Ancient and Medieval Economic

Thought and Institutions

1) Contributions of the Ancient Greeks:
 Best recorded history: The ancient Greeks provided the most comprehensive and detailed
historical records, which served as the foundation for intellectual exploration.
 Rational approach to social science: The Greeks introduced a rational approach to social
science, including economics, focusing on efficiency and organizational effectiveness.
 Anthropocentric worldview: The Greeks believed that humans were the center of the
universe and emphasized individual decision-making and the pursuit of human happiness.
 Pre-market economy: Although trade existed, the Greek economy was not characterized
by uniform products, organized exchanges, or the analysis of goods for their own sake.
Instead, the Greeks focused on economic and organizational efficiency.
 Two forms of individualism: Greek culture recognized both an authoritarian ruler making
decisions on behalf of society and individual households driven by success, contributing
to private household management and a hedonic calculus of rational self-interest.
 Elaboration of administration: The Greeks developed the art of administration,
emphasizing the efficient management of resources and the division of labor. They also
explored concepts such as resource allocation and diminishing marginal utility.
 Major contributors: Xenophon, Plato, Protagoras, and Aristotle were the prominent
writers who made significant contributions to economic analysis during this period.
 Xenophon's contributions: Xenophon emphasized efficient organization, skill, and
division of labor as the key elements for increasing economic surplus. He also discussed
subjective value, diminishing marginal utility, and the role of leadership and
entrepreneurship.
 Plato's administrative tradition: Plato analyzed the political and economic structure of the
state, highlighting specialization, division of labor, and the importance of efficient
leadership. He advocated for controls on profit and property and proposed an ideal state
ruled by an elite class.
 Plato on democracy and "public choice": Plato believed in the decline of states from ideal
forms due to excesses of central values, including lust, greed, and acquisitiveness. He
criticized both tyranny and democracy as potentially regressive forms of government

 Protagoras was a relativist philosopher who believed in subjective opinion and denied the
existence of objective truth.
 He famously stated that "Man is the measure of all things," emphasizing the subjectivity
of truth.
 Protagoras valued utility and believed that it is up to the citizens to determine social
welfare and how to achieve it.
 He trusted common sense and practical social experience over scientific or theoretical
doctrines.
 Plato criticized Protagoras' subjectivism and believed in the absolute authority of the
philosopher-kings.
 Protagoras' subjectivism was based on the interaction between human perception and
physical phenomena.
 He believed in an active view of individualism and challenged the prevailing belief that
vision is produced by light emanating from the eye.
 Protagoras' philosophy influenced the development of political economy and anticipated
elements of modern economic theory, such as the market's role in maximizing utility and
the use of hedonic measurement in evaluating choices.
 Aristotle was an ancient Greek philosopher who approached utility measurements and
public decision making analytically.
 He discussed value in terms of incremental comparisons, but his analysis of value was
unrelated to contemporary price theory.
 Aristotle focused on distributive justice and analyzed isolated exchange rather than
market exchange.
 Isolated exchange occurs when two parties exchange goods based on their subjective
preferences without considering alternative market opportunities.
 Aristotle believed that exchange should be fair and reciprocal, making both parties better
off.
 He viewed exchange as a bilateral process that required proportionate return and
equalization of goods.
 Aristotle's analysis of exchange laid the foundation for discussions of value in the Middle
Ages and established preconditions for trade.
 He recognized the empirical nature of demand and the role of money as a representative
of demand in facilitating exchange.
 Aristotle's theory of money emphasized its functions as a standard of value, medium of
exchange, and store of value.
 He specified five properties required for good money: durability, divisibility,
convenience, uniformity, and limited supply.
 Aristotle's ideas on money and interest laid the groundwork for understanding the nature
and functions of money in economic systems.

2) Roman And Early Christian Contributions:

 Economic details are available for only about two centuries of Roman history, from circa
150 BC to AD 50.
 During this period, little analytical work was done as the focus was mainly on military
and political matters.
 Rome's commercial interests developed and spread throughout the empire when it
reached its peak power.
 The end of the Roman Republic saw various economic problems, such as trade, finance,
war, colonization, and slavery, which led to the emergence of economists and
government advisers.
 Rome's social structure, influenced by ancient Greece, did not encourage entrepreneurial
activities or extensive reflection on markets.
 Roman society consisted of slaves, peasants, artisans, traders, and a civil and military
aristocracy.
 The major ways of accumulating wealth in Rome were through conquest, piracy, slave
capture and trade, money lending, tax farming, and similar predatory activities.
 The one great achievement of Roman society was its law, which divided into civil law
(jus civile) for citizens and common law (jus gentium) for noncitizens.
 Roman law, particularly in property and contract, became the foundation for legal
systems in the Western world.
 The concept of natural law and the doctrine of the corporation can be traced back to
Roman law.
 From the fall of Rome to the eighteenth century, most writers on economics were either
businessmen or lawyers, often trained in civil or canon law.
 Christianity overlapped with the decline of the Roman Empire and offered a different
kind of civilizing influence.
 Early Christian thought focused on the kingdom of God and otherworldly treasures,
deeming material wealth as an impediment to spiritual attainment.
 As time passed, wealth came to be seen as a gift of God for promoting human welfare.
 Early Christian writings emphasized the "right" use of material gifts rather than analytical
economic thought.
 Saint Augustine hinted at a subjective theory of value, where wants are individually
determined.
 Early Christian writers generally showed indifference or hostility toward economic
topics, focusing more on individual behavior and morality rather than economic
mechanisms.

3) Chinese Economics In the Millennium:

 Chinese economic thinking originated during the Eastern Chou Dynasty (771-249 BCE).
 The Chou Dynasty saw the decline of monarchy and aristocracy, the emergence of
independent states, increased land productivity, monetization, specialization, and the
growth of merchants, cities, and marketplaces.
 Confucianists, Legalists, and Moists were the three groups of writers dealing with
economic issues during this time.
 Confucius emphasized moral issues and promoted an ethical system of order based on
reciprocal obligations, virtue, and ability.
 Confucian society valued social harmony, personal roles, and the common good.
Confucius advocated fair taxation, balanced government spending, and noninterference
with production and distribution.
 Confucius's followers had disagreements on human nature and the role of government.
Mencius believed individuals are inherently good and supported noninterference, while
Hsun-tzu argued for a more authoritarian government due to people's evil impulses.
 The Legalists, influenced by Hsun-tzu, believed people are motivated by self-interest and
advocated strict centralized control, rewards, and punishments for social order and
economic progress.
 The Moists, led by Mo Ti, sought economic harmony and welfare. They rejected
Confucian teachings and favored universal brotherly love, social mobility, peace, order,
national wealth, a large population, and specialization.
 Mo Ti emphasized government effectiveness through strict hierarchy and a strong
sovereign.
 Chinese economic analysis was influenced by morality and ethics, considering economics
as a branch of moral philosophy. The marketplace was not seen as a self-regulating
mechanism.
 Overall, Chinese economic thinking in the first millennium was diverse and focused on
societal harmony, moral principles, and the role of government in promoting economic
well-being.

4) Medieval Arab-Islamic Economics:

 Arab-Islamic thought had a significant influence on the world during the
medieval period (AD 700 to 1200).
 Islamic civilization excelled in various fields such as government, literature,
scholarship, science, medicine, and philosophy.
 Muslim scholars preserved and developed ancient Greek knowledge in
mathematics, physics, chemistry, astronomy, and medicine.
 The Arab world served as a bridge for transmitting Greek and Hindu wisdom to
the West.
 Arabic numerals replaced Roman numerals, and Arab mathematicians made contributions
to optics.
 Arab scholars focused on reconciling reason with faith and viewed economics as a means
to achieve salvation.
 Islamic law, derived from divine will, guided economic principles and differed from
Western economics based on human reason.
 Abu Hamid al-Ghazali (1058-1111) contributed to economic thought, emphasizing
ethical and moral aspects.
 Ghazali discussed voluntary exchange, markets, production, money, interest, and public
finance.
 He recognized the importance of markets, specialization, and division of labor in
economic activities.
 Ghazali considered wealth accumulation essential for a progressive economy but
emphasized ethical conduct in economic affairs.
 He discussed the evolution of money, distinguishing between use value and exchange
value.
 Ghazali argued against usury, stating that interest deflects money from its function of
facilitating exchange.
 He saw the state as necessary to ensure the proper functioning of the economy and fulfill
social obligations.
 Ghazali's ideas influenced subsequent Arab scholars, and the intellectual tradition
continued until the fourteenth century.
 Ibn Khaldun (1332-1404) formulated the labor theory of value and anticipated some ideas
later developed by Adam Smith.
 Medieval scholars in Christian Europe also contributed to the development of economic
thought.

5) Medieval European Economic thought:

 European scholars flocked to Toledo in 1085 to translate ancient texts after its recapture
from the Moors.
 The dominant economic system in medieval Europe was feudalism, where land
ownership was tied to duties and obligations.
 Feudal lords had governmental functions within their territories, and economic
production took place on agricultural estates called manors.
 Labor services were provided by serfs, and self-sufficiency was the goal of the manor
system.
 The Roman Catholic Church provided doctrinal unity in medieval society, and the market
mechanism was more prevalent in cities.
 Scholastic economics developed within the context of the medieval Church, with scholars
integrating various philosophical and religious influences.
 Scholasticism used a deductive method of posing questions, providing detailed
expositions, and appealing to authority.
 Albertus Magnus introduced the idea that value-in-exchange must comply with cost-of-
production, setting the stage for the labor theory of value.
 Thomas Aquinas emphasized human wants and their influence on price, but his analysis
was limited and focused on moral instruction.
 The concept of a "just price" was associated with Aquinas, reflecting a concern for justice
in exchange.
 Henry of Friemar advanced the concept of indigentia as an aggregate measure of wants,
moving closer to the contemporary notion of market demand.

6) Theory Meets History: Economic Impact of Christianity

And the Medieval Church:

 State and religion have influenced economics in ancient and modern societies.
 Christianity emerged in the first century CE and competed with other religions.
 Christianity offered advantages such as a clear afterlife contract and a loving God.
 The Council of Nicaea in 325 CE defined Christianity and established its monopoly.
 The Roman Catholic Church played a pivotal role in the development of capitalism.
 The Church dominated Western Europe and had influence over civil law and rulers.
 The Church collected revenues from contributions, relics, indulgences, taxes, and land
rents.
 The Church had a hierarchical organization with the Vatican as the central authority.
 The Church protected its monopoly through punishment of heretics and manipulation of
doctrines.
 Rational behavior theory helps explain the economic aspects of Church policies and
practices.
 Protestantism emerged as a transformative force, challenging the Roman Catholic
Church.
 Views differ on whether the Church hindered or encouraged economic development.
 The reasons for the rise of liberalism are complex and may never be fully understood.
MCQs Test 1
1. Which ancient civilization provided the most comprehensive historical records?
a) Mesopotamians
b) Egyptians
c) Greeks
d) Romans
Answer: c) Greeks

2. Which ancient Greek philosopher emphasized the efficient management of resources and the
division of labor?
a) Xenophon
b) Plato
c) Protagoras
d) Aristotle
Answer: a) Xenophon

3. Who believed that "Man is the measure of all things"?

a) Plato
b) Protagoras
c) Xenophon
d) Aristotle
Answer: b) Protagoras

4. Which ancient Greek philosopher analyzed the political and economic structure of the state and
advocated for controls on profit and property?
a) Xenophon
b) Plato
c) Protagoras
d) Aristotle
Answer: b) Plato

5. According to Aristotle, what are the five properties required for good money?
a) Durability, divisibility, convenience, uniformity, and limited supply
b) Stability, scarcity, portability, divisibility, and uniformity
c) Rarity, flexibility, convenience, uniformity, and limited supply
d) Durability, scarcity, portability, divisibility, and limited supply
Answer: a) Durability, divisibility, convenience, uniformity, and limited supply

6. During which period did economic details become available for about two centuries of Roman
history?
a) The Roman Republic
b) The Roman Empire
c) The Hellenistic period
d) The Middle Ages
Answer: a) The Roman Republic

7. What major economic problems were faced by the Roman Republic?

a) Trade, finance, war, colonization, and slavery
b) Corruption, inflation, unemployment, and famine
c) Overpopulation, drought, epidemics, and civil unrest
d) Decline in agricultural productivity, invasion by barbarian tribes, religious conflicts
Answer: a) Trade, finance, war, colonization, and slavery

8. Which ancient civilization had a social structure consisting of slaves, peasants, artisans,
traders, and a civil and military aristocracy?
a) Egyptian
b) Greek
c) Roman
d) Chinese
Answer: c) Roman

9. Which ancient legal system became the foundation for legal systems in the Western world?
a) Roman law
b) Greek law
c) Egyptian law
d) Chinese law
Answer: a) Roman law

10. Early Christian thought considered material wealth as:

a) A means to achieve salvation
b) A sin
c) An impediment to spiritual attainment
d) An individual choice
Answer: c) An impediment to spiritual attainment

11. Who among the early Christian writers emphasized the "right" use of material gifts?
a) Saint Augustine
b) Saint Thomas Aquinas
c) Saint Paul
d) Saint Peter
Answer: a) Saint Augustine

12. Chinese economic thinking during the Eastern Chou Dynasty was influenced by:
a) Confucianists, Legalists, and Moists
b) Taoists, Buddhists, and Confucianists
c) Legalists, Taoists, and Buddhists
d) Moists, Legalists, and Taoists
Answer: a) Confucianists, Legalists, and Moists

13. Who among the Confucianists emphasized moral issues and promoted an ethical system of
order based on reciprocal obligations?
a) Confucius
b) Mencius
c) Hsun-tzu
d) Mo Ti
Answer: a) Confucius

14. Which ancient Greek philosopher emphasized efficient organization, skill, and division of
labor as key elements for increasing economic surplus?
a) Xenophon
b) Plato
c) Protagoras
d) Aristotle
Answer: a) Xenophon

15. Which ancient Greek philosopher advocated for controls on profit and property and proposed
an ideal state ruled by an elite class?
a) Xenophon
b) Plato
c) Protagoras
d) Aristotle
Answer: b) Plato

16. Protagoras believed in the subjectivity of truth and famously stated that "Man is the measure
of all things." Which philosopher criticized Protagoras' subjectivism?
a) Xenophon
b) Plato
c) Protagoras
d) Aristotle
Answer: b) Plato

17. According to Aristotle, what were the three functions of money?

a) Standard of value, medium of exchange, and store of value
b) Unit of account, medium of exchange, and store of value
c) Standard of value, unit of account, and medium of exchange
d) Medium of exchange, unit of account, and store of value
Answer: c) Standard of value, unit of account, and medium of exchange

18. During which period was there little analytical work done in ancient Rome, with the focus
mainly on military and political matters?
a) Roman Republic
b) Roman Empire
c) Early Christian period
d) Medieval period
Answer: a) Roman Republic

19. Which civilization served as a bridge for transmitting Greek and Hindu wisdom to the West
during the medieval period?
a) Arab-Islamic civilization
b) Chinese civilization
c) Roman civilization
d) European civilization
Answer: a) Arab-Islamic civilization

20. Abu Hamid al-Ghazali emphasized ethical conduct in economic affairs and argued against
usury. Which civilization did he belong to?
a) Ancient Greece
b) Ancient Rome
c) Chinese civilization
d) Arab-Islamic civilization
Answer: d) Arab-Islamic civilization
21. In medieval Europe, what was the dominant economic system characterized by land
ownership tied to duties and obligations?
a) Feudalism
b) Capitalism
c) Socialism
d) Mercantilism
Answer: a) Feudalism

22. Which European scholar introduced the idea that value-in-exchange must comply with cost-
of-production, setting the stage for the labor theory of value?
a) Albertus Magnus
b) Thomas Aquinas
c) Henry of Friemar
d) Saint Augustine
Answer: a) Albertus Magnus

23.Which religious council defined Christianity and established its monopoly in 325 CE?
a) Council of Nicaea
b) Council of Trent
c) Council of Constantinople
d) Council of Ephesus
Answer: a) Council of Nicaea

24. Which religious movement emerged as a transformative force, challenging the Roman
Catholic Church?
a) Protestantism
b) Buddhism
c) Islam
d) Hinduism
Answer: a) Protestantism

25. Which ancient Chinese philosopher emphasized moral principles, reciprocal obligations, and
the common good in economic matters?
a) Confucius
b) Legalists
c) Moists
d) Mencius
Answer: a) Confucius