ABSTRACT
A short excursion into is the origins of economics essential in order to grasp why some older tenets of economics must be abandoned and new ideas tentatively accepted. The subject of economics does not constitute a system of beliefs forever valid. On the contrary economics must change not only because logical errors are discovered or new empirical findings overturn accepted propositions but also and most importantly because the economy itself changes. An economy is more like a living creature than like the subject matter of the physical sciences. Economics aims at understanding very complicated behavior and practices, whether contrived deliberately or not, in the economy. Shibboleths and slogans have no place in this endeavor. The proper subject matter of economics is the economy as it is, not as rival cliques would like it to be. Thus some highly technical analysis has shown how prices support an equilibrium. The conditions that imply this result, notably constant returns to scale, are more conspicuous by their absence than by their relevance to the real economy. For example, marginal cost pricing for computer software would place the purveyor of this software in bankruptcy because the marginal cost of software is zero. Prices play an ancillary role in many actual economic situations. They do not guide decisions. They only determine how sellers and their customers divide their gains from their transactions.
