For analytical purposes, are economic agents—humans—the same or not? In this chapter, we argue that, historically, the debate between those who trusted in markets and those who did not followed logically from different answers to this questions. Starting with Adam Smith, classical economists held that humans are the same in their capacity for language and trade. They concluded that since markets are useful for some agents, they are beneficial for all of us. But the supposition of homogeneous competence was widely questioned in the nineteenth century but those who held that significant differences exist among humans, only some of whom are capable of language or trade. This presumption of (hierarchical) difference led critics of economics to argue against markets. In their stead, they offered two alternatives: slavery and, when slavery was no longer a possibility, paternalism.

Thus, our contention in what follows is that, as a historical fact, the controversy over whether markets work or not occurs over the presumption of equal competence, or homogeneity. On the side of homogeneity, we locate all the great classical economists and, much later, the Chicago school of economics associated with George Stigler and Gary Becker. On the side of heterogeneity, we find many “progressives” (Thomas Carlyle, John Ruskin, Charles Dickens, and Charles Kingsley). We hold that the reputation for “progressiveness” of those on the side of heterogeneity is unwarranted. This chapter explains why.

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Copyright © 2004 The University of Michigan Press. This chapter first appeared in Race, Liberalism, and Economics.

Edited by: David Colander, Robert E. Prasch, and Falguni A. Sheth

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