To Hesiod, emulation leads to the healthy development of a spirit of competition, which he calls "good conflict," a vital force in relieving the basic problem of scarcity.
To keep competition just and harmonious, Hesiod vigorously excludes such unjust methods of acquiring wealth as robbery, and advocates a rule of law and a respect for justice to establish order and harmony within society, and to allow competition to develop- within a matrix of harmony and justice. It should already be clear that Hesiod had a far more sanguine view of economic growth, of labor and of vigorous competition, than did the far more philosophically sophisticated Plato and Aristotle three and a half centuries later.
Man is prone to error and even folly, and therefore a history of economic thought cannot confine itself to the growth and development of economic truths. It must also treat influential error, that is, error that unfortunately influenced later developments in the discipline. One such thinker is the Greek philosopher Pythagoras of Samos c. The world not only is number, but each number even embodies moral qualities and other abstractions. Thus justice, to Pythagoras and his followers, is the number four, and other numbers consisted of various moral qualities. While Pythagoras undoubtedly contributed to the development of Greek mathematics, his number-mysticism could well have been characterized by the twentieth century Harvard sociologist Pitirim A.
Sorokin as a seminal example of "quantophrenia" and "metromania. Pythagoras thus contributed a sterile dead end to philosophy and economic thought, one that later influenced Aristotle's pawky and fallacious attempts to develop a mathematics of justice and of economic exchange.
The next important positive development was contributed by the pre-Socratic actually contemporary of Socrates Democritus c.
Justice in a Free Society
This influential scholar from Abdera was the founder of "atomism" in cosmology, that is, the view that the underlying structure of reality consists of interacting atoms. Democritus contributed two important strands of thought to the development of economics. First, he was the founder of subjective value theory. Moral values, ethics, were absolute, Democritus taught, but economic values were necessarily subjective. Democritus also pointed out that if people restrained their demands and curbed their desires, what they now possess would make them seem relatively wealthy rather than impoverished.
Here again, the relative nature of the subjective utility of wealth is recognized. In addition, Democritus was the first to arrive at a rudimentary notion of time preference: the Austrian insight that people prefer a good at present to the prospect of the good arriving in the future. As Democritus explains, "it is not sure whether the young man will ever attain old age; hence, the good on hand is superior to the one still to come.
In addition to the adumbration of subjective utility theory, Democritus's other major contribution to economics was his pioneering defense of a system of private property. In contrast to Oriental despotisms, in which all property was owned or controlled by the emperor and his subordinate bureaucracy, Greece rested on a society and economy of private property. Democritus, having seen the contrast between the private property economy of Athens and the oligarchic collectivism of Sparta, concluded that private property is a superior form of economic organization.
It all began, as usual, with the Greeks
In contrast to communally owned property, private property provides an incentive for toil and diligence, since "income from communally held property gives less pleasure, and the expenditure less pain. Plato's search for a hierarchical, collectivist utopia found its classic expression in his most famous and influential work, The Republic.
There, and later in The Laws, Plato sets forth the outline of his ideal city-state: one in which right oligarchic rule is maintained by philosopher—kings and their philosophic colleagues, thus supposedly ensuring rule by the best and wisest in the community. Underneath the philosophers in the coercive hierarchy are the"guardians" — the soldiers, whose role is to aggress against other cities and lands and to defend their polis from external aggression. Underneath them are to be the body of the people, the despised producers: laborers, peasants, and merchants who produce the material goods on which the lordly philosophers and guardians are to live.
These three broad classes are supposed to reflect a shaky and pernicious leap if there ever was one — the proper rule over the soul in each human being. To Plato, each human being is divided into three parts: "one that craves, one that fights, and one that thinks," and the proper hierarchy of rule within each soul is supposed to be reason first, fighting next, and finally, and the lowest, grubby desire. The two ruling classes — the thinkers and the guardians — that really count are, in Plato's ideal state, to be forced to live under pure communism.
There is to be no private property whatsoever among the elite; all things are to be owned communally, including women and children. The elite are to be forced to live together and share common meals.
Since money and private possessions, according to the aristocrat Plato, only corrupt virtue, they are to be denied to the upper classes. Marriage partners among the elite are to be selected strictly by the state, which is supposed to proceed according to the scientific breeding already known in animal husbandry.
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If any of the philosophers or guardians find themselves unhappy about this arrangement, they will have to learn that their personal happiness means nothing compared to the happiness of the polis as a whole — a rather murky concept at best. In fact, those who are not seduced by Plato's theory of the essential reality of ideas will not believe that there is such a real living entity as a polis. Instead, the city-state or community consists only of living, choosing individuals. To keep the elite and the subject masses in line, Plato instructs the philosopher—rulers to spread the "noble" lie that they themselves are descended from the gods whereas the other classes are of inferior heritage.
Freedom of speech or of inquiry was, as one might expect, anathema to Plato.
The arts are frowned on, and the life of the citizens was to be policed to suppress any dangerous thoughts or ideas that might come to the surface. Remarkably, in the very course of setting forth his classic apologia for totalitarianism, Plato contributed to genuine economic science by being the first to expound and analyze the importance of the division of labor in society. Since his social philosophy was founded on a necessary separation between classes, Plato went on to demonstrate that such specialization is grounded in basic human nature, in particular its diversity and inequality.
Plato has Socrates say in The Republic that specialization arises because "we are not all alike; there are many diversities of natures among us which are adapted to different occupations. Since men produce different things, the goods are naturally traded for each other, so that specialization necessarily gives rise to exchange. Plato also points out that this division of labor increases the production of all the goods. Plato saw no problem, however, in morally ranking the various occupations, with philosophy of course ranking highest and labor or trade being sordid and ignoble.
The use of gold and silver as money greatly accelerated with the invention of coinage in Lydia in the early seventh century BC and coined money quickly spread to Greece. In keeping with his distaste for moneymaking, trade, and private property, Plato was perhaps the first theorist to denounce the use of gold and silver as money. He also disliked gold and silver precisely because they served as international currencies accepted by all peoples.
Since these precious metals are universally accepted and exist apart from the imprimatur of government, gold and silver constitute a potential threat to economic and moral regulation of the polis by the rulers. Plato called for a government fiat currency, heavy fines on the importation of gold from outside the city-state, and the exclusion from citizenship of all traders and workers who deal with money. One of the hallmarks of an ordered utopia sought by Plato is that, to remain ordered and controlled, it must be kept relatively static.
Civic Obligation and Individual Liberty in Ancient Athens
And that means little or no change, innovation or economic growth. Plato anticipated some present-day intellectuals in frowning on economic growth, and for similar reasons: notably, fear of collapse of the domination of the state by the ruling elite. Particularly difficult in trying to freeze a static society is the problem of population growth. Quite consistently, therefore, Plato called for freezing the size of the population of the city-state, keeping the number of its citizens limited to 5, agricultural landlord families.
A disciple and contemporary of Plato was the Athenian landed aristocrat and army general, Xenophon — BC. Xenophon's economic writings were scattered throughout such works as an account of the education of a Persian prince, a treatise on how to increase government revenue, and a book on "economics" in the sense of thoughts on the technology of household and farm management.
Most of Xenophon's adumbrations were the usual Hellenic scorn for labor and trade, and admiration for agriculture and the military arts, coupled with a call for a massive increase in government operations and interventions in the economy. These included improving the port of Athens, building markets and inns, establishing a governmental merchant fleet and greatly expanding the number of government-owned slaves. Interspersed in this roll of commonplace bromides, however, were some interesting insights into economic matters. In the course of his treatise on household management, Xenophon pointed out that "wealth" should be defined as a resource that a person can use and knows how to use.
In this way,something that an owner has neither the ability nor the knowledge to use cannot really constitute part of his wealth. Another insight was Xenophon's anticipation of Adam Smith's famous dictum that the extent of the division of labor in society is necessarily limited by the extent of the market for the products. Thus, in an important addition to Plato's insights on the division of labor, written 20 years after The Republic, Xenophon says that "In small towns the same workman makes chairs and doors and plows and tables, and often the same artisan builds houses…" whereas in the large cities "many people have demands to make upon each branch of industry," and therefore "one trade alone, and very often even less than a whole trade, is enough to support a man.
Elsewhere, Xenophon outlines the important concept of general equilibrium as a dynamic tendency of the market economy. Thus, he states that when there are too many coppersmiths, copper becomes cheap and the smiths go bankrupt and turn to other activities, as would happen in agriculture or any other industry. He also sees clearly that an increase in the supply of a commodity causes a fall in its price. The views of the great philosopher Aristotle are particularly important because the entire structure of his thought had an enormous and even dominant influence on the economic and social thought of the high and late Middle Ages, which considered itself Aristotelian.
Although Aristotle, in the Greek tradition, scorned moneymaking and was scarcely a partisan of laissez-faire, he set forth a trenchant argument in favor of private property. Perhaps influenced by the private-property arguments of Democritus, Aristotle delivered a cogent attack on the communism of the ruling class called for by Plato. He denounced Plato's goal of the perfect unity of the state through communism by pointing out that such extreme unity runs against the diversity of mankind, and against the reciprocal advantage that everyone reaps through market exchange.
Aristotle then delivered a point-by-point contrast of private as against communal property. First, private property is more highly productive and will therefore lead to progress. Goods owned in common by a large number of people will receive little attention, since people will mainly consult their own self-interest and will neglect all duty they can fob off on to others. In contrast, people will devote the greatest interest and care to their own property.
Second, one of Plato's arguments for communal property is that it is conducive to social peace, since no one will be envious of, or try to grab the property of, another. Aristotle retorted that communal property would lead to continuing and intense conflict, since each will complain that he has worked harder and obtained less than others who have done little and taken more from the common store.
Furthermore, not all crimes or revolutions, declared Aristotle, are powered by economic motives. As Aristotle trenchantly put it, "men do not become tyrants in order that they may not suffer cold. Third, private property is clearly implanted in man's nature: His love of self, of money, and of property, are tied together in a natural love of exclusive ownership. Fourth, Aristotle, a great observer of past and present, pointed out that private property had existed always and everywhere.
To impose communal property on society would be to disregard the record of human experience, and to leap into the new and untried. Abolishing private property would probably create more problems than it would solve. Finally, Aristotle wove together his economic and moral theories by providing the brilliant insight that only private property furnishes people with the opportunity to act morally, e. The compulsion of communal property would destroy that opportunity. While Aristotle was critical of moneymaking, he still opposed any limitation — such as Plato had advocated — on an individual's accumulation of private property.
Instead, education should teach people voluntarily to curb their rampant desires and thus lead them to limit their own accumulations of wealth. Despite his cogent defense of private property and opposition to coerced limits on wealth, the aristocrat Aristotle was fully as scornful of labor and trade as his predecessors. Unfortunately, Aristotle stored up trouble for later centuries by coining a fallacious, proto-Galbraithian distinction between "natural" needs, which should be satisfied, and "unnatural" wants, which are limitless and should be abandoned.
There is no plausible argument to show why, as Aristotle believes, the desires filled by subsistence labour or barter are "natural," whereas those satisfied by far more productive money exchanges are artificial, "unnatural" and therefore reprehensible. Exchanges for monetary gain are simply denounced as immoral and "unnatural," specifically such activities as retail trade, commerce, transportation and the hiring of labour. Aristotle had a particular animus toward retail trade, which of course directly serves the consumer, and which he would have liked to eliminate completely.
Aristotle is scarcely consistent in his economic lucubrations.