ANCIENT ECONOMIC THOUGHT I. INTRODUCTION A. 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 in Natural Law a.1. Natural Law there was a set of rules governing society and scholars are to discover these rules through logic a.2. the first wave of Natural Law philosophers were the Greeks, then came the doctors of the Church ( i.e., the Scholastics) and then the writers from the Period of Enlightenment B. Plato, Aristotle and the Medieval Friars 1. lived in nonmarket societies basic economic decisions were based on tradition II. CONTRIBUTIONS OF THE ANCIENT GREEKS A. Xenophon (427 355 BC) the source of the word economics

1. efficient management and leadership : oeconomicus 2. was a soldier and student of Socrates 3. based his ideas on the individual decision-maker proper administration was very dependent on HUMAN CAPACITY a. a good manager strives to increase the size of the economic surplus of whatever he is supervising this is accomplished through skill, order and division of labor b. the leader organizes human activity the leader is mitivated by self-interest but is not inquisitive

4. actions are means to extract pleasure from nature and avoid pain ( this is very much related to hedonism) 5. was interested in finding a significant distinction between subjective value and objective wealth B. Plato

1. analyzed the entire political and economic structure of the state a. specialization and division of labor lead to efficient and productivity b. goods are to be distributed in market places c. money is used only as a medium of exchange d. the marketplace was NOT self-regulating and needed 1] rules and 2] fiat money e. recognized profit and interest as threats to the status quo that is why the leaders are not allowed to earn/own private property f. tolerated money and trade activity as necessary evils 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 been proven as quite faulty C. Protagoras

1. believed there was no objective truth only subjective opinion 2. unlike Plato, the means to a goal was more important than the ends 3. social stability was achieved through individual participation 4. administration helps in providing informed choices of means to achieve ends 5. anticipated that two of the most basic elements of modern economic theory: a. the way the market maximizes utility through its function of allocating resources b. the use of hedonic measurement in the evaluation of choices D. Aristotle

1. discussed incremental discussions 2. 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 peace and even develops moral character b. wealth and privilege are distributed by custom 4. all forms of exchange must always be win-win 5. the trade of goods must be comparable money is needed as a medium of exchange 6. 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 surplus c. Traders must establish a rapport that recognizes the potential mutual advantage from exchange

d. If a dispute arises is isolated exchange regarding specific allocations of benefits, the proper shares will have to be determined by an administrative authority, taking into account the rules of common justice and the welfare of the state 7. Money is used as a store of value and as a medium of exchange a. money should be spent and not acquired 8. unrestrained acquisitive behavior is a threat to social and economic stability 9. usury and unlimited exchanges are not good