ABSTRACT
This chapter discusses three successive stages in the evolution of Western capitalism, by relating the market movements characteristic for each stage to certain regulatory factors of the environment. It presents the primary stage of capitalism, as it was ushered in by the Industrial Revolution. There is no sharp break separating the classical from the neoclassical stage. This is as true of the historical sequence of events as it is of the doctrinal development reflected in Mill, the early Marginalists, Marshall, and the school of Lausanne. The chapter focuses on a crucial property of the industrial market of the neo-classical stage, which linked it not only to the classical stage but also to a central proposition of traditional theory. This was the capacity of the market for self-regulation. For the modern stage of capitalism a reverse effect of expectations on incentives is more important.
