Non Western Economic Thought

Non-Western Economic Thought

Western historians of economic thought, like ourselves, have a tendency to focus on Western writers. Whether this is justified or not is a matter of opinion. J. A. Schumpeter, who wrote a comprehensive, widely respected history of economic thought in 1954, held that he could find no non-Western early economic writing with any analytic content and, further, that "no piece of reasoning on strictly economic topics has come down to us that can be called 'scientific' within our meaning of the term."1 Schumpeter also pointed to what he regarded as a curious gap in economic literature between the writings of the Greeks and Aquinas, a period of nearly one thousand years during which no economic writings of merit seemed to have been produced.

Scholars since Schumpeter have questioned his conclusions and have begun to find some interesting early economic writings of merit. We will briefly examine newly translated works of a seventh century BC Chinese writer, Guan Zhong (725-645 BC), for example, in order to give you a flavor of his contributions and, more broadly, to suggest that analysis of economic activity is likely to occur at various times and places. The majority of early Chinese writings on economics fit Schumpeter's characterization: they were essentially limited to considerations of public administration within ethical frameworks, rather than strictly "scien­tific" studies. Guan Zhong's book Guan Zi, however, stands out as going far beyond the administrative mold.2 It includes a number of ideas that are central to economic thinking. Probably the most important of these is his "light/heavy" theory, an anticipation of supply/demand theory. Others include his anticipation of the quantity theory, his discussion of countercyclical fiscal policy, and his appreciation for the workings of the market. Let's consider each briefly.

Guan Zhong argued that when a good was abundant, it became light, and its price would fall. When it was "locked away," it became heavy, and its price would rise. There would be movements of goods into and out of markets based on their lightness and heaviness, with a definite tendency toward one price—equilibrium. Thus the light/heavy theory is a statement of the law of supply and demand. Guan Zhong also used this light/heavy theory to develop a quantity theory of money, asserting that when money was heavy, its price should rise (prices of goods would fall), and when money was'light, its price would fall (prices of goods would rise). To stop that fluctuation, he advised that the state should buy goods when money was heavy (thereby holding the price level up) and sell goods when it was light (thereby holding the price level down). This would not only help stabilize the price level, but also make money for the government.

His understanding of the market led him to the following policy insight:

Indeed, it is the nature of men that whenever they see profit, they cannot help chasing after it, and whenever they see harm, they cannot help running away. When the merchant engages in trade and travels twice the ordinary distance in a day, uses the night to extend the day, and covers a thousand li without considering it too far, it is because profit lies ahead. When the fisherman puts out to sea, the sea may be ten thousand-ren deep, and when he heads into its waves and struggles against its tides, raises his small mast and sails out a hundred li, never leaving the water from morning to night, it is because profit lies in the water. Thus, wherever profit lies, even though it be atop a thousand-ren peak, there is no place people will not climb. Even though it is at the bottom of the deepest depths, there is no place people will not enter.

Indeed, those who are skilled in government control the presence of wealth so that the people are naturally content. Without pushing them, they go; without pulling them, they come. Without trouble or worry, the people enrich themselves. It is like a bird sitting on its eggs: there is neither shape nor sound, but the young suddenly appear quite complete.

The writings of Guan Zhong indicate that there is a universality to ideas of supply and demand that transcends time and place. They are not Western ideas
imposed on other cultures; rather, they are aspects of reality that will show up in all institutional structures. The general structure of economic ideas is univer­sal. However, when it comes to policy, the thoughts reflected in Guan Zi also suggest that economic insights have no direct policy implications independent of institutional structure. Change the institutional structure and one changes the policy implications. Guan Zhong actively structured policy to fit the institutional structure of his time, but with an activism that worked with market forces, not against them. Currently China is undergoing a significant economic transforma­tion and is turning to Western economics for thoughts about how to structure and manage it. Coming as it does from a Chinese tradition, a study of Guan Zi might be more relevant to Chinese economics than the more conventional analysis of its Western counterpart, Wealth of Nations.