Although this essay is essentially an intellectual biography, personal experiences have influenced my career as an economist and historian of economic thought. For this reason, I shall devote some space to these experiences before turning to the main topic.

My parents migrated from Sicily to the United States prior to the First World War; met and then married in this country and eventually settled in Hartford, Connecticut. I was conceived in 1929, the year of the Great Crash and born the following year at the onset of the Great Depression. However, for my family our economic depression had begun in 1929, when my father was seriously injured at a construction site and spent the next 8 months hospitalized, leaving my mother, who was pregnant with me, and my two siblings, without any means of support.

More than 100 years have passed since Alfred Marshall introduced the representative firm to economic theory in 1891. During this long period of time, many arguments have been raised giving either support or opposition to the concept. In recent years, macroeconomists have taken an increasing interest in the representative firm. Since the beginning of the modern microfoundations literature in the early 1970s, the representative firm and its big brother, the representative agent, have been made essential analytical tools for linking macroeconomics and microeconomics. Within this debate, the microfoundation of business cycle theory has played a prominent role.

Adam Smith starts his account of economic life supposing two trading individuals, and not with Robinson Crusoe alone on an island. It is a consequence of this modeling strategy that, when considering an actor's choice, the model builder automatically has access to the judgment of the spectator. Thus it is that when Smith describes the actor gambling for money, he takes into consideration the fact that the spectator will make note of unusual events. In particular, the winner of a large-number lottery will become famous. To the extent that fame is desired, the actor's decision will be influenced by the spectator's judgment. The gambling model Smith describes is an exchange between the actor–who takes risk–in return for the chance of applause from the spectator. Everything in Smith's account is an exchange; hence, we denote Smith's model as a katallactic model, thus remembering Richard Whately's suggestion to rename political economy as the science of exchange, from the Greek καταλλατειγ–to exchange.