Lec # 2 - Ancient Eco Thought

8/6/2019 Lec # 2 - Ancient Eco Thought

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ANCIENT ECONOMIC THOUGHT

I. INTRODUCTIONA. theme of economic theory of development

1. attempts to construct a scientific explanation of society

and the economy a. was actually born of Adam Smith who believed inNatural Law

a.1. Natural Law there was a set of rulesgoverning society and scholars are to discover these rules throughlogic

a.2. the first wave of Natural Law philosopherswere the Greeks, then came the doctors of the Church ( i.e., theScholastics) and then the writers from the Period of Enlightenment

B. Plato, Aristotle and the Medieval Friars

1. lived in nonmarket societies basic economic decisionswere based on tradition

II. CONTRIBUTIONS OF THE ANCIENT GREEKS

A. Xenophon (427 355 BC) the source of the wordeconomics

1. efficient management and leadership : oeconomicus2. was a soldier and student of Socrates3. based his ideas on the individual decision-maker

proper administration was very dependent on HUMAN

CAPACITYa. a good manager strives to increase the size ofthe economic surplus of whatever he issupervising this is accomplished through skill,order and division of labor

b. the leader organizes human activity the leaderis mitivated by self-interest but is not inquisitive
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4. actions are means to extract pleasure from nature andavoid pain ( this is very much related to hedonism)

5. was interested in finding a significant distinctionbetween subjective value and objective wealth

B. Plato

1. analyzed the entire political and economic structure ofthe state

a. specialization and division of labor lead to efficientand productivity

b. goods are to be distributed in market placesc. money is used only as a medium of exchanged. the marketplace was NOT self-regulating and

needed 1] rules and 2] fiat moneye. recognized profit and interest as threats to the

status quo that is why the leaders are not allowed to earn/ownprivate property

f. tolerated money and trade activity as necessaryevils

2. limitations of Platonic thought:a. success was based on rationalism instead of

participative social processes

b. a state is imposed on by authority has beenproven as quite faulty

C. Protagoras
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1. believed there was no objective truth only subjectiveopinion

2. unlike Plato, the means to a goal was more importantthan the ends

3. social stability was achieved through individual

participation4. administration helps in providing informed choices ofmeans to achieve ends

5. anticipated that two of the most basic elements ofmodern economic theory:

a. the way the market maximizes utility through itsfunction of allocating resources

b. the use of hedonic measurement in the evaluationof choices

D. Aristotle

1. discussed incremental discussions2. utilized isolated exchange (no market price) instead of

market exchange ( there is a publicly known price)3. unlike Plato, he defended private property

a. as it promotes economic efficiency, social peaceand even develops moral character

b. wealth and privilege are distributed by custom4. all forms of exchange must always be win-win5. the trade of goods must be comparable money is

needed as a medium of exchange6. CLEARLY proposed the following:

a. Trade only arises when surplus exists.b. There must be differing subjective estimates

among traders of the worth of each surplusc. Traders must establish a rapport that recognizes

the potential mutual advantage from exchange
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d. If a dispute arises is isolated exchange regardingspecific allocations of benefits, the proper shareswill have to be determined by an administrativeauthority, taking into account the rules ofcommon justice and the welfare of the state

7. Money is used as a store of value and as a medium ofexchangea. money should be spent and not acquired

8. unrestrained acquisitive behavior is a threat to socialand economic stability

9. usury and unlimited exchanges are not good

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Lec # 2 - Ancient Eco Thought