The extension of economic analysis to problems beyond the domain of formal markets and explicit prices represents a major recent intellectual development. But "economic imperialism" is not new and was not invented in Chicago. Adam Smith, in his Wealth of Nations, extended economic reasoning to a variety of nonmarket exchange problems. One example is his analysis of religious behavior. Smith viewed participation in religion as a rational device by which individual enhanced the value of their human capital. He also explained the behavior of the clergy and other suppliers of religious services from an economic perspective.

The extension of economic analysis to problems beyond the domain of formal markets and explicit prices represents a major recent intellectual development. But "economic imperialism" is not new and was not invented in Chicago. Adam Smith, in his Wealth of Nations, extended economic reasoning to a variety of nonmarket exchange problems. One example is his analysis of religious behavior. Smith viewed participation in religion as a rational device by which individual enhanced the value of their human capital. He also explained the behavior of the clergy and other suppliers of religious services from an economic perspective.

[We defend Adam Smith's theory of the firm from the standpoint of positive economics. We argue that his evaluation of the joint-stock firm was not moralistic but instead based on available empirical evidence. The record showed that joint-stock companies had a poor survivorship record, even when granted legal monopoly status. His analysis contained an explanation of the role of agency costs within the firm. Finally, he did not discuss the East India Company as an ordinary joint-stock firm but rather as an aberrant form created by government.]

We defend Adam Smith's theory of the firm from the standpoint of positive economics. We argue that his evaluation of the joint-stock firm was not moralistic but instead based on available empirical evidence. The record showed that joint-stock companies had a poor survivorship record, even when granted legal monopoly status. His analysis contained an explanation of the role of agency costs within the firm. Finally, he did not discuss the East India Company as an ordinary joint-stock firm but rather as an aberrant form created by government.