I found preparing this presidential address a much greater challenge than I had anticipated. After much deliberation, I decided to explore the historical roots of what we are doing now. The History of Economics Society, like other learned societies, holds an annual conference in different cities; members present papers which are discussed; and the Society sponsors a specialist journal—The Journal of the History of Economic Thought. Why? Where did this tradition begin? I turned to several historians of science—I. Bernard Cohen, Thomas S. Kuhn, Richard Yeo, and Ian Hacking—for some background.

The transformation of economics through its mathematization has been of interest to historians of economics and economic thought. While considering aspects of this history, Philip Mirowski (1986a, 1992) and Lionel Punzo (1989, 1991) have introduced David Hilbert's work, the Hilbert program, formalism, and Kurt GddePs results into their discussions in a way that is inconsistent with the mathematical community's understanding of mathematical history.

John Rae, Scottish by birth, and a Canadian-Hawaiian (i.e. of the Kingdom of Hawaii) by residence, lived in Canada for about twelve years before the publication of his only work of significance in economies' and for nine years before he started writing it (James 1965,). He titled his book Statement of Some New Principles on the Subject of Political Economy, Exposing the Fallacies of the System of Free Trade and of Some Other Doctrines Maintained in the “Wealth of Nations” (1834) (obviously not a very memorable or popular title). The book was first conceived as an appendix to a statistical study of an aspect of the Canadian economy but, as sometimes happens, took a life of its own, in which references to Canada became merely illustrative and less frequent than to England, France or even China.

In the past three decades economics has entered a new phase in its development. The new stage did not involve a revolutionary change of basic tools as occurred with the triumph of neoclassical economics at the turn of the twentieth century and Keynesian economics in the post World War II era. Rather the recent mutation involves the introduction of economic tools of analysis into areas which have traditionally been part of contiguous disciplines. The invasion of economics came to be referred to, even by its enthusiasts (e.g., Stigler 1984; Radnitzky and Bernholz 1986), as “economics imperialism.”

My work as a historian of economic thought and methodologist has had several dimensions. One comprises a heavy research program. Another involves some major editing projects, several long term. Still another involves a synergistic relationship between my work on the history of economic thought and methodology and on the economic role of government. Another involves my participation in the founding and operation of both History of Political Economy and the History of Economics Society. If all this sounds like a lot of activity, it must be understood that my research and professional activities have been both my vocation and principal avocation. I use the word “work” in the title reluctantly and where others might say “career.” I have never thought of my professional activities as either toil or a career; indeed, I have both engaged in and seen them as a joyful adventure—so much for the theory of the marginal disutility of labor! Especially important has been the continued support of my wife, Sylvia. She has not only understood and supported, albeit sometimes with difficulty, my time-consuming involvement with intellectual work, she has nurtured a wonderful family life.

Walter Bagehot is an excellent example of the mid-Victorian polymath. He was a banker, journalist, editor, biographer, literary critic, economist and political analyst. The educated reader of today remembers him as the author of The English Constitution, which, though published in 1867, remains one of the best introductions to the workings of the Westminster political system. Economists, on the other hand, vaguely recall him as the monetary commentator who wrote Lombard Street (1873b) and edited The Economist (1861–1877). Only a few historians of economic thought cite Bagehot for his participation in the English Methodenstreit. He played a significant role in this largely forgotten Victorian debate between the historical and orthodox economists. He was one of the first orthodox economists to respond to the historicist challenge, and, in doing so, he articulated a highly controversial relativist interpretation of the orthodox doctrines. Specifically, in response to the historicist claims that recent evidence gathered from custom-bound societies falsified the orthodox

Oddly enough, my first clear recollection of an encounter with an economic proposition dates from the age of six or seven, when my father (who died suddenly from the pneumonia when I was eight) casually remarked that the Colman Mustard Company derived most of its profits from the residue people left on their plates. Unfortunately at the time I did not appreciate the analytical subtlety of this observation. Nor, I suspect, did my father, who probably only wanted to particularize the familiar maxim: waste not, want not. Nevertheless, the point evidently stayed in my mind, though I cannot claim it as the origin of my subsequent fascination with economics. The evolution of my attitudes to economics will tie considered later. First, however, let me briefly sketch some relevant features of my personal and socio-economic background, which may shed some light on my subsequent intellectual activities.

In his contribution to the 1987 conference that celebrated the fiftieth anniversary of Ronald Coase's “The Nature of the Firm” (1937), Harold Demsetz noted that from the birth of modern economics to 1970, “only two works seem to have been written about the theory of the firm that have altered the perspectives of the profession: Knight's Risk, Uncertainty, and Profit (1921) and Coase's ‘The Nature of the Firm’” (Demsetz 1993, in Williamson and Winter 1993, p. 159). It is easy to feel uncomfortable with this observation. First, Coase's article was ignored for decades. Second, Knight's book did not receive much attention because of its theory of economic organization, but because of its statement of the theory of perfect competition (Stigler 1957; Machovec 1995), its distinction between risk and uncertainty, and its theory of profits (see, e.g., Boulding 1942 and Papandreou 1952).'

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:

Utilitarianism as conceived of in the present article is the philosophical movement that is roughly characterized by three main features: (1) during his lifetime a person maximizes his utility, which depends on his pleasure and his pain; (2) an individual's behavior should be based on a good education and guided by effective legislation; (3) society's ultimate purpose is the maximization of the aggregate happiness of all people.

At one level or another, economic processes make it possible for diverse individuals to coordinate their activities. Although microeconomists have long recognized this insight, and purport to explain it with their tools, macroeconomists often seem to lose sight of the centrality of coordination when they focus on the movements of, and relationships among, aggregate variables. One problem with emphasizing aggregates is that, in reality, economic coordination ultimately takes place at the microeconomic level, which poses the issue of microfoundations. However, recognizing that micro issues are the fundamental ones does not deny a role for distinctly macroeconomic analysis. Macroeconomic analysis should show how movements in markets for goods that are pervasive (i.e., affect some very large number of microeconomic markets simultaneously), help or harm the coordination processes taking place in those individual markets and thus influence the determination of aggregate measures such as total income and employment.

In an episode that reflects tellingly on the state of the economics profession in England circa 1870, John Morley presented himself as a candidate for the London University Chair of Political Economy that John Elliot Cairnes was obliged to vacate because of advancing paralysis. Morley, perhaps the most unswervingly loyal disciple of John Stuart Mill and the editor of the Fortnightly Review, was undeterred by the fact that he had published nothing on the subject, apart from an article on Turgot. Nor, in his letter seeking Mill's endorsement, did Morley feel the need to hint at any prospective scholarly contributions to the discipline. He suggested only that he was “a competent person and likely to discharge the duties of the post industriously” (Morley 1872).

Are Pierre Leroux, Pierre-Joseph Proudhon and Leon Walras economists? Certainly, but to a different extent. This alphabetical order, which is also that of chronology, seems to be in inverse order of merit—at least in the opinion of Joseph A. Schumpeter, who praised Walras as “the greatest of all economists…as far as pure theory is concerned” (1954, p. 827), but who briefly described Proudhon as someone who defended “results that are no doubt absurd” (ibid., p. 457). Leroux's name does not even appear in Schumpeter's 1954 book, nor in any other history of economic thought. Although the judgment pronounced by a historian on one or another of our three authors may be contested, there seems no reason to call into question the hierarchy implicitly established by Schumpeter. In a certain way the succession: Leroux, Proudhon, Walras, represents and summarizes the development of political economy, beginning with the embryonic stage (which would be represented by Leroux), passing through the disorders of adolescence (Proudhon), and finally arriving at the stage of scientific maturity (Walras).

Austrian economics is arousing increasing interest, not to say enthusiasm, these days. No doubt this is in part due to the collapse of the planned economies of the Soviet type, which has lent credibility to the claims of Ludwig von Mises and Friedrich Hayek regarding the impossibility of rational economic calculation under socialism-claims which were disputed by the mainstream neoclassical economists of a generation ago. The phenomenon also reflects a relatively long-standing dissatisfaction with neoclassical economics. For many years it was the radical critics of capitalism who felt most keenly the attractions of alternative approaches in economics. Now, increasingly, champions of the market are coming to believe that neoclassical theory does not offer a deep and firm enough basis for asserting the virtues of the market system, and the counterproductive effects of government intervention therein.

Allin Cottrell's criticisms of my paper fall into three general categories: criticisms of the paper I did not write, criticisms of the paper I claimed to write, and criticisms of the paper he thinks I was really writing. Let me try to address each of these categories, emphasizing the more substantive points he raises about the paper I claimed to write.

In the last decade or so, intellectual historians have tried to alter and enhance our understanding of the Scottish Enlightenment by situating the classic writings in the context of contemporary political debates and intellectual traditions. Two main approaches have emerged to date, tied to the themes of natural jurisprudence and civic humanism respectively. While both have much to offer to historians of economic thought, the present paper seeks to evaluate only the latter. It focuses in particular on civic humanist interpretations of the economic theories of David Hume and Adam Smith.

Friedrich A. Hayek's work spans over more than forty years and encompasses a number of social disciplines. That work has a single goal, however: the justification of a liberal social order. Apart from the justification of the liberal order, two other elements of his work in particular draw the attention of many economists: his definition of the economic problem as being one of coordination, and his effort to explain certain social phenomena as the result of a spontaneous order.