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A Little History of Economics
A whistle-stop tour of the major questions posed by economists through the centuries, from Aristotle to Thomas Piketty
- Read in 16 minutes
- Audio & text available
- Contains 10 key ideas
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.
Key idea 1 of 10
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.