ABSTRACT
One morning in the early 1870s the world woke up and proceeded to learn the neo-c1assical economics. It learned that the allocation problem is central to economics for the simple reason that economics is about economising behaviour in conditions of perceived scarcity of means. It learned that market exchanges aimed at optimality in want-satisfaction are made , atomistically and individualistically, by households (which seek to maximise happiness or utility subject to a resources constraint) and by firms (which seek to maximise profits on the inputs at their disposal , in the same way as you and I are obsessed with maximising the juice which we derive from a given lemon); and it acquired a healthy respect for the equilibrium prices which appear automatically to be ground out by market processes inspired by nothing more elevated than rationality and self-interest. The world learned, finally, that the ranking of alternatives grasped not in total so much as at the margin could usefully be set down mathematically in the terse language of the differential calculus; that deductive logic has a certain pre-eminence over the less abstract and more mundane concerns of the inductivists, historical and statistical; and that good axioms and assumptions do indeed matter if good results and predictions are ultimately to be obtained. The new economics had arrived and many in England saw Jevons as its Ricardo.
