Michael Woodford's 2003 Interest and Prices has been regarded as the most important contribution to monetary economics since the publication of Don Patinkin's Money, Interest and Prices fifty years ago. Like Patinkin, Woodford sought inspiration in Knut Wicksell's 1898 Interest and Prices. But, while Patinkin built on Wicksell's incipient formulation of the real balance effect and stability analysis of the price level (see Boianovsky 1998), Woodford has elaborated on Wicksell's concept of a pure credit economy (called “cashless economy” in the 2003 version), a theme largely disregarded by Patinkin. This difference in perspective is in part related to the fact that Patinkin's concern was mainly monetary theory, whereas Woodford has focused on monetary policy instead. In early 2004 I invited a group of scholars to discuss Wood-ford's book from the point of view of the history of thought and methodology in a session at the History of Economics Society meetings, held in June of that year at Victoria University, Toronto. Michael Woodford was also invited to participate in the session and reply to the comments. The revised papers are published here as a mini-symposium.

Irving Fisher is widely regarded as one of the greatest economists of the twentieth century, and his achievements in neoclassical theory have had a profound influence on contemporary research. However, while there is no lack of research into the international diffusion of Keynes's thought, very little is known about how Fisher's ideas spread among scholars and policymakers throughout different countries. Yet, an understanding of when and how Fisher's writings influenced economic theorizing and policy debates worldwide could shed new light on the process of international transmission of economic ideas in general and on the evolution of the neoclassical paradigm in particular.

In a study of pre-classical monopoly theory published in 1951, Raymond de Roo ver started by briefly examining the doctrines held by the medieval scholastics. His analysis met with favorable response and was confirmed and further developed by later historians. The most satisfactory statement may still be that of Barry Gordon in his monograph on early economics. The consensus of these scholars can be summarized as follows. Medieval authors looked askance at the attempts by the guilds to establish minimum prices. They recognized the expediency of government grants of monopoly and regulation of prices of certain commodities. They strongly condemned private monopolies established for personal gain, as well as collusion among sellers for that purpose, price discrimination, engrossing, forestalling, regrating, and other forms of speculation. The just price was the current, competitive market price, free of all irregularities of these kinds and free of fraud and duress. Gordon adds that the schoolmen also sometimes referred to labor and cost factors, rather than the market, as estimates of the just price. These estimates were not necessarily contradictive but mutually supportive. They applied when the market was not working smoothly and when there was no market in operation at the time and place of the sale. When an exchange is concluded in a competitive market under normal circumstances, the going price can hardly be said to be unjust. It may sometimes seem uncharitable. There will always be some who cannot afford to pay the competitive price. Poor relief in medieval society, however, was mainly a matter of almsgiving. Unlike commutative justice, charity is not a workable ethical norm in the marketplace.

Economics revolves around a central character: “economic man.” As historians, we are all familiar with various episodes in the history of this character, and we appreciate his ever-changing aspect even while many of our colleagues in economics think the rational economic agent of neoclassical economics is the same kind of person as Adam Smith's economic man. The fact that this is a familiar history means that I can focus on a few salient examples—a “short” history, rather than a complete history— to provide the raw material for my account which has a more specific agenda than simply a history of economic man. My aim is to re-consider the history of economic man as a model man. This leads to two further questions: What kind of a role has this model man played in relation to the science he inhabits? And, how can we characterize the processes by which economists have arrived at their model characters?

To illuminate this history of economic man, I adopt ideas from philosophy about how scientists arrive at models and use them in science. Of course, economists have always had their own ideas about such matters. So in effect, there are two intersecting strands in this account: one is how economists have discussed their strategies in creating these characters, and the other is how philosophers of science have—at the time and since—labeled and thought about such strategies. These discussions, from the economists and from philosophers, will enable us to explore the usefulness of the concept of idealization, a standard way of thinking about model construction in philosophy of science. They will also allow us to consider model man as an ideal type (using Weber's concept) or as a caricature (to follow Gibbard and Varian's label). These analytical labels—ideal types, idealization, and so forth—relate to questions about the status of models and their construction that are sometimes evident, and sometimes lie below the surface, but always remain important in the historical discussions about economics as a science. My account is concerned then with constructions of the persona of economic man, how he has changed over the last 250 years, how far we can regard that character as a model, and with reflections on his role in the changing science of economics.

The Modern Archives, King's College, Cambridge University contain a carbon copy of a three-page single spaced manuscript with the title “A Passage From The Autobiography of an Analytical Economist” (RFK/16/2/134–139, hereinafter “Autobiography”). Joan Robinson's initials are typed at the end of the document, which is dated October 1932.

In October 1932, Heffer, the Cambridge University student bookstore, published Joan Robinson's methodological pamphlet, Economics is a Serious Subject, and she delivered the manuscript of The Economics of Imperfect Competition to Macmillan (Joan Robinson to Richard Kahn, October 30, 1932, RFK/13/90/1/19). The Autobiography was apparently drafted shortly after these two projects were completed. The typescript in Modern Archives, which seems to be the only extant copy, was not made until some months later. In a letter of March 2, 1933, Kahn suggested adding “a long section to your secret document if you can do so without spoiling it,” regretting that he had not asked her for a copy (RFK/13/90/1/162–67). She replied somewhat mysteriously, alluding to a superstitious reluctance to having it typed but admitting that eventually it would have to be done (March 23, 1933, RFK/13/90/1/205–208). Since the carbon copy refers to page 275 of her book, the Autobiography was not typed until she had seen the final set of page proofs, and perhaps not until the book had appeared.

In 1922, Thomas Edison publicly introduced his latest invention—a new type of money, a commodity-backed currency that he believed was the long-term solution to America's monetary woes. “I want to cast the variable out of money. This gold money is not good enough. It's a fiction” he boldly proclaimed (New York Times 1922).

Michael Woodford's Interest and Prices: Foundations of a Theory of Monetary Policy (2003) is an important book. Woodford's title is, of course, a conscious revival of Wicksell's own famous work and it points to an effort to recast the analysis of monetary policy as centered on interest rates. I believe that Woodford's theoretical orientation is essentially correct. In repairing to Wicksell, he places the monetary aggregates into a more reasonable perspective, correcting the distortions of the monetarist and Keynesian diversions with respect to money. My money is, so to speak, where my mouth is: My own textbook-in-progress is also based around an IS/interest-rate rule/AS model, in which financial markets cleared by price rather than the LM curve are emphasized. Such an approach, as Woodford notes, has become standard in central banks, but has not yet captured either core undergraduate or graduate textbooks and instruction. My task here, however, was not to praise Woodford's economics nor to trace or evaluate its Wicksellian routes, but to consider Interest and Prices from a methodological point of view.

The thesis that economics is “performative” (Callon 1998) has provoked much interest but also some puzzlement and not a little confusion. The purpose of this article is to examine from the viewpoint of performativity one of the most successful areas of modern economics, the theory of options, and in so doing hopefully to clarify some of the issues at stake. To claim that economics is performative is to argue that it does things, rather than simply describing (with greater or lesser degrees of accuracy) an external reality that is not affected by economics. But what does economics do, and what are the effects of it doing what it does?

That the theory of options is an appropriate place around which to look for performativity is suggested by two roughly concurrent developments. Since the 1950s, the academic study of finance has been transformed from a low-status, primarily descriptive activity to a high-status, analytical, mathematical, Nobel-prize-winning enterprise. At the core of that enterprise is a theoretical account of options dating from the start of the 1970s. Around option theory there has developed a large array of sophisticated mathematical analyses of financial derivatives. (A “derivative” is a contract or security, such as an option, the value of which depends upon the price of another asset or upon the level of an index or interest rate.)

There can be no doubt that the monetary systems of a number of advanced countries nowadays resemble Knut Wicksell's (1898) model of the “pure credit economy” much more closely than did any that actually existed in the world for which he wrote. Currency has long been losing its quantitative importance in mediating transactions among the general public in such countries, and more recently, the development of modern information technology has made it possible for them to operate the clearing and settlement systems that underpin the use of bank deposits as means of exchange with a close-to-zero stock of reserve assets.

Antonio De Viti de Marco is perhaps the most representative scholar at the origin of the Italian tradition in Public Finance, and his main work has been at the disposal of English-speaking economists since 1936 (De Viti de Marco 1936). However, at the time he was not particularly appreciated: his book had at the time one good and one bad review, but certainly left no mark on mainstream economic analysis. The fact is that De Viti's message was too far beyond the range of interests of Anglo-Saxon writers of the time.

The disparate approaches of James Buchanan and Richard Musgrave to public economics are both anchored in Knut Wicksell's contribution to the theory of public goods. In “A New Principle of Just Taxation,” the second essay of Finanztheoretische Untersuchungen (1896 [1994]), Wickseil considered how to design a voting mechanism to finance public goods and assure a just distribution of the tax burden. Applying the benefit principle to taxation, Wicksell argued that a unanimity-voting rule would guarantee that all individuals receive benefits commensurate to their tax cost from any public good. “No one can complain if he secures a benefit which he himself considers to be (greater or at least) as great as the price he has to pay” (Wicksell 1994, p. 79). Wicksell's primary interest was not in determining the appropriate mix of public and private, instead he demonstrated how one might finance public expenditures provided the decision of the mix has already been made. The actual voting mechanism is much less controversial than the philosophy and antecedent assumptions behind the process. While Musgrave and Buchanan share common ground, agreeing to the originality of Wicksell's work, and the necessity of considering the rules by which social decisions are made, their views on Wicksell are generally acknowledged to be radically different (Bernd Hansjurgens 1999, Pieter Hennipman 1982, David Riesman 1990).

Over the years, Friedrich Hayek has received a generous response from some members of the British Conservative Party. One immediately thinks of endorsements of his work by Mrs. Thatcher in the 1970s and '80s.

Those with longer memories—and teeth—might also recall the controversy around Winston Churchill's first election broadcast in 1945, and the response to it by the Labour leader Clement Attlee, the following evening. Churchill spoke of the dangers of planning, and raised the idea that it would, in the end, require the powers of a Gestapo to put the ideal of a planned society into practice. Attlee criticized these ideas, and Hayek as the source of the theoretical conceptions behind them. This led to a fair bit of attention being paid to Hayek by the press, and to his being described as an economic adviser to Churchill. But Hayek himself has downplayed his direct contacts with Churchill (cf. Hayek 1994, pp. 106–107). Indeed, in Hayek on Hayek (Hayek 1994), Hayek indicates that he met Churchill only once. On that occasion he was struck by Churchill's being the worse for drink and then recovering, to Hayek's surprise, to make a first-rate speech.

In 1954, Paul A. Samuelson presented on just two and a half pages what he claimed to be “a pure theory of government expenditure on collective consumption goods” (1954c, p. 388). Just a year later, he supplemented this theory by an equivalent diagrammatic formulation and a few clarifying comments (Samuelson 1955). Although his initial paper was strongly criticized on various grounds, an industry was launched and public goods—or, as referred to initially by Samuelson, collective consumption goods—now play a crucial role in a number of theories like fiscal competition or endogenous growth, and in almost all textbooks on public economics or microeconomics at least a paragraph is devoted to public goods. In fact, Samuelson's 1954 paper is conventionally considered the foundation of the modern theory of public goods (for example, see Richard A. Musgrave 1983a, p. 141). However, the many contributions to the modern theory of public goods, including Samuelson's subsequent writings, have revealed that there is widespread disagreement both on fundamental aspects of the theory as well as on its significance for the determination of government expenditure.

Once one recognizes that many prices (and wages) are fairly sticky over short time intervals, the arbitrariness of the path of nominal prices (in the sense of their under-determination by real factors alone) implies that the path of real activity and the associated path of equilibrium real interest rates are equally arbitrary. It is equally possible, from a logical standpoint, to imagine allowing the central bank to determine, by arbitrary fiat, the path of aggregate real activity, or the path of real interest rates, as it is to imagine allowing it to determine the path of nominal interest rates. In practice, it is easiest for central banks to exert relatively direct control over overnight nominal interest rates, and so they generally formulate their short-run objectives (their operating target) in terms of the effect that they seek to bring about in this variable rather than in one of the others.

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).

Economists and finance researchers have long recognized the “close relation between the measurement of inequality and the measurement of risk” (Breitmeyer et al., 2004). Economists today agree that a measure of income inequality must respect the Pigou-Dalton transfer principle, that is, inequality cannot increase with a transfer from a richer person to a poorer person. Finance researchers today agree that a measure of risk must respect the diversification principle, that is, risk cannot increase when portfolios are combined. Where did these convictions originate? While both principles were advocated early in their respective fields, they were not viewed as definitive until relatively recently. In both fields major empirical and theoretical efforts were mounted in support of various conceptualizations at odds with these two principles. For example, Robert Gibrat advocated the use of the variance of log income despite the fact it is inconsistent with the Pigou-Dalton principle. In finance, value at risk (VaR), although it can violate the diversification principle, was widely advocated. People supporting research programs at odds with Pigou-Dalton or the diversification principle, based those programs on ambitious empirical and theoretical claims about distributions. Such claims could have been right and are not a priori or logically false. The purpose of this paper is to review these “at odds” conceptualizations, the types of arguments advanced for their legitimacy, and the reasons they have been given up.

This paper investigates the influence of Allyn Abbott Young's theoretical work on the groundbreaking contributions of early development theorists, Paul Rosenstein-Rodan and Ragnar Nurkse. The work of Allyn Young had a significant impact on early development theory as the above-mentioned pioneers of development economics built substantial portions of their theories—the “big push” and “vicious circle and balanced growth,” respectively—on the dynamic external economies, an integral part of the vision of self-sustaining growth, as described in Young (1928).

The year 2003 marked the 100th anniversary of the birth of John von Neumann (1903–1957), one of greatest geniuses of the last century. Beyond contributing to fields as diverse as set theory, quantum mechanics, atomic energy, and automatic computing, von Neumann has also had a decisive influence upon modern economics. From the invention of game theory to the axiomatization of expected utility, from the introduction of convex analysis and fixed-point techniques to the development of the balanced growth model, the von Neumann heritage can be clearly traced in several areas of our discipline. The aim of this paper is to clarify the relationship between the two concepts of rationality he devised in his classic 1944 book Theory of Games and Economic Behavior, written with the collaboration of the Austrian economist Oskar Morgenstern (von Neumann and Morgenstern 1953).

The New Neoclassical Synthesis that Michael Woodford puts forward in his Interest and Prices (2003) is primarily a synthesis of New Classical and New Keynesian ideas. Yet Woodford presents it as an encompassing approach that goes much further back in time to integrate the pre-Keynesian macroeconomics of Knut Wickseil and his followers. Starting with the title, the book contains many references to Geldzins und Güterpreise (1898), Wicksell's landmark contribution to monetary theory which was translated as Interest and Prices in 1936. Woodford relates his concept of a “monetary policy without money” to Wicksell's concept of the pure credit system and to Wicksell's proposal to eliminate inflation by adjusting nominal interest rates to changes in the price level—an idea that has much in common with modern policy rules à la Taylor. He presents the core model of the new synthesis (in shorthand: IS + AS + Taylor rule) as a “neo-Wicksellian framework” that serves to analyze the dynamics of interest-rate gaps and output gaps (2003, chapter 4). Referring to the Wicksellians of the 1920s and 1930s (primarily Erik Lindahl, Gunnar Myrdal, and Friedrich A. Hayek), Woodford grounds his advocacy of rules to fight inflation on the potential non-neutrality of monetary policy: “[I]t is because instability of the general level of prices causes substantial real distortions—leading to inefficient variation both in aggregate employment and output and in the sectoral composition of economic activity—that price stability is important” (2003, p. 5). He thus sees his analysis of interest-rate and output gaps as “an attempt to resurrect a view” that the old Wicksellians had developed in their analyses of cumulative processes.

In the aftermath of the so-called Marginal Revolution of the last end of the nineteenth century, economic analysis split into two branches. The first one was made up of economists who took as the methodological starting-point of their analyses the static or stationary state of a barter economy and considered that this basic framework was likely to be extended in order to account for monetary and financial considerations, as well as dynamics. However, in such a setting, the introduction of money, bank-credit, or any factor of growth did not substantially alter the features that are associated with the rudimentary economy of static real exchange.