Oikonomia. (oiks –
household; tu oikonomika – science of household management.
In Roman law the household,
under the father of the family, was the basic pattern of social organization
and the basic unit, and larger units were conceived and spoken of as
analogies of the household.
Aristotle:
1. Man’s gain in selling his produce enough to live in accordance with his estate.
2. Value in use vs. value in exchange.
3. Money (sterile) - medium of exchange, not an end in itself as in the business of buying and selling.
4. Medium of exchange in lending money.
5. Speaks more characteristically of chrematistike (the acquisitive system) as basically unsound and unjust since it requires return of more than what is necessary to support seller in his estate [holds in Communist and still holds and constitutes half of the essential dilemma in Christian theology: capital formation with justice (or price at cost)—the peculiar fascination of Christian theology is that it seems to explain the dilemma.]
6. Justice (Hutchins: negative
golden rule etc.). Property not evil as an institution but the way men
administer it is. Price equilibrates all things in some sense or other.
(F: ?) F:”Exchange value” – What is its significance?
B. Roman slave – capitalism: (753 B.C. Romulus and Remus – Etruscans). (Macaulay’s Logo of Ancient Rome: Struggle with Etruscans)
1. Early Roman economy: [Gauls, under Bremus, sacked Rome in 390 (?)B.C.].
(First Punic War 264 B.C.) (451-450 the Twelve Tables – note effect of new laws).
(Comillus …?... 326 B.C.)
By 2nd century every writer complained of the ignorance (Occult
learning – fowl’s
entrails, etc.) of common citizens, but no one wanted to do anything about it.
C. Christian ethics (by 325 at Nicaea) became a formal church with rituals etc. but new
elements – no God-image in the temple – omnipresent God, non-anthropomorphic.
(Michelangelo
painted God on Sistine Chapel.)
Justice – equals amongst
“We-uns” but not otherwise, etc. (as with Greeks). Toward
real in social theory, etc.
Roman: Pliny – Columella – Cato. Extended Greek theoretical development. (No new basic concepts.)
Private property upheld almost without limit. Evolved by Roman jurists.
And ius gentium (law common to all people).
First Punic War 264-41 B.C.; second 218-01 B.C. Scipio (African); third 149-46 B.C.; … est Carthage.
Latins – Romans (Kings until
509 B.C. Republic. Octavian (Augustus Caesar) Dictator 27 B.C. – champion
of the people (emperor, dictator ?).
I. Hebrew:
Early tribal organization
II. Greek: Tribal to capitalistic – aristocratic – slave economy.
338 B.C. Macedonian conquest (why?). Philip and Alex divided by history – great
man theory of historu, etc.
Socrates – Plato- Aristotle: Plato (427-347 B.C.: City arises because of division of
labor (natural skills and diversity of wants) but specialization requires commerce.
Protecting against debasing of old values at height of cultural conflict (commoners vs.
aristocracy).
Aristotle (394-322 B.C.): Soldier – statesman – priest according to age – (all rulers).
City-state based on slaves (slaves, however, non-Hellenic).
1). Scale of economy.
2) Exchange (two uses of object - ? and ?).
3)
Theory of money (medium of exchange)
Canonists
Torquin the Proud was deposed. The Patricians’ Revolution in 509 BC gave them control and they proceeded to develop a system of Agrarian spoliation—the system in the progressive dispossession of the plebeians frequently broke out in violence. Frequent efforts to stop the development (Hortensian law of 287 BC gave the plebeians equal rights with the patricians but ways of circumventing this were inherent in the economic system.) After the First Punic War (264 BC) Rome (shipbuilding) rapidly became dominant in the Mediterranean World. Development: Colonate Leftenlin. …?... progressive local authority after Pax Romana and progressive scarcity of claims.
G..?..entic origins Dopsch, Louis Paul, Neilson, and Carl Stephenson (Eric Roll), Romans, etc.
3. We have seen last time that all entered into the new system.
Frederick Piebahm. Both German and Roman systems existed side by side for
centuries.
Alphans Dopsch: Germans filtered peacefully into Roman world and even tok
over its administration. When Alaric marched on Rome, his opponent was St
Stilicho, a P…anian vandal, and Emperan Theodosius (ruled before invasion)
Was Spaniard supported by Gothic auxiliaries. (Wheat averaged 8 bu per acre.)
Canonists (cont)
Throughout the Middle Ages a commercial economy existed in the towns (Henri
Pirenne). Lowest ebb of activity during Muslim (?) power in Europe, particularly in the 8th and 10th centuries. And it was the activities centered here that the Canoinists felt obliged to rationalize. Why not the manorial system?
The Canonists—really the transition from feudalism to commercial capitalism—from commercial, self-supporing industry to profit-making business. Aristotle in Latin, 12th century—commercial capitalism clearly beginning in 11th century.
Scholasticism: the Church, Christianity , Aristotle, Roman Law, German custom.
1. Aquinas: Aristotelian, but mutual advantage concept.
2. Later:acceptance as common sense.
E. State and Property
What generalizations regarding
institutional adjustments and their rationale, political and economic
thought, can be drawn from this?
HISTORY OF ECONOMIC THOUGHT (cont)
(Card #12)
C. Non-conformist thought throughout this period (Conformity except on attainability)
1. Etienne de Bourbon and the Vanclois – Communism – “Communistic.”
2. Franciscans--1226--sent against them but (Michael of Cesena) adopted many of
their doctrines. (St. Francis of Assisi resigned leadership and order sent against V.
and …? at stake, Marseille 1318.
Conclusion of Mercantilism
(F: Division of labor in early mercantilism less than on the manors.)
I. Have discussed the characteristics common to all mercantilist thought:
1. Emphasis on selling.
2. Fear of goods.
3. Accumulation of treasure.
4. Opposition to usury.
And we have seen the parental antecedents of these ideas.
II. We discussed the change from the “bullionist accumulation fallacy” to the more
sophisticated error of the export surplus. And we have seen that there have been two
stages in the development of the export-surplus idea: 1) accumulate money; 2)
accumulate ownership in foreign enterprise. Both of these latter are like early
mercantilist thought in that they are still seeking “accumulation of treasure”—and we
hope seeing that differences result from changes in the character of “treasure,”
which in turn is a reflection of changes in the character of “money.”
III. Positive statement of the ideas of the mature mercantilist doctrine Thomas Munn
(1571-1641): A Discourse of Trade from England into the East Indies (1621)—
defense of Ease India Company ...? etc., England’s Treasure by Foreign Trade (1630)
-definitive work.
England’s Treasure by Foreign Trade: Shifts emphasis from accumulation of money to circulation of money and shows (or purports to) that if foreign traders make a profit the balance of trade must be favorable in the sense that the “wealth of the realm” must be increased thereby. It is by trade that the wealth of the nation is increased: therefore, those who trade, i.e., the merchants, should decide the policies of the state since their interests are identical with those of the general welfare, namely the / of the wealth of the nation (realm).
Roll, p. 80. Roll does not confuse money and capital, but, in the very next sentence “stock” “generally” takes the form of money, is / used to yield a surplus.
by trule (?) which was later replaced by the classical labor theory of value. The very confusion with which Roll credits him as avoiding. But forerunner of classical “capital.”
Discussion to where his successor (A. Smith) could solve it by relating prices.
balance of trade (which still was only way to accumulate)
The Jews were ousted from: Back Expelled Return Expelled
England 1290
France 1306 1315 1322 1359 1374
Austria 1421
Bavaria 1452
Spain 1492
Portugal 1496
Founders of
Political Economy
(H.J. Lueki Rise of European Liberalism for philosophical contribution)
I. Political Philosophers
Machiavelli: The Prince Italy, 16th century
1.Distinction, really divorcement, between “normative” and “positive.”
Bodin, Philipe – 16th century
Bacon, Francis –English, 16th century
monarchy a natural institution and obedience to it a natural duty. –
Will Durant in ….? same old stuff – history non-scientific..
Hobbes, Thomas – 17th century – abandoned divine or natural right of kings, substituted
agreed reformulation of common consent for someone (king)—power derived from the
character of the office, not from God (?) – to speak the common will – social contract
(Rorty) and sovereignty of the state….(?) Machiavelli, individual motivated by self-
interest, the place to start analysis. Some beginnings of Utilitarianism in that the State
(Leviathan) contracts for common good.
Locke – Philosopher; Administration of Colonial Renaissance (?) . Also important
economist.. Next step in development of Utilitarianism.
Synthesized and furthered the elements of past thought which made up philosophical
basis of capitalistic state.
1. “Social contract” – Plato, build city state. (All natural orders based on human
nature. Hobbes, submit to “Leviathan”; Bacon, rule of monarch; Bodin, set the limits of central authority; Lock transferred it to basis of natural instincts of the individual and thus govt became founded in the consent of the governed.
--Aquinas--or divine right of kings—Bacon--or the state (Leviathan)--Hobbes.
It was rather the voluntary association of individuals in trading bodies that constituted the natural state of affairs.
.3. Property was the basis of freedom, and freedom should be restricted only in the
interest of preserving it.
4..Therefore the social contract would be realized most properly in a constitutional
monarchy whereby the restrictions of the state power would guarantee the exercise of pursuit of individual self interest founded in property which was the limiting institution.
II. The Growth of Industrial Capitalism
p. 96. “In an age of commercial privilege vested interests were strong enough to
oppose the introduction of new processes which threatened their monopoly.”
(Use pp. 94-100 as example in critical reading. What assumptions underlie it?
What is the author’s theory of history? As evidenced by the dynamic in the causal
continuance identified? Etc.
III. Petty (1623-87)
With the change from commercial capitalism to industrial capitalism, attention
diverted from trade to production—from the relation of merchant and financier to the
relation between capital and labor. “It was no longer possible to insist that wealth,
in a social sense, was created by exchange, that value (i.e., exchange value, which is
the attribute of social wealth) and the profit by which wealth arose in exchange.”
[F.: We shall see that the change was not so great at the core (where value arises) as
Roll seems to think, but economic theory did take on a different formulation.]
Political Arithmetick – ((written in 1662, published in 1690 – post written.)
A Treatise of Taxes and Contributions – (1662)
Sir William Petty’s Quantulumcumque Concerning Money (1692 – published 1695)
Stood with Hobbes on absolute state.
The state existed to protect individual’s property and individual owed contri-
bution in proportion. Thus “no man suffers the loss of any Riches from it.”
(F: “riches” then what you have and your right….?)
Given fame as a founder of a science of statistics. He proposed to carry on
explanation of the economy in terms of “Number, Weight, and Measure.…
and to consider only such causes as have visible foundation in Nature.”
Contrasts with Mercantilists but still…. Etc.
Shift from income to property as the basis of status and taxation and control.
Differed from Hobbes only in the emphasis on reproducible property.
Later came to be identified by perceiving property in terms of income.
By sifting out the pieces and putting them together, a body of general theory can be
found in Petty’s writings.
His economic theory:
1. Value: more emphasis than theretofore on labor as the origin of value.
Comes to it in discussing natural “rent” of land (savings during some time
above cost of production of commodities used in producing the money
commodity (ex. wheat and silver). Distinguishes between “political price” and
“natural price.” Labor is the true source and measure of value.
2. (Natural wages equals subsistence because if more given, less work, etc.
Anticipated Marx and Value [G: Veblen?]
3. Rent: Understood differential rent theory of Ricardo. Petty was quite clear that
Rent was determined by price and not vice versa. States value of land=cap. of
rent natural …?. (This reduces land value to labor and abandons his dichotomy
of land and labor.) [Value of land = 3 times (61 years?) return therefrom.]
4. Interest: derived from rent theory (does not derive rate of capitalization of land
return from theory of interest as usually ….(?) but vice versa. Interest = return
from land the money would buy plus insurance for repayment—varies (time a
place) and therefore can’t be fixed by law.
5. International exchange: price determined by cost of shipping specie (against
prohibition of exporting bullion).
6. Money: (thought a country could have too much as well as too little). concept
of velocity of circulation and of banks “double the effect of our coined
money.”
IV. Other Founders (Locke, North, Law, Hume, Cantillon, Stewart) and Their Ideas:
1. World economic unit (and therefore free trade – North), private
good equals public
good.
2. Interest from rent theory (Locke) – tenant for money not used by oneself. Accumu-
lation of money unlimited since it does not deteriorate. North – stock levels in
same category. Low interest sign of flourishing country (Hume) but opposed
regulation of it.
3. Value and Price: Locke et al - value equals “usefulness but price equals supply
and money demand.
Led to Mercantilist dilemma: Locke held that the quantity of money of little
significance in a country but of great significance internationally. If little money,
forced to sell cheap and buy dear, but if much money, couldn’t sell. Value of
money like anything else – labor and land both measured in either as common unit
of measure; but Hume value of money (after Law, paper money, etc.) is fictitious –
represents goods.
4. Interest: (Locke, North, Hume, Law) a consequence, not a cause, of the amount of
money seeking investment. The “tenant” idea for money at interest.
5. Rent: Although land still the only source of surplus, the conclusions were still
unfavorable to landlords by undermining their specie status.
6. Changes in quantity of money the important generic item in economic affairs.
Hume. Important in that it changes the habits of people. Later used in people’s
“propensity to consume” and “liquidity preference.”
7. Competition (especially Hume) increasingly emphasized because it decreased
profits on stock and therefore interest and therefore stimulated trade and production.
Still mercantilistic – one horn of the classical dilemma when theory of capital
formation became a problem.
8. …itable balance of trade (Cantillon) interaction of all the parts in terms of wages,
value, money, rent, profits, population, etc.
9. “Intrinsic value” and market price (Cantillon – Intrinsic values ….? alter but
market values …..? about them (Stewart – through competition); common
consent gives money its value but its value commensurate (gold and silver) with
labor and land involved.
10. Surplus value: from land (but still - Stewart – could arise - mercantilists – in
exchange.
V. The Physiocrats (Quesnay – Tableau Oeconomique 1758, Turgot, Mirabeau.)
1. Brief summary:
1). Productive and unproductive labor (productive labor is that which produces in
excess of wealth, which it consumes.
2). Holdings from preceding period of production (agriculture) content of each
class’s trading value (Agri. labor is productive labor; landlord’s is nothing;
sterule class – merchants, artisans, etc. – stock from preceding period.
(Side note: Sacrifice pain of saving not as potent here.)
3). The holdings were the product of agriculture alone. (Surplus could arise only in
agriculture.)
4). The idea that money was merely the great wheel of circulation elaborated here.
5). Price (except in agriculture) equals cost of production.
6). Wage theory anticipates Malthus –subsistence – labor cost of labor (?); and rent
theory of Ricardo (especially Turgot).
How do these ideas fit in system of analysis?
1). Start: $5,000 annual gross product - $2,000 held by farmers in kind to produce
next crop. $3,000 net product, of which $2,000 is food, say, and $1,000 raw
product in manufacturing. The farmers also hold the money supply, say $2,000
(show presently how they come to have it - cost price in manufacturing ….(?)
Landlords hold nothing but have right to collect $2,000 rent from farmers.
2). Farmers pay the $2,000 rent to landlords – wage theory (subsistence) explains.
3). Landlords buy $1,000 food, etc., from farmers (who now have money back).
4). Landlords buy $1,000 mfg. goods (sterile class now has the other half).
5). Sterile class buys $1,000 food from farmers (who now have all this back).
6) Farmers buy $1,000 mfg. goods from sterile class who return the money for raw
materials, thus completing the cycle.
Farmers have received $1,000 mfg. goods and its own support ($2,000);
Landlords $1,000 of each; and Sterile class $1,000 raw materials, $1,000 food
which combine to produce the $2,000 mfg.
2. All accumulation comes out of surplus value which can, because of wage theory,
arise only in rent. Natural order (what would occur if no state interference) –
laissez faire. Therefore state policy should not try to increase wealth through
measures in trying to regulate trade where it could not arise. Such measures
(Colbert’s efforts, e.g.) useless, and harmful in that they encumbered the natural
process which maximized the general welfare. The only logical tax was the single
tax (Henry George) on land. Labor theory of valuation and creation; land source of
all value. Surplus, which is source of all advancement--theory ov value—
comes from land’s productivity (what Ricardo later called “the original and
indestructible powers of the soil.”
With Locke the social contract founded in the “natural instincts” of man, and it
became dependent upon the measure of consent of those who were governed (his
economic theory will determine who shall “consent” etc.). (The basis of freedom was
property – and freedom must be restricted only in the interest of preserving it). The
State, then, became founded in “utility,” which was worked out through the
institution of property acquired by industry and reason.
In Locke, the State began to lose authority as the basis of estimation which was to be
replaced with utilitarianism.
“Free traders” or “interlopers” were breaking down monopoly rights of trading
companies and the factory system was breaking down the apprentice system and
therewith the local cartels of craftsmen.
Thus, state interference was breaking down (18th century) as a phase of the struggle
against monopoly. (Times have changed with the development of democracy and now
the situation is reversed through development of democratic institutions.)
Cournot (1801-77) had shown that diminishing unit costs tend to make pure
competition impossible, and he therefore assumed monopoly as the starting norm and
the long-run tendency.
Then Sraffa (1926) (Italian – student of Marshall) set forth in “The Laws of Return
Under Competitive Conditions” and at the same time and independently in The
Theory of Monopolistic Competition by Joan Robinson and by a whole list of books
Americans in studies of corporate enterprise, etc. (A.R. Burns: The Decline of
Competition, Berle and Means: The Modern Corporation and Private Property, etc.)
the analysis was set forth starting with the individual firm as the basic datum and the
object of analysis—and thus got into common terms all categories of enterprise but
breaks down the assumption of competition, but continuing the general-equilibrium
possibility set forth by Walras in 1874. And thus apparent integration of all cases both
micro and macro through the use of the one set of intellectual tools which still are in
terms of supply and demand (with a doubt on this score in the American case—except
Chamberlin).
The general conclusion final outcome is the identification of equilibrium in
sufficiently general terms that they (those terms) can be applied to competition,
monopoly, or oligopoly, and to the aggregate and thus “integration,” and in terms not
requiring conclusion of (1) optimum of resource distribution, (2) natural order,
(3) consumer sovereignty, etc.
(F: The duopoly determinate equilibrium of Cournot is debated still, etc. But perhaps
the whole thing is beside the point now—Joan Robinson thinks so—and I think that
most, but not all, of it is without significance.)
(Edgeworth had objected: Walras had used the concept of “alternative opportunity”
costs and therefore no profit or loss.)
Breaking down the assumption of perfect competition.
Sraffa (extending the “Austrian” analysis by Menger and Walras and Jevons) had
shown (a) that where a large number of sellers is involved the reaction may be either
(1) price reduction or (2) increased sales and (b) that where differentiation in the
product can be established, irrespective of the number of sellers, the single market
becomes in part broken up into many monopoly markets superimposed on the
competitive “base.” (Here Robinson differed from Chamberlin who had it a different
kind of thing, not an imposition, super or otherwise.) Joan Robinson “Rising Supply
Price,” Economica, 1941.
Marshall: Marginal analysis – margin a function of the average as specified by the
principle of diminishing utility and increasing costs. (Keynes contrary.)
Time periods
Consumers surplus
Decreasing-cost enterprise.
Jevons’ law of markets:
Ratio of exchange equals reciprocal of degrees of marginal utility after the exchange.
How solve the problem of price in market where individuals have different
diminishing utility schedules?
Concepts used by Jevons to answer the question:
Law of indifference:
1. Only one price in the market (indifference to sellers).
(H.: Merely definition of competition is not answer.)
2. H:Concept of “trading body”: buyers and sellers in complete communication—
each knows all other’s offers, etc.—example of two men exchanging two
commodities.
Eco. 191:
Mitchell: “The Theory of Economic Guidance”
Three concurrent and parallel processes in the economic system:
1. Business: process of making money.
2. Industry: process of making and transporting goods.
3. Commerce: process of collecting and distributing.
In the economy, industry and commerce are subordinated to business.
The business cycle greatly complicates business management of industry and
commerce. Otherwise the operation of the whole economy would be clear and
fairly simple.
(F: Note the difference here between Mitchell and Commons since Commons
thought of the problematic character of futurity as what served as the dynamic.)
The theory of guidance is contrasted with the classical concept in terms of deliberate
decisions to control production (character and quality)—monopoly vs competition
etc. (corporation etc.) in the modern economy as compared to the lack
….
(c) 2010 All rights reserved.