Economics revolves around a central character: “economic man.” As historians, we are all familiar with various episodes in the history of this character, and we appreciate his ever-changing aspect even while many of our colleagues in economics think the rational economic agent of neoclassical economics is the same kind of person as Adam Smith's economic man. The fact that this is a familiar history means that I can focus on a few salient examples—a “short” history, rather than a complete history— to provide the raw material for my account which has a more specific agenda than simply a history of economic man. My aim is to re-consider the history of economic man as a model man. This leads to two further questions: What kind of a role has this model man played in relation to the science he inhabits? And, how can we characterize the processes by which economists have arrived at their model characters?

To illuminate this history of economic man, I adopt ideas from philosophy about how scientists arrive at models and use them in science. Of course, economists have always had their own ideas about such matters. So in effect, there are two intersecting strands in this account: one is how economists have discussed their strategies in creating these characters, and the other is how philosophers of science have—at the time and since—labeled and thought about such strategies. These discussions, from the economists and from philosophers, will enable us to explore the usefulness of the concept of idealization, a standard way of thinking about model construction in philosophy of science. They will also allow us to consider model man as an ideal type (using Weber's concept) or as a caricature (to follow Gibbard and Varian's label). These analytical labels—ideal types, idealization, and so forth—relate to questions about the status of models and their construction that are sometimes evident, and sometimes lie below the surface, but always remain important in the historical discussions about economics as a science. My account is concerned then with constructions of the persona of economic man, how he has changed over the last 250 years, how far we can regard that character as a model, and with reflections on his role in the changing science of economics.

The thesis that economics is “performative” (Callon 1998) has provoked much interest but also some puzzlement and not a little confusion. The purpose of this article is to examine from the viewpoint of performativity one of the most successful areas of modern economics, the theory of options, and in so doing hopefully to clarify some of the issues at stake. To claim that economics is performative is to argue that it does things, rather than simply describing (with greater or lesser degrees of accuracy) an external reality that is not affected by economics. But what does economics do, and what are the effects of it doing what it does?

That the theory of options is an appropriate place around which to look for performativity is suggested by two roughly concurrent developments. Since the 1950s, the academic study of finance has been transformed from a low-status, primarily descriptive activity to a high-status, analytical, mathematical, Nobel-prize-winning enterprise. At the core of that enterprise is a theoretical account of options dating from the start of the 1970s. Around option theory there has developed a large array of sophisticated mathematical analyses of financial derivatives. (A “derivative” is a contract or security, such as an option, the value of which depends upon the price of another asset or upon the level of an index or interest rate.)

The disparate approaches of James Buchanan and Richard Musgrave to public economics are both anchored in Knut Wicksell's contribution to the theory of public goods. In “A New Principle of Just Taxation,” the second essay of Finanztheoretische Untersuchungen (1896 [1994]), Wickseil considered how to design a voting mechanism to finance public goods and assure a just distribution of the tax burden. Applying the benefit principle to taxation, Wicksell argued that a unanimity-voting rule would guarantee that all individuals receive benefits commensurate to their tax cost from any public good. “No one can complain if he secures a benefit which he himself considers to be (greater or at least) as great as the price he has to pay” (Wicksell 1994, p. 79). Wicksell's primary interest was not in determining the appropriate mix of public and private, instead he demonstrated how one might finance public expenditures provided the decision of the mix has already been made. The actual voting mechanism is much less controversial than the philosophy and antecedent assumptions behind the process. While Musgrave and Buchanan share common ground, agreeing to the originality of Wicksell's work, and the necessity of considering the rules by which social decisions are made, their views on Wicksell are generally acknowledged to be radically different (Bernd Hansjurgens 1999, Pieter Hennipman 1982, David Riesman 1990).

Economists and finance researchers have long recognized the “close relation between the measurement of inequality and the measurement of risk” (Breitmeyer et al., 2004). Economists today agree that a measure of income inequality must respect the Pigou-Dalton transfer principle, that is, inequality cannot increase with a transfer from a richer person to a poorer person. Finance researchers today agree that a measure of risk must respect the diversification principle, that is, risk cannot increase when portfolios are combined. Where did these convictions originate? While both principles were advocated early in their respective fields, they were not viewed as definitive until relatively recently. In both fields major empirical and theoretical efforts were mounted in support of various conceptualizations at odds with these two principles. For example, Robert Gibrat advocated the use of the variance of log income despite the fact it is inconsistent with the Pigou-Dalton principle. In finance, value at risk (VaR), although it can violate the diversification principle, was widely advocated. People supporting research programs at odds with Pigou-Dalton or the diversification principle, based those programs on ambitious empirical and theoretical claims about distributions. Such claims could have been right and are not a priori or logically false. The purpose of this paper is to review these “at odds” conceptualizations, the types of arguments advanced for their legitimacy, and the reasons they have been given up.

The year 2003 marked the 100th anniversary of the birth of John von Neumann (1903–1957), one of greatest geniuses of the last century. Beyond contributing to fields as diverse as set theory, quantum mechanics, atomic energy, and automatic computing, von Neumann has also had a decisive influence upon modern economics. From the invention of game theory to the axiomatization of expected utility, from the introduction of convex analysis and fixed-point techniques to the development of the balanced growth model, the von Neumann heritage can be clearly traced in several areas of our discipline. The aim of this paper is to clarify the relationship between the two concepts of rationality he devised in his classic 1944 book Theory of Games and Economic Behavior, written with the collaboration of the Austrian economist Oskar Morgenstern (von Neumann and Morgenstern 1953).

In his Journal of the History of Economic Thought article, “A Suggestion for Clarifying the Study of Dissent in Economics,” Roger Backhouse usefully proposed some terminological clarifications with respect to studying the ideas of disagreement, controversy, and dissent in (Western) economic discourse, heterodoxy being defined as a more narrow category than dissent. Backhouse also wrote that “the ideas on which Marxist, Radical, and Post Keynesian economics are based were arguably never widely held” (Backhouse 2004, p. 265).

Roger Backhouse (Backhouse 2004) has provided both an insightful deconstruction of dissent and a suggested terminology to deal with subtle distinctions within the domain of dissent, especially regarding the status of heterodoxy. There is more to be said, largely in expansion of his analyses—placing his analyses in a larger context. Section I summarizes Backhouse's position and Section II presents my own thoughts.

In my note on dissent (2004), I emphasized that heterodoxy and dissent had to be defined socially. Given that crucial elements of the social context differ from one society to another, it follows that the meaning and significance of dissent may vary too. Barnett (2006) has pointed out a conclusion I should have drawn explicitly: that my suggestions for thinking about dissent make sense only in Western economics. In the former Soviet Union, as he points out, dissent in economics could not be understood apart from the political situation. The examples he cites illustrate some of the ways in which dissent in Soviet economics differed from that in the West, where there was no officially sanctioned orthodoxy comparable to Marxism-Leninism (or rather to what the Soviet authorities chose to call by that name) from which economists wished either safely to signal their dissent or to which they wished, despite their dissent, to be seen to adhere. We see here, it might be argued, a simple difference between two types of society.