8/10/2019 A Companion to History of Economic Thought Notes

1/2

ANCIENT AND MEDIEVAL ECONOMICS

The dominant thesis is, however, the challenge to divine authority by the benefciarieso the abundance o the Garden o Eden. When Adam and Eve ate the orbiddenruit o the tree o knowledge and asserted the right to choose or themselves,they were cast out o the world o abundance into scarcity; to eat bread in thesweat o their aces.! The moral theme is that knowledge and the e"ercise o

choice are burdens in a world o divinely im#osed or natural scarcity. This #ictureo economics is usually ound in the introductory cha#ter o so#histicatedintroductory economics te"tbooks, although contradicted by sub$ective relativismin later cha#ters. An unortunate s#ino% o the Eden story is the curse owork! with its sim#listic tension between work and leisure, in a world in whichmost #eo#le fnd ulfllment and sel&defnition in their work.

'n book ('' o the Politics, Aristotle clearly ormulated the conce#t o diminishingmarginal utility and an ordinal hierarchy o values, an in)uential conce#tualramework that has been attributed to *aslow in contem#orary motivation theory.

The im#ortance o Aristotle+s distinction is its basis or the moral re#udiationo usury, in which money loans are condemned as immoral and e"tortionate.

The commendam! was a commercial #artnershi# inwhich one #arty advanced the ca#ital or a trading venture and the other #rovidedthe #ersonal service. As in modern #artnershi# law, #rofts were dividedeually between the #artners ater the voyage.

-y the thirteenth century, annual airs or clearingbills o e"change were held in ham#agne /0ostan, 12345.

The institution s#read to 6#ain andelsewhere in the si"teenth century. 7istorically, many fteenth&century commercialcities arranged or 8ews to enter and set u# sources o credit. redit wasneeded by rich and #oor alike.

The #rinci#le o voluntary choice was used in more com#le" systems such asthe Athenian antidosis,! where the ostensibly wealthiest citi9en was called onto fnance #ublic estivals.

The oundation or a theory o air e"change in the market is laid out in thewidely cited incident rom the Cyropaedia where yrus, as a boy, is assigned theres#onsibility o $udging the airness o a orced e"change. A tall boy with a short tunicorcibly e"changes tunics with a short boy who has a long one. yrus rulesthat the e"change is air because it results in both boys having better ftting tunics.7is mentors )oghim or his decision, #ointing out that he was asked to $udge the

$ustice o the case, not the enhanced use values involved. To be $ust, an e"changemust be voluntary.

'n :eno#hon+sBanquet /('', 1

8/10/2019 A Companion to History of Economic Thought Notes

2/2

E=ciency was an absolute with only one true measureo rational utility and de#artures rom it occurred only through ignorance.

There are two relevant mathematical insights into Aristotle+s analysis o e"change.-oth are ignored by most modern classical scholars /*eikle, 122nly a ew haverecogni9ed the harmonic #ro#ortion as the one that Aristotle intended to use toillustrate e"change.

Another nuance in Aristotle+s analysis o e"change is the conce#t o consumer+ssur#lus. This is not strange, since he was not burdened with the #resum#tiono a single market e"change #rice. 7is #oint was that #arties were drawn togetherbecause they both saw a #otential advantage in e"changing. There was,thereore, a 9one o sur#lus that had to be divided by a $udge /?owry, 12@2; 124,ch. 5.

B>*AC ?AW ACD *ABETT7E>BF

Early Greek and 8udaic law, ollowing the voluntaristic #rinci#leo $ust e"change, held that a #arty could back out o an arrangement beore itse"ecution; that is, the #oint o sale. Boman law develo#ed contract. ontractrecogni9es that the economy reuires #lanning and that without commitments overtime, com#le" chains o #roduction and trade cannot take #lace at an individuallevel.

The rule is stated in 8ustinian+s Institutes/.HCEF ACD T7E E>C>*F*oney is re#uted to have emerged shortly beore @HH -.. in ?ydia, #ossibly to#ay soldiers in #re&measured amounts o #recious metals. *inted money, however,s#read over the *editerranean basin during the ollowing century as aconvenience in local trade.

Aristotle+s discussion o money has been widely recogni9ed. 7e identifed theuses o money as a medium o e"change, a unit o measure, and a store o valueor uture #urchases. 'n listing these conce#ts, 6chum#eter contended that Aristotleailed to identiy money as a means o deerred #ayment, and labeled him ametalist