Professional Documents
Culture Documents
Economic Thought
Martin Kragh, PhD
Stockholm School of Economics
Martin.Kragh@hhs.se
A Definition of economics
Ancient Greek:
oikos, meaning household
nomos, meaning law
Thus, a study of the principles which govern the household
China
Guan Zhong (725-645 BC)
Guan Zi
Guan Zi (ca 700 BC) by Guan Zhong first
known treatise containing economic thought:
Supply and Demand: light and heavy
Price: inflation and deflation
Profit: Whenever there is profit, there is no place
man will not go
Wealth: To govern a country it is necessary to
increase the wealth of the people. When people
have plenty, they are easier to govern
Jinzi
Jinzi (ca 400-300 BC), written by a legal scholar
and administrator Ji Ran (presumably):
The importance of meritocracy
Wealth a result of wise governance, low corruption,
low taxation and support of strategic sectors (for
example, silk production and agriculture)
Wealth military might of the state
Business Cycle: Trade and prices fluctuate over the
year:
Jupiter in Yin: sell live stock, and buy food
Jupiter in Yang: sell food, and buy land, house and live stock
Commercial Activity
Trade to satisfy human needs accepted, while profit
motive for trade was not
Money has two faces:
Money as a means (facilitates trade)
Money as a measure (makes the comparison between
different goods possible)
Goods have both use value and exhange value
Key concepts in Adam Smith, David Ricardo and Karl Marx
Rome
A political and economical empire
Secular jurisprudence:
Lucretius (ca 99-55 BC) and De rerum natura
The world can be understood by rational thought
Tantum religio potuit suadere malorum
Civil Law:
Private property
The firm as a separate legal entity
Laws to govern trade and agreements
Islam
Highly advanced levels of science during
European dark ages
Mathematics
Astronomy
Philosophy (including Greek philosophy)
Khalduns Economics
Role of key principles:
Profit
Self-interest
Private Property
Scholastic Thought
Christian theology evolved from the 4th century
through to the renaissance
Continous struggle to harmonize teachings from
theology and ancient philosophy with changes in
society
Scholastic thought explicitly normative:
How should trade be organized?
What is allowed? What is a sin?
Interest or Usury?
Ancient dilemma: What role for money is accepted?
OT: Ezekiel (18:10-13):
he even eats at the mountain shrines, and defiles his neighbors
wife, oppresses the poor and needy, commits robbery he lends
money on interest and takes increase; will he live? He will not live!
Changing definitions of usura and intereo over time was crucial for
economic development during the Renaissance
Usura (usury) means to use something (i.e. capital)
Usury not legitimate
Intereo (interest) means to lose
Interest legitimate as compensation for losses
Concluding Remarks
Continuity and Change through Time
Understanding of fundamental principles similar over
time, but normative conclusions change