No one will deny that products come into existence, change in character, and eventually disappear or become altered out of all recognition. Archaeologists, historians, businessmen and ordinary people have no difficulty in recognizing that fact. Economists, at least since David Hume, have occasionally acknowledged the phenomenon. But until a decade or two ago, the disposition of economists to use that process as a basis for formal inductive or deductive analysis has been extraordinarily limited. The ideas have surfaced from time to time in the works of John Williams (1947), Donald MacDougall (1957) and Michael Posner (1961) among many others, only to slip back into limbo. When economists have found it difficult to disregard innovation and product change in any formal analysis, they have usually assumed that the economic effects of innovation could be captured through its consequences for increased productivity, hence through a change in production costs. The appearance of the railroad, the automobile and the commercial aircraft, therefore, was usually thought to have been captured by referring to a decline in the cost of transportation; the appearance of nylon was treated as the equivalent of a decline in the cost of thread.