Ricardo “and his chief followers … did not express their meaning with sufficient clearness, and they have been misunderstood by all but the most careful readers” (Marshall, 1920, p. 84).

“Ricardo … has not been fortunate in finding careful students” (Cairnes, 1874, p. 237).

The dominant metaphor of conceptual relativism, that of differing points of view, seems to betray an underlying paradox. Different points of view make sense, but only if there is a common co-ordinate system on which to plot them; yet the existence of a common system belies dramatic incomparability (Davidson, 1984, p. 184).

In chapter 5 of his book More Heat Than Light (1989), Philip Mirowski mentions that the first neoclassical (W. S. Jevons, Leon Walras, Vilfredo Pareto, and Irving Fisher, but with the notable exception of Carl Menger) all referred to the analogy between their formulations and those of the physics of their day. Then he asserts, going beyond their statements on this matter, that the early neoclassical model was purely an analogical transposition of the model of the field theory of physics of the 1860s, which he calls “protoenergetics.” The latter implies a subject matter that is a mechanics of equilibrium and of reversible phenomena, and in which there is no question of the appearance of the notion of entropy.

The invitation to reflect for a wide audience upon my professional life and work is simultaneously flattering, daunting and dismaying: daunting because the shield of privacy normally surrounding personal and family matters can hardly avoid being breached; dismaying because the called-for reimmersion in one's past so strongly evokes unfulfilled hopes and ambitions. Not, I should add, that I have any cause for complaints. My life has been fortunate and fulfilling, yet with the clarity of hindsight, roads not taken become visible more clearly than they were when choices were made.

John Rae is best known for his contribution to capital theory, particularly to Austrian capital theory. J. A. Schumpeter's (1954) assessment is typical in the literature: “two cornerstones of [Böhm-Bawerk]'s structure–one of them also a cornerstone of [Nassau] Senior's–are in fact there” (Schumpeter, 1954, pp. 468-69). Although this seems to have been the standard perception (see also Dorfman, 1995, p. 21), there is growing appreciation that Rae had a theory of economic development, rather than only a theory of capital. As Klaus Hennings put it: “Rae ascribes to inventions a more important role for economic progress … than capital accumulation” (Hennings, 1987, p. 40). Spengler (1959) saw Rae's contribution as “his recognition of the importance of the role of technical knowledge and invention in economic development” (ibid., 1959, p. 406; see Deans and Deans, 1972; Birchler, 1980). Syed Ahmad (1996a, 1996b) and Anthony Brewer (1990, 1991, 1996) agree on the central role of innovation in the economics of Rae.

The loan fund theory of capital was developed by the unheralded American economist, Herbert J. Davenport (1861-1931). Davenport's name has virtually disappeared from writings on the history of economic thought. Today, he seems best known as a teacher of Frank Knight at Cornell around 1915. Davenport wrote three major books during an 18-year period between 1896 and 1914. The first (1896) was a treatise based on what he called the “principle of sacrifice,” or subjective opportunity cost. His second book, Value and Distribution (1908), covered much of the same ground but also presented some original contributions. It marked his emergence as a professional economist, since he presented his ideas within the context of an appraisal of classical and neoclassical economic doctrine. Among other things, the book contained a penetrating, subjectivist critique of four ideas in the history of subjectivist economics: marginal utility, Eugen von Bohm-Bawerk's theory of capital, Friedrich Wieser's theory of cost, and Frank Fetter's theory of market interest. It also introduced the loan fund theory of capital, which is the topic of this paper.

In a recent article in this Journal, Robert Ekelund (1997) has renewed his criticism of the discussion of price formation in William Thornton's On Labour (1869) and criticized the work of “modern supporters” of Thornton, such as Kenneth Dennis, Philip Mirowski, Takashi Negishi and myself. While that work differs in the precise significance attributed to On Labour, there is agreement that Thornton's critique of contemporary explanations of “the laws of supply and demand” and/or his discussion of price formation do not warrant the negative and dismissive treatment they have often received from historians of economics. Ekelund disagrees. Based on “preposterous notions,” Thornton's work was “worse than nonsense” and, as he did not understand contemporary explanations of supply and demand, he should “receive a grade of ‘F’; (with strongly worded advice to return to the pursuit of poetry and sociology)” (Ekelund, 1997, pp. 11, 20, 21). Five examples are given below showing that this evaluation of On Labour depends on misinterpretation of the meaning, context and significance of Thornton's analysis.

Some might argue that William T. Thornton, whatever his ultimate place in social history, has received far too much attention from economists. Yet, I welcome Michael White's comments on a recent paper of mine (1997) and even note that, in a small way, his earlier comments on my paper written with Sven Thommesen (1989) led me to reread Thornton's writings in depth. Nevertheless, and after augmented reflection, White's comments do not cause me to alter any of my arguments concerning Thornton's worth as an economic theorist. Indeed, rereading Thornton in light of White's comments strengthens my belief that his analysis was as flawed as I initially thought it to be. While Thornton's critique of supply and demand (read “of economic analysis”) and others like it raise issues far broader and of more critical moment than those suggested by White, I confine my remarks to the issues he raises in his comment on my most recent paper.