Unit 1

Introduction:

Economics in the classical age is defined in the modern analysis as a factor of ethics and politics, only becoming an object of study as a separate discipline during the 18th century
Economic thinking, on the other hand, has a much longer tradition, going back to Ancient Greece and China
Used like a map in which various schools of thought are located in different places

PRE-CLASSICAL ECONOMIC THOUGHT

Intro:

Ancient economic thought refers to the ideas from people before the middle ages
Aristotle
Xenophon
Other Greek writing show understanding of sophisticated economic concepts
ex.
In the opinion of the Austrian School of Economics, the first economist is thought to be Hesiod, by the fact of his having written on the fundamental subject of the scarcity of resources, in Works and Days.

The Ancient Greeks

Xenephon
Plate
Aristotle
All wrote about the division of labour and specialization, money, exchange, value, self-interest, estate management and public administration
Value and Price

- Aristotle —> used a distinction between value in use and value in exchange

The Ancient Greeks

In The Republic, Plato described how a society develops with a division of labour that results in higher productivity
Also discussed in Xenophon’s Cyropedia. He argues that in small towns one person may produce everything, while in large cities a craftsman may specialize and become more skillful at one thing.

In his Politics and Ethics, Aristotle treated economic questions such as exchange, money, price and value.
Aristotle’s interest in exchange presupposes private ownership, which he deemed to be good because it increases efficiency, whereas Plato was more inclined to support collective ownership.
Exchange involving money is not natural, but to sell in order to acquire money to be able to buy another good is, nevertheless, a necessary form of exchange

Ancient India

Chanakya considered economic issues
Wrote the Arthashastra (“Science of Material Gain” or “Science of political economy’” in Sanskrit). Many topics discussed are still prevalent in modern economics, including its discussions on the management of an efficient and solid economy, and the ethics of economics.
Discusses a mixed economy: private enterprise and state enterprise frequently compete side by side, in agriculture, animal husbandry, forest produce, mining, manufacturing and trade.

The Scholastics

Scholastic thought is sometimes considered as an amalgamation of three different intellectual traditions: Aristotle’s philosophy, Bible and the Church Fathers, and Roman Law.
Just price and interest

Just price is the price that would appear spontaneously on the market if nobody was deceived, or exerted coercion against anybody else, and if the situation is also normal in other aspects.
The attitude towards the just price determined the view on interest-taking. Basically, the scholastics were against interest taking, as money was seen as a mere medium of exchange.

Defined as a system of moral principles found in the order of thinks and in the nature of man, independent of any legislative body.

Leading Members of the School of Salamanca

Early Muslim Economic Thought: Ibn Khaldun

Ibn Khaldun describes the economy as being composed of value-adding processes; that is, labour and skill is added to techniques and crafts and the product is sold at a higher price.
Also outlines early theories of division of labor, taxes, scarcity, and economic growth. Khaldun was also one of the first to study the origin and causes of poverty, he argued that poverty was a result of the destruction of morality and human values.
Also looked at what factors contribute to wealth such as consumption, government, and investment — a precursor to our modern GDP-formula.
Also believed that the currency of an Islamic monetary system should have intrinsic value and therefore be made of gold and silver.

Mercantilism

Origin of the name is credited to the French physiocrat Marquis de Mirebeau. It refers to the central policy prescription that the state should act like a merchant, augmenting the wealth of the nation by maximizing the surplus from their trade with other nations.

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