History of economic thought
The history of economic thought is the study of the philosophies of the different thinkers and theories in the subjects that later became political economy and economics, from the ancient world to the present day.
This field encompasses many disparate schools of economic thought. Ancient Greek writers such as the philosopher Aristotle examined ideas about the art of wealth acquisition, and questioned whether property is best left in private or public hands. In the Middle Ages, Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price.
In the Western world, economics was not a separate discipline, but part of philosophy until the 18th–19th century Industrial Revolution and the 19th century Great Divergence, which accelerated economic growth.
Ancient economic thought (before 500 AD)
Ancient Greece
active 750 to 650 BC, a Boeotian who wrote the earliest known work concerning the basicorigins of economic thought, contemporary with Homer. Of the 828 verses in his poem Works and Days, the first 383 centered on the fundamental economic problem of scarce resources for the pursuit of numerous and abundant human ends and desires.
China
, an adviser to King Goujian of Yue, wrote on economic issues and developed a set of "golden" business rules. Discourses on Salt and Iron in 81 BCE was one of the first recorded debates of state intervention and laissez faire.Ancient India
Hindu texts Vedas contain economic ideas but Atharvaveda is most vocal about such ideas.Chanakya of the Maurya Empire, authored the Arthashastra along with several Indian sages, a treatise on statecraft, economic policy and military strategy.
The Arthashastra posits the theory that there are four necessary fields of knowledge: the Vedas, the Anvikshaki, the science of government, and the science of economics. It is from these four that all other knowledge, wealth, and human prosperity is derived.
Greco-Roman world
, an advanced city-state civilisation and progressive society, developed an embryonic model of democracy.Xenophon's Oeconomicus is a dialogue principally about household management and agriculture.
Plato's dialogue The Republic describing an ideal city-state run by philosopher-kings contained references to specialization of labor and to production. According to Joseph Schumpeter, Plato was the first known advocate of a credit theory of money that is, money as a unit of account for debt. Plato also argued that collective ownership was necessary to promote common pursuit of the common interest, and to avoid the social divisiveness that would occur "when some grieve exceedingly and others rejoice at the same happenings."
Aristotle's Politics analyzed different forms of the state as a critique of Plato's model of rule by philosopher-kings. Of particular interest for economists, Plato provided a blueprint of a society based on common ownership of resources. Aristotle viewed this model as an oligarchical anathema. Though Aristotle did certainly advocate holding many things in common, he argued that not everything could be, simply because of the "wickedness of human nature".
"It is clearly better that property should be private", wrote Aristotle, "but the use of it common; and the special business of the legislator is to create in men this benevolent disposition." In Politics Book I, Aristotle discusses the general nature of households and market exchanges. For him there is a certain "art of acquisition" or "wealth-getting", which is necessary and honourable for one's household, while exchange on the retail trade for simply accumulation is "justly censured, for it is dishonorable". Writing of the people, Aristotle stated that they as a whole thought acquisition of wealth as being either the same as, or a principle of oikonomia, with oikos meaning "house" and with nomos meaning "law". Aristotle himself highly disapproved of usury and cast scorn on making money through a monopoly.
Aristotle discarded Plato's credit theory of money for metallism, the theory that money derives its value from the purchasing power of the commodity upon which it is based:
Middle Ages
Thomas Aquinas
was an Italian theologian and economic writer. He taught in both Cologne and Paris, and was part of a group of Catholic scholars known as the Schoolmen, who moved their enquiries beyond theology to philosophical and scientific debates. In the treatise Summa Theologica Aquinas dealt with the concept of a just price, which he considered necessary for the reproduction of the social order. Similar in many ways to the modern concept of long-run equilibrium, a just price was just sufficient to cover the costs of production, including the maintenance of a worker and his family. Aquinas argued it was immoral for sellers to raise their prices simply because buyers had a pressing need for a product.Aquinas discusses a number of topics in the format of questions and replies, substantial tracts dealing with Aristotle's theory. Questions 77 and 78 concern economic issues, primarily what a just price might be, and the fairness of a seller dispensing faulty goods. Aquinas argued against any form of cheating and recommended always paying compensation in lieu of service obtained as it utilized resources. Whilst human laws might not impose sanctions for unfair dealing, divine law did, in his opinion.
Duns Scotus
One of Aquinas' main critics was Duns Scotus, originally from Duns Scotland, who taught in Oxford, Cologne, and Paris. In his work Sententiae, he thought it possible to be more precise than Aquinas in calculating a just price, emphasizing the costs of labor and expenses, although he recognized that the latter might be inflated by exaggeration, because buyer and seller usually have different ideas of a just price. If people did not benefit from a transaction, in Scotus' view, they would not trade. Scotus said merchants perform a necessary and useful social role by transporting goods and making them available to the public.Jean Buridan
was a French priest. Buridanus looked at money from two angles: its metal value and its purchasing power, which he acknowledged can vary. He argued that aggregated, not individual, demand and supply determine market prices. Hence, for him a just price was what the society collectively and not just one individual is willing to pay.Ibn Khaldun
| It should be known that at the beginning of a dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments. |
| Ibn Khaldun on taxes and the ideals of Governance |
Until Joseph J. Spengler's 1964 work "Economic Thought of Islam: Ibn Khaldun", Adam Smith was considered the "Father of Economics". Spengler highlighted the work of Arab scholar Ibn Khaldun of Tunisia, though what influence Khaldun had in the West is unclear. Arnold Toynbee called Ibn Khaldun a "genius" who "appears to have been inspired by no predecessors and to have found no kindred souls among his contemporaries...and yet, in the Prolegomena to his Universal History he has conceived and formulated a philosophy of history which is undoubtedly the greatest work of its kind that has ever yet been created by any mind in any time or place." Ibn Khaldoun expressed a theory of the lifecycle of civilizations, the specialization of labor, and the value of money as a means of exchange rather than as a store of inherent value. His ideas on taxes were similar to supply-side economics' Laffer curve, which posits that beyond a certain point higher taxes discourage production and actually cause revenues to fall.
Nicole Oresme
French philosopher and priest Nicolas d'Oresme wrote De origine, natura, jure et mutationibus monetarum, about the origin, nature, law, and alterations of money. It is one of the earliest manuscripts on the concept of money. His treatise argues how money or currency belongs to the public, and that the government or sovereign of the economy has no right to control the value of the currency just so that they can profit from it.Antonin of Florence
Saint Antoninus of Florence, O.P., was an Italian Dominican friar, who became Archbishop of Florence. Antoninus' writings address social and economic development and argued that the state has a duty to intervene in mercantile affairs for the common good, and an obligation to help the poor and needy. In his primary work, "summa theologica" he was mainly concerned about price, justice and capital theory. Like Duns Scotus, he distinguishes between the natural value of a good and its practical value. The latter is determined by its suitability to satisfy needs, its rarity and its subjective value. Due to this subjective component, there cannot only be one just price, but a bandwidth of more or less just prices.Mercantilism and international trade (16th to 18th century)
Mercantilism dominated Europe from the 16th to the 18th century. Despite the localism of the Middle Ages, the waning of feudalism saw new national economic frameworks begin to strengthen. After the 15th century voyages of Christopher Columbus and other explorers opened up new opportunities for trade with the New World and Asia, newly-powerful monarchies wanted a more powerful military state to boost their status. Mercantilism was a political movement and an economic theory that advocated the use of the state's military power to ensure that local markets and supply sources were protected, spawning protectionism.Mercantile theorists held that international trade could not benefit all countries at the same time. Money and precious metals were the only source of riches in their view, and limited resources must be allocated between countries, therefore tariffs should be used to encourage exports, which bring money into the country, and discourage imports which send it abroad. In other words, a positive balance of trade ought to be maintained through a surplus of exports, often backed by military might. Despite the prevalence of the model, the term mercantilism was not coined until 1763, by Victor de Riqueti, marquis de Mirabeau, and popularized by Adam Smith in 1776, who vigorously opposed it.