However interesting the question of origins in economics is, I was under the impression that we were talking about how it currently works, not how it was conceptualized decades and centuries ago.

I'd be fascinated to hear why you thought it doubtful that I've read those books (most happen to be included in the University of Chicago's core reading requirement, and Friedman and Rothbard are obviously connected to the school); perhaps I'm insufficiently aware of the quality of economics education elsewhere. It's just that none of those are being used in modern research, with the exception of Friedman's technical papers--and the modern foundations of economics do not depend on them in the slightest. See e.g. Gary Becker's 1962 paper which discusses how even the normal assumption of rationality on the part of consumers is unnecessary to the basic functioning of markets.

As an important note, the efficient functioning of markets, while often spoken of as a terminal value, has never in my experience actually been other than instrumental: efficient markets quite by definition are allowing greater progress along individual value scales than inefficient markets, though not necessarily as much progress as some further refinement (like regulation).

I suspect, however, that we are just using different definitions of the subject. It seems that you are primarily interested in the economics of public policy and in the value judgments that drive it. Indeed, you define out the very kind of economics that is most prevalent in modern departments (Berkeley perhaps excepted): mathematical models that seek to understand and predict how humans will act.

In short, I, and much of the modern profession of economics, hold little attachment to the origins of economic theory (though I am surprised that you didn't include Smith's Wealth of Nations in your list, being more directly foundational for economics through the 19th century). If you really wanted to get into it, economics goes back to Xenophon's Oeconomicus, but surely we aren't to believe that modern economics bears any similarity to ancient Greek household management theory. Economics, to match your phrasing, is statistics plus insights about how humans actually behave.

Finally, my thoughts on the dichotomy were expressed in a previous article here.

efficient markets quite by definition are allowing greater progress along individual value scales than inefficient markets, though not necessarily as much progress as some further refinement

Inefficient markets are great for increasing individual wealth of certain groups. I think Rothbard would disagree with the second point (regulation) - as would I.

In short, I, and much of the modern profession of economics, hold little attachment to the origins of economic theory (though I am surprised that you didn't include Smith's Wealth of Nations in your list,

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The Difference Between Utility and Utility

by Matt_Simpson 1 min read2nd Dec 200916 comments

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Recently I argued that the economist's utility function and the ethicist's utility function are not the same.  The nutshell argument is that they are created for different purposes - one is an attempt to describe the actions we actually take and the other is an attempt to summarize our true values (i.e., what we should do).  I just ran across a somewhat older post over at Black Belt Bayesian arguing this very point.  Excerpt:

Economics (of the neoclassical kind) models consumers and other economic actors as such utility maximizers... Utility is not something you can experience. It’s just a mathematical construct used to describe the optimization structure in your behavior...

Consequentialist ethics says an act is right if its consequences are good. Moral behavior here amounts to being a utility maximizer. What’s “utility”? It’s whatever a moral agent is supposed to strive toward. Bentham’s original utilitarianism said utility was pleasure minus pain; nowadays any consequentalist theory tends to be called “utilitarian” if it says you should maximize some measure of welfare, summed over all individuals... Take note: not all utility maximizers are utilitarians.

There’s no necessary connection between these two kinds of utility other than that they use the same math. It’s possible to make up a utilitarian theory where ethical utility is the sum of everyone’s economic utility (calibrated somehow), but this is just one of many possibilities. Anyone trying to reason about one kind of utility through the other is on shaky ground.