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Zusammenfassung von A Little History of Economics

Name: A Little History of Economics
Rating: 4.5 (273 reviews)
Author: Niall Kishtainy

Niall Kishtainy

A whistle-stop tour of the major questions posed by economists through the centuries, from Aristotle to Thomas Piketty

4.5 (273 Bewertungen)

26 Min.

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What’s in it for me? A rollicking, whistle-stop tour of the global history of economics.

You might think you know what economics is about. Input-output, supply and demand, etcetera, etcetera. In a way, you’d be right. The word economics comes from the ancient Greek – oikos for house, and nomos for law. For the Greeks, economics was about managing households.

But economics also seeks to explain the differences between societies. Why does Britain have state-of-the-art buildings, teachers, and books to educate its young people, and Burkina Faso doesn’t? No one knows the full answer. But economists are the ones asking the questions.

In these blinks, we’ll learn the history of the field, from the ancient Greeks to the cowboy (and girl) bankers who triggered the global financial collapse of 2007. Perhaps by considering how earlier economists sought to explain their own times, we can see our own more clearly.

In these blinks, you’ll also discover

why the Catholic Church reversed its position on moneylending;
why the renegotiated relationship between the Soviet government and economy led to the death of millions; and
the bias most economists are likely to share.

The first question for early economists was the role of money and merchants.

Among many other things, the ancient Greek philosopher Aristotle was probably the first economist. Aristotle thought deeply about the concept of money, in the fourth century BCE. Money, of course, can be incredibly useful: it measures what something is worth, and allows things to easily pass from one person to another.

But money also opens dangerous doors. If an olive farmer, say, realizes that he can make money from selling olives, he might begin to grow them purely for profit, rather than only growing enough to support his family. Aristotle called this commerce, and he found it wholly unnatural. Even worse were those who used money to make more money – the moneylenders, who lent money to people for a price. We now call this interest.

Aristotle’s grumbling didn’t have much of an impact on the development of an economy, though. Commerce, once it had begun, was here to stay.

The key message here is: The first question for early economists was the role of money and merchants.

Like Aristotle, early Christian thinkers didn’t much care for moneylenders. In the thirteenth century, St. Thomas of Aquinas detested moneylending, which he called “usury.” The only proper, Christian use for money, he believed, was buying and selling.

But the practice of moneylending was becoming very convenient for the merchants of Venice and Genoa, who were beginning to trade with other cities in Europe and the Mediterranean. The first banks emerged here to let merchants store their money and easily settle debts.

Peasants began abandoning their farms, where they toiled under feudal lords, to work for themselves in cities in exchange for money. Soon even the Catholic church began softening its stance on usury: in the twelfth century, the pope even made an Italian merchant called Homobonus a saint.

A few centuries later, as European ships began exploring the world, they came upon civilizations rich in silver and gold. European merchant-explorers looted them, delivering vast wealth to European rulers who bought ever-fancier castles and outfits, among other things. So began mercantilism: the alliance between merchants and European rulers.

In England, economists such as Thomas Mun began thinking about how their country could become richer than its rivals. He believed that what was good for merchants was good for the nation. Countries set up special companies allowing investors to pool their money and share in the profits, like the East India Company, in which Mun was an official.

In medieval times, religion and personal relationships ruled economic life. Mercantilism was a harbinger of change, a pivot to the industrial age in which money would take precedence.

As the Industrial Age dawned, economists came up with radical new ideas to explain the world.

The first school of economists formed in pre-revolutionary France, led by François Quesnay. Quesnay was a monarchist, but he had a radical notion: do away with taxes on France’s peasants and tax the aristocrats instead. Peasants worked with nature, given by God, and their products were the ultimate source of a nation’s wealth. France had been foolish, he thought, to tamper with their earnings.

Worse, France had bestowed special privileges on merchants, allowing them to organize themselves into guilds to protect themselves from competition.

Nineteenth-century economic thought was devoted to problems of wealth inequality.

England’s new factories created vast wealth and privileges, but only for landowners and the capitalists who owned the factories. A diverse group of economists in the nineteenth century turned their minds to this new problem.

British stockbroker David Ricardo thought free trade would solve inequality. At the time, Britain had laws in place that banned cheap foreign grain, resulting in high grain prices. This made life more difficult for workers. Meanwhile, Ricardo showed, the laws further enriched the capitalists and landowners who profited from domestic grain.

As Europe debated over the relationship between government and economy, America’s great wealth became obvious.

In the early twentieth century, the Russian revolutionary Vladimir Lenin put Marx’s ideas into practice. He and other economists hypothesized that imperialism, the European practice of taking over foreign territories for profit, had propped up capitalism longer than its natural life cycle. When Lenin overthrew Tsarist Russia in 1917, he set up the world’s first communist state: the Soviet Union, also known as the USSR. It would be, Lenin proclaimed, the enemy of imperialism.

The USSR practically addressed a problem that would be central to twentieth-century economics: the role a government should play in the economy. The Soviet economy was subject to a system called central planning. That means the economy took direction from the government, not the markets. For instance, in the USSR, cars would be painted blue due to a decision made in the highest levels of government – not consumer demand.

In the mid-twentieth century, political events inspired economists to develop theories of government involvement.

When the Great Depression hit the US in 1929, fortunes were lost overnight and 13 million Americans – about a quarter of the working population – were plunged into unemployment. Economists were faced with an urgent new question: How could the world’s richest country be experiencing such acute poverty? The British economist John Maynard Keynes, whose influence endures even today, believed that the Great Depression was the result of governments failing to respond properly to early signs of recession. When the Depression hit, worried people stopped spending and started saving. When businesses followed suit, things only got worse. The economy wasn’t going to right itself, Keynes believed, so the government had to step in.

The key message here is: In the mid-twentieth century, political events inspired economists to develop theories of government involvement.

After World War II, economists turned their minds to new problems, big and small.

We’ve seen how Keynes ushered in new thinking about government’s role in economics – he believed that government should preside over the economy, taking steps to enact change. This became known as macroeconomics. But what about the small decisions people and companies make every day, which cumulatively make up an economy? Beginning around World War II, economists started to study everything that goes into these small decisions. This is known as microeconomics.

But during the Cold War, it became clear that one political decision-maker’s actions could decide the economic fates of many. To help decision-makers choose a course of action based on strategic factors and predictions of an enemy’s behavior, a group of American economists and mathematicians developed what’s called game theory. Game theory turned out to be as relevant to geopolitics as it is to individuals and firms.

The popularity of Keynesian economics waxed and waned in the decades after World War II.

In the decades after World War II, Keynes’s ideas of government involvement in the economy were put to the test. A group of economists, the young Keynesians, developed practical applications of Keynes’s theories. Their ideas gained currency, and in the 1960s President Kennedy adopted a Keynesian policy of tax cuts, with the goal of jump-starting the economy by putting more money in the hands of consumers.

The policy was a success, and for a while, everybody was convinced – even the Republican party, which was traditionally skeptical of government interference. But by the late ’70s, economists began to wonder whether too much government spending was causing a rise in inflation. Perhaps the good economic performance of the 1960s wasn’t due to Keynesian policies at all.

At the end of the twentieth century, risky financial behavior led to catastrophic loss.

Before the 1980s, bankers were stodgy types, typically stuffy men in tweed suits. In the 1980s, though, a new breed emerged: brash, arrogant cowboys, brazen with their risk-taking. They engaged in speculation, making guesses about what a commodity such as wheat or oil would cost in the future, then buying a lot of it based on that guess. When their guesses were right, they then sold the commodity for a profit.

Sometimes that commodity was currency. Currency speculators like George Soros made money by guessing how a country’s currency would fare over the course of weeks or months. And it wasn’t just a couple of bucks here and there: in 1992, Soros made a profit of £1 billion after his speculative behavior destabilized the Bank of England.

Inequality remains the most pressing topic for modern economists.

When he was a boy, the Indian economist Amartya Sen was witness to horrific violence between Hindus and Muslims in Bangladesh. This led him to pursue a career thinking about the reasons behind inequality. Poverty, Sen believes, is about more than just material goods. It’s about a lack of capabilities that open up possibilities for advancement – a lack of transportation or education, for example. According to Sen, developing society is more about expanding peoples’ capabilities than it is about economic development.

Sen helped the United Nations develop the Human Development Index, which measures income alongside other metrics like life expectancy and literacy. To Sen, economics is about the various things people need to live happy lives – not just money.

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Worum geht es in A Little History of Economics?

A Little History of Economics (2017) is a whistle-stop tour of the major questions posed by economists through the centuries, from Aristotle to Thomas Piketty. It examines questions of inequality, selfishness, and the role government should play in economies.

Wer A Little History of Economics lesen sollte

The econo-curious
Those looking for a bird’s eye view of economics
Students of broad-scope history

Über den Autor

Niall Kishtainy is a professor at the London School of Economics and the University of Warwick. He believes a study of the history of economics can explain a lot about our modern times, and help us move forward in a better way.

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