1. Henry Sidgwick in "the system of natural liberty considered in relation to production" in Principles of Political Economy, 2nd edition, considered exceptions to the presumption of self-interest working toward public good.
2. Alfred Marshall introduced the notion of "external economies and diseconomies." [3. Exhibit "A": Chapman's "Hours of Labour" was the first analytical demonstration of *market failure* under the standard assumptions of neoclassical analysis.] 4. Pigou recaps Chapman's theory in Part III of Economics of Welfare but doesn't credit it as the analytical milestone that it was. 5. Subsequent discussion of "externalities" and "market failure" cite Pigou, ignore Chapman; focus on part II of Economics of Welfare and ignore part III. 6. Part III of Economics of Welfare is where the failure rubber meets the market road and Chapter Seven, "The Hours of Labour" of part III is the hinge, the sweet spot. 7. Ronald Coase challenged the Pigouvian tradition with his "The Problem of Social Cost" except there's no Part III in that Pigouvian tradition -- there's no Chapter Seven. Labor has disappeared! (pssst -- it's been stuffed in the closet!) 8. Steven G. Medema has written a wonderful, eloquent, erudite history of the market failure/government failure debate, from before Adam Smith to after Ronald Coase. Professor Medema was not aware of Chapman's work. 9. J.R. Hicks was aware of Chapman's work. Lionel Robbins was aware of Chapman's work. Cecil Pigou was aware of Chapman's work. Alfred Marshall was aware of Chapman's work. John Maynard Keynes was aware of Chapman's work. Not only were they aware of it, Hicks, Robbins and Marshall explicitly referenced it as canonical. Pigou and Hicks paraphrased it. 10. Cognitive dissonance dictates that economists ignore the implications of Exhibit "A": that a competitive, self-adjusting "labor market" is theoretically impossible. 11. Employment is essentially -- I repeat, essentially -- administered and regulated. The only question is whether that administration is to be done with eyes open or shut -- out in the open or behind closed doors. 12. It is time to put the myth of "the labor market" to rest. -- Sandwichman
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