The Economic Science In Ancient Times

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These days many Universities of Economics and Business teach their undergraduate students about the origin of economic science which is mainly associated with the work of the most famous economists- sociologists- philosophers, such as Adam Smith, John Maynard Keynes, Karl Marx, Milton Friedman, Ricardo and many personalities whose name is related to economics.

All these personalities contributed to the evolution of economic thinking and created different school of thoughts. Although their work is of high quality and interest, there were some curious philosophers many centuries ago who tried for the first time to explain the principles of economics. So the main question remains the same:

Who is the Father of economics?  The answer is the Ancient Greek!

It is not a coincidence that the word “economy” is traced back to the Greek words “οἶκος” (household) and “νέμω” (distribute). We have samples of economic science since ancient times, samples which were strongly influenced by the conditions of that era.

Starting with Homer, what we observe is that he placed a lot of emphasis on the household that is the owner of the land along with his family and slaves. It was believed that the household was supposed to be wealthy and in good shape, but without too much wealth. Thus, prosperity came from the cultivation of land, where almost all household members were involved. The trade played a minor role and had a lower position than the land.

Hesiod (750 and 650 BC), in turn, poses the problem of the scarcity of resources available and the dilemma of people between work and leisure. He also refers to the concept of competition, which leads to an increase in production. In addition, Hesiod agrees with Homer that land constitutes a (kind of) security for its people.

Xenophon (430 – 354 BC), with his work Oeconomicus “, gives us an idea of how the house should be managed, i.e. the farm (like Homer’s and Hesiod’s). In this work, the concept of “management” and “leadership” is emphasized in the data of his time. The proper management of a house was essentially based on the effectiveness of the leader. Some virtues that a competent leader needed to have was organization, willingness of the others to follow him willingly, order and knowledge of his subject.

However, apart from each house separately, Xenophon considered that similar virtues should prevail in the state as a whole. In particular, he analyzed the organization of the Empire of Cyrus in an effort to show the effectiveness of a whole society. Another important concept, analyzed by Xenophon, was the division of labor that we encounter in Adam Smith. Division of labor means that each person is engaged in tasks where he is more able and useful in order to increase efficiency.

“I once heard him discuss the topic of economy after the following manner. Addressing Critobulus, he said: Tell me, Critobulus, is “economy,” like the words “medicine,” “carpentry,” “building,” “smithing” , “metal-working,” and so forth, the name of a particular kind of knowledge or science? “   (A dialogue between Socrates and Critobulus , XenophonOeconomicus)

“Riches do not exhilarate us so much with their possession as they torment us with their loss.” ~ Epicurus

Aristotle (384–322 BC) then set up three types of justice, related to the exchange and distribution of goods. Distributive justice considers distribution of goods to be in proportion to the value of people. However, how can you measure the value of a person? For example, a person could gain more value if he had contributed to the victory of a war. Restorative justice was intended to compensate in case of injustice. Rewarding justice was important for the exchange of goods. But how can we assess whether an exchange is fair? In ancient Greece, an acceptable way was: “a short child with a long tunic, to exchange with a tall kid with a short tunic”. However, in more difficult situations where no solution was found, Aristotle pointed out as a solution the use…. of money!

“The virtue of justice consists in moderation, as regulated by wisdom.  ~ Aristotle

As mentioned above, we could conclude that the main characteristics of the ancient world were two: 1) individual transactions and 2) autarky (economic self-sufficiency). The fact that these two characteristics were a human creation made many philosophers wondering for a long period of time. Furthermore, trade was really developed during these centuries and many people were suspicious, so these famous philosophers tried to explain these meanings and give an answer to these suspicions.

Ethics and fairness of trade were two meanings of high importance and were the most common topic of economic issues until the 17th century. After that we have major changes and new personalities make their presence, trying to explain the economics of a new era. The Scottish philosopher Adam Smith with his famous book An Inquiry Into the Nature and Causes of the Wealth of Nations is considered to be the first philosopher who created a complete theory of economics. But it’s obvious that ancient Greek philosophers started the theory many centuries ago.

Main Source:

Roger E. Backhouse, “The Penguin History of Economics’’, 2002


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