The Beginnings of Economic Thought

The Nature of Wealth and Value

The Beginnings of Economic Thought

A few of the greatest men of early times gave consideration to economic problems, and sought principles which might explain them. Of all the ancients the early Greek thinkers contributed most to economic theory. Confined as their ideas were to a superficial treatment of domestic management, the revenue of the city state, and the regulation of occupations, they nevertheless dealt with the basic concepts of modern economic knowledge. Plato (427-347 B. C.) made his chief contributions in his discussions of the division of labor. He noted the variety of men's needs and the variation in men's abilities and came to the logical conclusion that if everyone did the thing most natural to him greater production would result with a smaller expenditure of effort. Furthermore, specialization presupposed merchants to carry on exchange and a system of currency to facilitate the process.

Plato's ideal state as described in the Republic is a strange mixture of the real and the imaginary, of current practises interwoven with what ought to be. It would be difficult to look upon these general outlines of the ideal state as basic economic concepts; although such proposals as the subordination of the individual to the state, the specialization of labor, the rule of the wise, communism in wives and property, rules for the family, inheritance, limitation of population—all these certainly presuppose an acquaintance with economic matters. The Laws written some years later is a more realistic appraisal of the practical methods necessary to hold a city state together.

Aristotle (384-322 B. C.) probed deeper into the character of economic activity and expressed himself more directly on these matters. Wealth, he believed, was of two kinds; true or genuine wealth which was limited in supply, and wealth gained through unnatural acquisition which was unlimited. The former was derived from specialized productive activity such as agriculture and mining, in which labor was applied to raw materials. The latter was acquired through the exchange of things having different values. This emphasis upon natural wealth forecasts the thought of the school of French economists of later years known as the Physiocrats. The tendency of modern economists to consider productive activity as only that which produces wealth in a material sense, would find little kinship with Aristotle, for he is emphatic in saying that pursuits which produce non-material values are far more important since the essence of a man, as of a city, is non-material.

Of all the forms of unnatural wealth, that acquired through usury was looked upon as the most objectionable. Aristotle could not conceive of money having a productive use, consequently usury was really appropriating unjustly the natural wealth earned by another. Money was merely an arbitrary, not a natural, form of wealth. Its value was, as he saw it, determined by man for his own convenience. The need for money was great, however, since it was the means whereby values were made comparable in the process of exchange; it performed a certain service also in enabling persons to defer the consumption of goods for a time, since the value of money tended to remain constant. In determining values, Aristotle emphasized the usefulness of the article as fundamental. His acknowledgment of the distinction between value in exchange and value in use placed him into the company of any one of the most modern schools of economic thought.

Although he did not formulate anything which remotely resembled a system of economic thought, the relatively few comments which Aristotle did make summarized the current ideas of his time and laid foundation stones for the future schools of thought.

Centuries passed before another figure of the stature of Aristotle paid any attention to economic ideas. Then came Thomas Aquinas, a northern Italian cleric who lived from approximately 1225 to 1274. As with Plato and Aristotle, for whom economic matters were incidental to the conduct of the state and the development of certain abstract ideas, so with Aquinas. The society in which he lived was largely dominated by the Church and Christian philosophy on the one hand, and the philosophical ideas of Aristotle on the other. Economic activity of course went on. Since Aquinas was a native of northern Italy he certainly knew the importance of trade to the Italian cities. His contribution, as his work adequately demonstrates, was in making the Christian teachings practical for his time, and in finding a common ground upon which ethical and moral principles might exist side by side with buying and selling.

Early Christian doctrine had looked askance at wealth, and the character of the early Christian communities led many followers to think of Christianity as a type of communism although no direct admonition in that vein can be found. Aquinas took the attitude that wealth and private property were not in themselves either good or bad; it was the use to which they were put which determined their moral status. Property was a trust, placed in private hands to be used for social good. He believed it just as possible for wealth to serve as a means of greater virtue to the individual as to accomplish his moral degradation.

The other economic issues with which Thomas Aquinas concerned himself were the just price and the prohibition of usury. Both were practical applications of the principle of justice which was considered the abiding rule of human relationship in medieval Christian communities. The theories of Thomas Aquinas, which will be discussed more appropriately in later chapters, were essentially revelations of the mental uncertainties occurring under the stress of economic change which went with the growing commercialization of the 13th century. To harmonize both religious and secular knowledge with the practises of the time and with each other was no small task. The completeness with which the work was done gives Aquinas a permanent place among the great intellects of history in spite of the fact that of all the writers on economics, his ideas seem farthest from the trends of current thought. It is not unlikely, however, that some of his theories will again receive prominence as automatic processes in competition give place to forms of public regulation.