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 Hesiod active 750 to 650 BC, a Boeotian who wrote the earliest known work concerning the basic origins 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 Fan Li (also known as Tao Zhu Gong) (born 517 BCE), 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.Nishijima 1986, pp. 587–588
Ancient India
The earliest Hindu texts contain no systematic treatment of economics, but they record economic institutions. Joseph Spengler, a historian of economic thought, finds private property, occupational specialization, price-bargaining and interest-bearing loans mentioned in the Rigveda. The later Dharmaśāstras forbid false weights and measures and set the King's tax at between one-tenth and one-sixth of farm produce, and lower for other activities: one day's work for artisans. A customary maximum interest rate was about 1.25% per month. Apart from the Rigveda, other Hindu texts, the Vedas (1700–1100 BC) contain economic ideas, with Atharvaveda (1200 BC) being the most vocal.
In early Buddhist writings, prices are set mostly by custom rather than by the state, and money mediates most trade. The Sigālovāda Sutta advises a householder to divide his wealth into four parts: one to enjoy, two to invest in business, and to save against misfortune.
The most important ancient Indian work on economic policy is the Arthashastra, a treatise on statecraft, military strategy, and the economy traditionally attributed to Chanakya (also known as Kautilya, born ~350 BC) of the Maurya Empire. Chanakya was a minister to Chandragupt Mourya in the fourth century BCE. Its authorship and date are disputed.
The Arthashastra posits that four fields of knowledge are necessary: the Vedas, the Anvikshaki (philosophy of Samkhya, Yoga, and Lokayata), the science of government, and the science of economics (Varta of agriculture, cattle, and trade). All other knowledge, wealth, and human prosperity derive from these four. The text defines the purpose of economics as acquiring what is not possessed, augmenting what is preserved, and bestowing it. Standard histories of economic thought generally begin with the Greeks; some scholars argue that Indian contributions have been largely overlooked.
Greco-Roman world
Ancient Athens, an advanced city-state civilisation and progressive society, developed an embryonic model of democracy.David Held, Models of Democracy (Polity, 2006) 3rd Ed., pp. 11 ff.
Xenophon's (c. 430–354 BC) Oeconomicus (c. 360 BC) is a dialogue principally about household management and agriculture.
Plato's dialogue The Republic (c. 380–360 BC) 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.Chpt 1 Graeco-Roman Economics, History of Economic Analysis, Joseph Schumpeter, (1954) 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."Republic, 462b-c
Aristotle's Politics (c. 350 BC) analyzed different forms of the state (monarchy, aristocracy, constitutional government, tyranny, oligarchy, and democracy) 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".Aristotle, Politics Book II, Part V
"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".Aristotle Politics Book I, Part X Writing of the people, Aristotle stated that they as a whole thought acquisition of wealth (chrematistike) as being either the same as, or a principle of oikonomia ("household management" – oikonomos),Book I, Part III 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, Politics Book I, Part XI
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 Wang Anshi
Wang Anshi (1021–1086) was a Chinese politician and reformer, who asserted that financial management should be the main concern of the state, emphasizing the need to boost state revenue through "developing production". In his writings, Wang used Sang Hongyang as an example to show that good financial management could provide enough money for the country without raising taxes. Specifically, Wang prioritized agriculture suggesting that reducing burdens on farmers and preventing mergers would stimulate their motivation.
Ye Shi
Ye Shi (1150–1223) was a Chinese government official and philosopher from the Yongjia School during the Southern Song dynasty. He wrote on finances and government organization, over which his monetary expositions can be found in his texts such as Coins II, which delves with his views on the dynamics between currency and commodities.
Ye argued that money was created by merchants of trade as a medium of exchange. He described the evolution of currency in three periods. In the first period, during the three generations, money was used very little as households valued rice, cloth, vegetables, and fish more, leading to a focus on safety rather than currency. The second period saw more money use in the Qin and Han dynasties, while in the third period, during the Southern Song dynasty, money fell out of use due to the country's isolation, self-sufficiency needs, and lack of trade. Ultimately, only traders and the court relied on money's usefulness. He also questioned the imperial court's view of money as a means of storage, stating that money should be in circulation.
He criticized the policies of the Song dynasty in terms of fiscal policy and direct government control of industries. During the reign of Emperor Ningzong, Ye was labeled as a "heretic" scholar and, following the Southern Song dynasty's defeat in the northern expedition against the Jurchen Jin in 1207, was under suspicion as a collaborator of Counselor-in-Chief Han Tuozhou.
Thomas Aquinas
Thomas Aquinas (1225–74) 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 criticsMochrie (2005) p. 5 was Duns Scotus (1265–1308), originally from Duns Scotland, who taught in Oxford, Cologne, and Paris. In his work Sententiae (1295), 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 Jean Buridan (; Latin Johannes Buridanus; c. 1300 – after 1358) 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.Muqaddimah 2020 p 355 Ibn Khaldun on taxes and the ideals of Governance Until Joseph J. Spengler's 1964 work "Economic Thought of Islam: Ibn Khaldun", Adam Smith (1723–1790) was considered the "Father of Economics". Spengler highlighted the work of Arab scholar Ibn Khaldun (1332–1406) 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 (Muqaddimat) 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