Division of labor is thought to imply increasing returns to scale, which in turn implies that wages rise continually with economic growth. Yet the price theory of Wealth of Nations rests upon the assumption that the “natural” price of labor (and capital) is determined at any steady-state rate of balanced growth. There would seem, therefore, to be an irreconcilable contradiction between Smith’s exposition of the division of labor in Book I, chapters 1 to 3, and his price theory as set out in Book I, chapters 6 to 9.

This paper considers the distinction made by David Ricardo between “permanent” and “temporary” causes, which he sometimes refers to also as “stable” and “accidental” causes (see The Works and Correspondence of David Ricardo [hereinafter Works] I: 86, 88, 92; VI: 154), to derive implications useful to distinguish his approach from subsequent developments of the notions of short-period and long-period equilibrium. In particular, I trace the change of focus in the concept of “permanent” forces brought about by Alfred Marshall—from whose insights Alfred Kahn and John Maynard Keynes drew inspiration for their short-period analysis—which paved the way to fundamental changes in the method and theory.

It is argued that Ricardo’s distinction maintains an heuristic value, in particular vis-à-vis the distinction between short and long period, which is part of the common language in standard economics.

This paper explores the neglected theory of entrepreneurial profit proposed by Eugen von Böhm-Bawerk. Although historians of thought often dismiss Böhm-Bawerk’s writings on this topic, we argue that he did develop a coherent theory of entrepreneurial decision making and profit distinct from his theory of interest. We first discuss Böhm-Bawerk’s ideas about futurity, uncertainty, and expectations in his theory of goods, which help form the foundation of his theory of entrepreneurship. Further, we connect his notion of uncertainty with his thoughts on money. We then turn to several of Böhm-Bawerk’s ideas about entrepreneurial profit. Entrepreneurs purchase and allocate factors of production; these decisions are speculative because production takes time, and therefore entrepreneurs bear the uncertainty of the market. Their judgment thus yields profits or losses based upon the ability to anticipate the future state of consumer demand. Finally, we discuss the views of several of Böhm-Bawerk’s contemporaries, in order to place his theory in historical context.

In a series of papers, Mark Blaug has accused modern, mainstream economic theory of sterility because of the abandonment of “competition as a process,” tracing the cause to the Formalist Revolution of the 1950s. The paper agrees with the criticism but disagrees on the cause, which is, rather, to be found in the shift from the treatment of capital as a single factor of variable ‘form’ to a Walrasian specification of the capital endowment as a given vector, a datum incompatible with the role of equilibrium as a center of gravitation of time-consuming adjustments. The shift was due, as shown by Pierangelo Garegnani, to unease in the 1930s with the conception of capital as a single factor, a fact neglected by Blaug but historically evident and a cause of great uncertainty in capital theory in subsequent decades. The conclusion is that, to avoid the sterility of neo-Walrasian equilibria, one cannot return to Alfred Marshall with his inconsistent notion of capital as a single factor, but Blaug himself indicates another possible direction.

This paper examines James Buchanan’s earliest writings within the context of post-WWII public finance theory and his education at Chicago. Public choice scholars have long recognized their ties to Chicago, but few have examined Chicago’s role in serving as the primordial soup for Buchanan’s later work in public choice. Thus, we know very little about the subdiscipline of public finance at Chicago and its institutional and intellectual traditions in the immediate post-war period. As the influence of Frank Knight, price theory, and catallactics on Buchanan have been well explored, the focus here is on Buchanan’s graduate training in public finance, the departmental emphasis on product differentiation of ideas, and the general acceptance in ‘Old Chicago School’ economics of the importance of institutions and institutional design. I find that while he maintained a high degree of intellectual affinity with Chicago economics generally, Buchanan broke decisively with orthodox public finance (including that taught at Chicago) on several substantive issues early in his career, including the importance of expenditure theory and the relevance of the benefit principle and voluntary exchange.