, it has been suggested that the consistency of Schumpeter's argument could be reconstructed in terms of an explanation of capitalist development that resonates Weberian thought on rationalization and bureaucratization (Langlois 1998b, pp. 57–58).

In the winter of 1934–35, when John Maynard Keynes was beginning to circulate proofs of The General Theory of Employment, Interest, and Money, he indulged in a playful exchange of letters with George Bernard Shaw devoted mainly to the merits of Karl Marx as an economist. At the end of his letter of January 1, 1935, Keynes's observations took a more serious turn, documenting fundamental changes in his theoretical ambitions following the publication of his Treatise on Money in 1930: “To understand my state of mind, however, you have to know that I believe myself to be writing a book on economic theory which will largely revolutionize—not, I suppose, at once but in the course of the next ten years—the way the world thinks about economic problems” (Keynes 1973a, p. 492).

The Austrian School of Economics has long been branded as a sort of radical laissez-faire wing within the economics profession, even much more “right-wing,” in fact, than Milton Friedman, the profession;'s most recognized “preacher” of the free-market. The economic journalist Alfred Malabre, Jr., for example, in his recent critical book on modern economics, Lost Prophets, argues that “the monetarism that Friedman and his followers were preaching was not quite as conservative as advertised. In fact, the University of Chicago professor was treading not far from the middle of the economic road, flanked on the left by the likes of Galbraith and Leontief and on the right by Hayek, along with such other Austrian-school luminaries as Hans Sennholz, chairman of the economics department at Grove City College in western Pennsylvania, and Ludwig von Mises, transplanted from Austria and finishing out a distinguished academic and writing career at New York University” (Malabre 1994, p. 144).

In his Nobel lecture, Friedman built on his earlier argument for a “natural rate of unemployment” by painting a picture of an economics profession which, as a result of foolish mistakes, had accepted the Phillips curve as offering a lasting trade-off between inflation and unemployment, and was thereby led to advocate a policy of inflation. It is argued here that, in fact, the orthodox economists of the time often did not accept Phillips’ analysis; almost no one made the mistakes in question; and very few advocated inflation on bases vulnerable to Friedman’s theoretical criticisms. The Phillips curve was put to various uses, but advocating inflation was hardly amongst them. It is suggested that one lasting result of the uncritical acceptance of Friedman’s history is to limit what appears to be within the reasonable range of views about macroeconomic policy.

Alfred Marshall, who once proclaimed that the Mecca of the economist lies in Economic Biology, is remembered more for the mechanical analogies contained in the appendices of his Principles of Economics. Subsequent revisions of Marshall based on the mechanical principles he incorporated into the theory of the firm (Robbins 1928; Pigou 1928), the theory of competition (Robinson 1933; Chamberlin 1933), and the theory of value (Hicks and Allen 1934), succeeded in completely removing the corpus of economic theory from the domain of biology.

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: