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Jürgen Georg Backhaus Editor Handbook of the History of Economic Thought Insights on the Founders of Modern Economics Editor Preface Prof. Dr. Jürgen Georg Backhaus University of Erfurt Krupp Chair in Public Finance and Fiscal Sociology Nordhäuser Str. 63 99089 Erfurt Thüringen Germany [email protected] Avant Propos A further reason for studying the history of economic thought was provided by Pareto in the lead article of the “Giornale di Economisti” of 1918 (Volume 28; pages 1–18) under the title “Experimental Economics”.1 In as much as economic theories also have an extrinsic value, that is, they lead people to act as informed by the theory, such as in economic policy or public fi nance, the theory becomes a subject for economic investigation itself. The distinction between the intrinsic aspect and the extrinsic aspect of a theory is crucial for this argument. The intrinsic aspect of a theory refers to its logical consistence and, as such, has no further repercussions. As far as the intrinsic aspects are concerned, theoretical knowledge is actually cumula- tive. On the other hand, the extrinsic aspect of an economic theory will become a “derivation” (in Pareto’s terminology) in that it serves as the rationalization of human activity. In Pareto’s sociology, human action is determined by residues, innate traits that determine human behaviour, and derivations. Derivations are more or less logical theories or world views that guide people’s behaviour. To the extent ISBN 978-1-4419-8335-0 e-ISBN 978-1-4419-8336-7 that economic theory can also guide human behaviour, economic theory becomes a DOI 10.1007/978-1-4419-8336-7 social fact or construct that is itself subject to economic analysis. As we experiment Springer New York Dordrecht Heidelberg London with different economic theories to guide economic policy in general and fi scal Library of Congress Control Number: 2011934677 policy in particular, the history of economic thought can actually be practised as experimental economics in documenting the impact different economic theories © Springer Science+Business Media, LLC 2012 have on economic behaviour. Of course, this experimental kind of history of All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, economic thought becomes the more relevant the more similar the situations are in NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in which different economic theories are applied. connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identifi ed as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. Printed on acid-free paper 1 The following account is based on Michael McLure, The Paretian School and Italian Fiscal Springer is part of Springer Science+Business Media (www.springer.com) Sociology. London, Palgrave 2007. viii Contents Contents 11 Johann Heinrich von Thünen: A Founder of Modern Economics ............................................................................ 299 Hans Frambach 12 The Legacy of Karl Marx ...................................................................... 323 Helge Peukert 13 Friedrich List’s Striving for Economic Integration and Development .................................................................................... 351 Karl-Heinz Schmidt 14 The Entwickelung According to Gossen .............................................. 369 Jan van Daal 15 Gustav Schmoller as a Scientist of Political Economy ........................ 389 Reginald Hansen 1 Introduction ............................................................................................ 1 16 The Empirical and Inductivist Economics Jürgen G. Backhaus of Professor Menger ............................................................................... 415 2 The Tradition of Economic Thought in the Mediterranean Karl Milford World from the Ancient Classical Times Through the Hellenistic 17 Antoine Augustin Cournot .................................................................... 437 Times Until the Byzantine Times and Arab-Islamic World ................ 7 Christos P. Baloglou Christos P. Baloglou 18 Léon Walras: What Cutes Know and What They 3 Mercantilism ........................................................................................... 93 Should Know .......................................................................................... 465 Helge Peukert J.A. Hans Maks and Jan van Daal 4 The Cameralists: Fertile Sources for a New Science 19 Alfred Marshall ...................................................................................... 495 of Public Finance .................................................................................... 123 Earl Beach Richard E. Wagner 20 Knut Wicksell and Contemporary Political Economy ....................... 513 5 The Physiocrats ...................................................................................... 137 Richard E. Wagner Lluis Argemí d’Abadal 21 Werner Sombart ..................................................................................... 527 6 Adam Smith: Theory and Policy .......................................................... 161 Helge Peukert Andrew S. Skinner 22 The Scientifi c Contributions of Heinrich von Stackelberg ................. 565 7 Life and Work of David Ricardo (1772–1823) ..................................... 173 Peter R. Senn Arnold Heertje 23 Joseph Alois Schumpeter: The Economist of Rhetoric ...................... 581 8 John Stuart Mill’s Road to Leviathan: Yuichi Shionoya Early Life and Infl uences ...................................................................... 179 Michael R. Montgomery 24 Against Rigid Rules – Keynes’s View on Monetary Policy and Economic Theory ............................................................................ 605 9 John Stuart Mill’s Road to Leviathan II: Elke Muchlinski The Principles of Political Economy..................................................... 205 Michael R. Montgomery 25 Keynes’s “Long Struggle of Escape” .................................................... 625 Royall Brandis 10 Jeremy Bentham (1748–1832) ............................................................... 279 Christos P. Baloglou Contents ix 26 John Maynard Keynes and the Theory Contributors of the Monetary Economy ..................................................................... 641 Hans-Joachim Stadermann and Otto Steiger 27 James Steuart and the Theory of the Monetary Economy ................ 667 Hans-Joachim Stadermann and Otto Steiger 28 Friedrich August Hayek (1899–1992) ................................................... 689 Gerrit Meijer Index ................................................................................................................ 713 Jürgen G. Backhaus University of Erfurt, Nordhäuser Street 63 99089, Erfurt, Germany [email protected] Christos P. Baloglou Hellenic Telecommunications Organization, S.A. Messenias 14 & Gr. Lamprakis, 143 42 Nea Philadelphia, S.A. Athens, Greece [email protected] Earl Beach Charles Beach, Department of Economics , John Deutsch Institute , Kingston , ON, Canada [email protected] Royall Brandis University of Illinois at Urbana, Champaign , IL , USA Lluis Argemí d’Abadal University of Barcelona , Diagonal, 690 , 08034, Barcelona , Spain [email protected] Jan van Daal Triangle, University of Lyon-2 , Lyon , France [email protected] Hans Frambach Department of Economics , Schumpeter School of Business & Economics, University of Wuppertal , Gaußstraße 20, 42097 Wuppertal , Germany [email protected] Reginald Hansen Luxemburger Stra b e 426, 50937 Cologne , Germany Arnold Heertje Laegieskampweg 17, 1412 ER , Naarden , The Netherlands [email protected] J.A. Hans Maks Euroregional Centre of Economics (Eurocom) , Maastricht University , Maastricht , The Netherlands [email protected] xii Contributors Gerrit Meijer Department of Economics, Maastricht University , Larixlaan 3, Chapter 1 1231 BL Loosdrecht , The Netherlands Introduction [email protected] Karl Milford Department of Economics , University of Vienna, Vienna , Austria Jürgen G. Backhaus [email protected] Michael R. Montgomery , PhD School of Economics, University of Maine , 5774 Stevens Hall, Orono , ME 04469, USA [email protected] Elke Muchlinski Institute of Economic Policy and Economic History , Freie Universität Berlin , Boltzmannstraße 20, 14195 Berlin , Germany [email protected] Helge Peukert Faculty of the Sciences of the State/Economics, History of Economic Thought, what for? Joseph Schumpeter has noted: “Older Law and Social Science, Nordhäuser Str. 63, 99089 Erfurt, Germany authors and older views acquire … an importance … [when] the methods of the [email protected] economic research worker are undergoing a revolutionary change.”1 In a time of economic crisis, a refl ection of the roots of economic theory and methods prevents Karl-Heinz Schmidt Department of Economics , University Paderborn , us from following the wrong path. Leland Yeager has outlined the responsibility of Warburger Street. 100, 33098 Paderborn , Germany the historian of economic thought as follows: [email protected] “It is probably more true of economics than of the natural sciences that earlier Peter R. Senn 1121 Hinman Avenue, Evanston , IL 60202, USA discoveries are in danger of being forgotten; maintaining a cumulative growth of knowledge is more diffi cult. In the natural sciences, discoveries get embodied not Yuichi Shionoya Hitotsubashi University, Kunitachi, only into further advances in pure knowledge but also into technology, many of whose Tokyo 186-8601, Japan , users have a profi t and loss incentive to get things straight. The practitioners of eco- [email protected] nomic technology are largely politicians and political appointees with rather different Andrew S. Skinner Adam Smith Professor Emeritus in the University incentives. In economics, consequently, we need scholars who specialize in keeping of Glasgow’s Department of Political Economy, Glen House, Cardross , us aware and able to recognize earlier contributions – and earlier fallacies – when Dunbartonshire G82 5ES , UK they surface as supposedly new ideas. By exerting a needed discipline, specialists in [email protected] the history of thought can contribute to the cumulative character of economics.”2 The Austrian process of time-consuming roundabout production, where the Hans-Joachim Stadermann Berlin School of Economics and Law , results get better over time, is hopefully true with respect to this book. The book Hochschule für Wirtschaft und Recht Berlin, Badensche Straße 50–51, grew out of lectures started on behalf of the graduate students at Maastricht 10825 Berlin , Germany University, 3 where I taught until the fall of the year 2000. The work has an encyclopedic [email protected] Otto Steiger Institut für Konjunktur- und Strukturforschung (IKSF) , 1 J oseph A. Schumpeter, “Some Questions of Principle,” unpublished introduction to his H istory of FB 7 – Wirtschaftswissenschaften, Universität Bremen, Postfach 33 04 40, Economic Analysis , 1948/1949, p. 4 (I owe this reference to Professor Loring Allen, who found 28334 Bremen , Germany this manuscript in Schumpeter’s estate at Harvard University.). [email protected] 2 Leland Yeager ( 1981 ) , “Clark Warburton 1896–1979.” History of Political Economy 13 (2), pp. 279–284, p. 283. Richard E. Wagner Department of Economics , George Mason University , 3 d r. Peter Berends, still of Maastricht University, was my trusted partner in this. Fairfax , VA 22030, USA [email protected] J. G. Backhaus (*) University of Erfurt , Faculty of the Sciences of State , Nordhäuser Street 63 99089 , Erfurt , Germany e-mail: [email protected] JG B kh ( d) H db k f h Hi fE i Th h 1 2 J.G. Backhaus 1 Introduction 3 character which is why we completed the lectures at Erfurt University, where I have Table 1.1 Purposes been since then. To learn In principle, there are at least four ways to answer the question “History of The intellectual heritage and a critical posture in Samuels ( 1974 ) Introductory course Economic Thought – what for?” One may fi rst speculate about possible uses and dealing with texts Principles of economics Breit and Ransom Principles purposes of the history of economic thought as revealed in the practice of teaching ( 1982 ) the subject matter; employ methods of literary interpretation in surveying earlier From the classical works that have withstood the Stigler ( 1969 ) Advanced attempts along similar lines in order to amicably urge others to follow the guidelines test of time undergraduate of a program thus derived. This is the approach characteristic of the largest part of From the masters Walker (1 983 ) Advanced the substantial body of literature discussing the purposes of doctrinal history. Economics as a history of economists Recktenwald ( 1965 ) Introduction Second, we can consult the published record and determine what difference the To receive new insights for current research Schumpeter (1 954 ) Graduate research use of historical analysis makes in published research. This will yield but a distorted To understand the “fi liation of ideas,” what succeeds, Schumpeter ( 1954 ) Graduate research picture. In many European universities, the emphasis on publishing research is and how, and why Guidance when the science undergoes revolutionary Schumpeter ( 1948 / Graduate research much slighter than in their North American counterparts. Scholars like the late Piero change 1949) Sraffa often command respect primarily for their contributions to the oral tradition. Epistemological argument Schumpeter (1 954 ) Research While the oral tradition has always remained important,4 publishing research has Study of the competition of ideas Stigler and Friedland Research become more important in European academe over the last few years, but was ( 1979 ) almost accidental before.5 Over time Third, one could analyze survey data. While the problems associated with this Across cultures method are generally recognized, this often proves to be the only feasible method. Between schools Fourth, an analysis of the course titles of the history of economic thought classes Concerning cyclical developments Neumark (1 975 ) Research taught will reveal a great deal about their contents. While in America, course titles With respect to different factor markets Perlman and Research McCann ( 2000 ) tend to be standardized and are unlikely to vary with the instructor who happens to Preserving the stock of economic knowledge Yeager ( 1981 ) Research teach the course, this is most likely not so in the German, Austrian, and Swiss uni- versity. The curriculum guidelines tend to be more general, and each chair is gener- ally responsible for the development of an area of research and instruction in a particular subdiscipline of economics. Hence, the course titles (and contents) are the historians of economic thought, and likely even more, since some resourceful writers work of the professor who offers the course and who tries to announce precisely such as Schumpeter (1 954 ) managed to give several good reasons, without adhering what the course is going to be about. to any one of them, while pursuing still different purposes. In order to reduce this The literature analysis revealed the following purposes commonly claimed for complexity, in our empirical study7 groups or categories of purposes have been the history of economic thought instruction. 6 Table 1 .1 lists purposes, an exemplary formed, which in turn we tried to identify by appropriately grouping the course bibliographical source, and a category to which the purpose has been assigned in titles. The result of this effort is shown in the following table. It shows how many order to make the empirical task more manageable. courses could be attributed to each category of purpose. In interpreting this result, It should be obvious that this list of purposes, as long as it is, cannot possibly be one should note that in general only advanced students will be enrolled in courses said to be fully complete. There may be as many different purposes as there are studying special problems or subdisciplines of economics (Table 1 .2 ). It is probably not an overstatement to say that historians of economic thought have many different purposes in mind when they teach the subject. 4 Compare, e.g., Wilhelm Röpke’s discussion in: “Trends in German Business Cycle Policy,” It came as a great surprise when we learned that the extent of instruction in Economic Journal , vol. XLIII, no. 171, ( 1933 ) , pp. 427–441. the history of economic thought of post WWII German universities is impressive 5 The notion of “publish or perish” is still not descriptive of life in most European universities. Publication may often be prompted by a particular festive occasion, as when a colleague is to be honored with a Festschrift . 7 C ompare Backhaus, op. cit. , ( 1983 ) . The purposes for offering courses in the history of economic 6 These results (slightly updated) are based on and excerpted from Jürgen Backhaus, thought at German, several Swiss and Austrian Universities have empirically been identifi ed for “Theoriegeschichte – wozu?: Eine theoretische und empirische Untersuchung.” S tudien zur the post WWII period until March 1980. Such a long time span was possible by making our survey Entwicklung der ökonomischen Theorie III, H. Scherf, ed. Berlin: Duncker & Humblot 1983 comparable to an earlier study undertaken before the university reforms in 1960. Compare Bruno (Schriften des Vereins für Socialpolitik, N.V. 115 III). Compare also Jürgen Backhaus (1 986 ) : Schultz ( 1960 ) , “Die Geschichte der Volkswirtschaftslehre im Lehrbetrieb deutscher Universitäten “History of Economic Thought – What For? Empirical Observations from German Universities,” und einiges zur Problematik.” In: Otto Stammer, Karl C. Thalheim (eds.), Festgabe für Friedrich The History of Economics Society Bulletin , VII/2, pp. 60–66. Bülow zum 70. Geburtstag . Duncker & Humblot, pp. 343–362. 4 J.G. Backhaus 1 Introduction 5 Table 1.2 Purposes and course titles Table 1.4 Rankings of second research area Category Number of courses General economic theory 131 General 191 Economic history 45 Periods in the history of thought 72 Economic systems 33 The history of thought of subdisciplines 57 General economics 31 Focus on particular economists 31 Domestic monetary theory, etc. 13 Special problems 17 Economic growth, etc. 10 Other 8 Industrial organization, etc. 9 Economic education 6 Domestic fi scal policy, public fi nance 6 Table 1.3 Ranking of economists Not available 6 In German course titles In Anglo-American journals Marx Smith Schumpeter Keynes titles and, for purposes of comparison, a ranking drawn from a publications analysis List Ricardo undertaken by Stigler and Friedland ( 1979 ) and de Marchi and Lodewijks (1 983 ). Smith Malthus In the period under consideration, the fi rst place in German course titles takes Keynes Marshall Marx. 9 He does not fi gure in de Marchi and Lodewijk’s ( 1983 ) study, since they Müller Walras consider Marx and Marxism as a subject area. If the numbers attributed to this sub- Fichte, Petty, Ricardo Knight, Veblen ject area were attributed to the man, he would rank fi rst in the American sample, too. Fisher Rudolph ( 1984 ) , in the preface to his important study on Rodbertus, 10 lists the fol- Schumpeter, Cournot, Quesnay lowing reasons that justify research in the history of thought from a Marxist point of Wicksell, J. B. Clark Pareto view: (1) to counter attempts at falsifying the historical record, undertaken by the enemies of progress (p. 7); (2) to uncover, preserve, and continue the progressive elements in our intellectual heritage (p. 7); (3) to make a contribution to the proto- and largely underestimated. Of the 54 universities surveyed, 27 offer instruction history of sources and elements which Marx and Engels used for their revolutionary in the history of economics, while 13 do not. It is likely that of the remaining doctrine of scientifi c socialism (p. 9); and (4) Marxist social theory has reached a quarter, or 14 universities, more are involved in instruction in the subject than level of modernity and differentiation which requires new studies using refi ned that are not. methods of historical research (p. 11), for instance, the use of “the high art of cita- These data even correct the earlier study by Schultz (1 960 ) . The reason for the tion” in which “Marx was a master.” (p. 13) differences is straightforward. Schulz had only consulted the university bulletins, As I have mentioned earlier, this study cannot be duplicated for the United States. while we had co-operated with each university on a case-by-case basis and therefore However, it is readily apparent that research in the history of economic thought is had received information not contained in the bulletins. This method yielded a sub- undertaken by American and European scholars alike for reasons other than l ’art stantial correspondence which proved helpful in assigning the courses to categories. pour l’art . This shows up when we look at the combination of research areas most The correspondence revealed more information about the purposes of the lectures often noted by historians of economic thought according to the AEA Handbook than can be mentioned in this introduction. (1981). If the marginal products of research in the history of thought were invariant It is interesting to note some cultural differences8 between our survey results and with the variation of secondary research areas, a stochastic distribution should be Anglo-American fi ndings. Apart from the obvious differences in the organization of expected. Our count, however, is shown in Table 1.4 . courses, which turn on the chair system, cultural differences show up most point- Again, this result is only indicative of some interesting patterns along which edly when the course emphasis is on major fi gures in the history of economic historical research of economics proceeds. The selection of authors made in this thought. Table 1 .3 shows a ranking of economists most often mentioned in course book is complete as far as the Anglo-American approach is concerned, but adds the continental European perspective. 8 W erner W. Pommerehne, Friedrich Schneider, Guy Gilbert and Bruno S. Frey ( 1984 ) , “Concordia 9 E ast German universities were excluded from the survey. discors: Or: What do economists think?” Theory and Decision 16.3, pp. 251–308. This cultural 10 R udolph, Günther (1984), “K arl Rodbertus (1805–1875) und die Grundrententheorie: Politische difference also shows up in the difference between the German and the English edition of Ökonomie aus dem deutschen Vormärz. ” Berlin: Akademie (Akademie der Wissenschaften der Recktenwald’s collection of biographical essays of major economists. DDR – Schriften des Zentralinstitutes für Wirtschaftswissenschaften Nr. 21). 6 J.G. Backhaus References Chapter 2 The Tradition of Economic Thought Backhaus J (1983) “Theoriegeschichte – wozu? Eine theoretische und empirische Untersuchung.” in the Mediterranean World from the Ancient Studien zur Entwicklung der ökonomischen Theorie III, H. Scherf, ed. Berlin: Duncker & Humblot (Schriften des Vereins für Socialpolitik, N.V. 115 III) Classical Times Through the Hellenistic Backhaus J (1986) History of economic thought – what for? Empirical observations from German Universities. Hist Econ Soc Bull VII/2:60–66 Times Until the Byzantine Times Breit W, Ransom R (1982) The academic scribblers. The Dryden Press, Chicago de Marchi N and Lodewijks J (1983) HOPE and the Journal Literature in the History of Economic and Arab-Islamic World Thought. Hist Polit Econ 15(3):321–343 Neumark F (1975) Zyklen in der Geschichte ökonomischer Ideen. Kyklos 29(2):257–258 Perlman M, McCann C (2000) The pillars of economic understanding: factors and markets. The University of Michigan Press, Ann Arbor Christos P. Baloglou Pommerehne WW, Schneider F, Gilbert G, Frey BS (1984) Concordia discors or: what do econo- mists think? Theory Decis 16(3):251–308 Recktenwald HC (1965) Lebensbilder großer Nationalökonomen. Kiepenheuer & Witsch, Köln Röpke W (1933) Trends in German business cycle policy. Econ J XLIII/171:427–441 Rudolph G (1984) Karl Rodbertus (1805–1875) und die Grundrententheorie: Politische Ökonomie aus dem deutschen Vormärz. Akademie, Berlin (Akademie der Wissenschaften der DDR – Schriften des Zentralinstitutes für Wirtschaftswissenschaften Nr. 21) Samuels W (1974) History of economic thought as intellectual history. Hist Polit Econ 6:305–322 Schultz B (1960) Die Geschichte der Volkswirtschaftslehre im Lehrbetrieb deutscher Universitäten und einiges zur Problematik. In: Stammer O, Thalheim KC (eds) Festgabe für Friedrich Bülow zum 70. Duncker & Humblot, Geburtstag, pp 343–362 Schumpeter JA (1948/1949) Some questions of principle. Unpublished introduction to his History of Economic Analysis Schumpeter JA (1954) History of economic analysis. Oxford University Press, New York Stigler G (1969) Does economics have a useful past? Hist Polit Econ 1(2):217–230 Stigler G (1979) Does economics have a useful past? Hist Polit Econ 1(2):217–230 Stigler G, Friedland C (1979) The pattern of citation practices in economics. Hist Polit Econ II(1):1–20 Walker D (1983) Biography and the study of the history of economic thought. Res Hist Econ Thought Methodol 1:41–59 Yeager L (1981) Clark Warburton 1896–1979. Hist Polit Econ 13(2):279–284 Cicero Xenophon C. P. Baloglou (*) Hellenic Telecommunications Organization, S.A. Messenias 14 & Gr. Lamprakis , 143 42 Nea Philadelphia , Athens , Greece e-mail: [email protected] JG B kh ( d) H db k f h Hi fE i Th h 7 8 C.P. Baloglou 2 The Tradition of Economic Thought in the Mediterranean World… 9 No piece of reasoning that would have to be mentioned here has been preserved. So far as our subject is concerned we may safely leap over 500 years to the epoch of St. Thomas Aquinas (1225–1274), whose Summa Theologica is in the history of thought what the southwestern spire of the Cathedral of Chartres is in the history of architecture.”1 Schumpeter classifi ed several pre-Latin-European scholastic centuries as “blank,” suggesting that nothing of relevance to economics, or for that matter to any other intellectual endeavor, was said or written anywhere else. Such a claim of “discontinuity” is patently untenable. A substantial body of contemporary social thought, including economics, is traceable to Hellenistic, Arab- Islamic, and Byzantine “giants.” Our purpose of this essay is to explore and present the continuity of the economic thought in the Mediterranean World from the Classical Times until the Byzantine and Arab-Islamic world. In order to facilitate the reader’s appreciation and compre- hension of this long period, the essay will open with an introductory section describ- ing the signifi cance of the Greek economic thought compared to the ideas of the other people lived in Mediterranean era. Following upon this general introduction, the essay deals with the economic thought and writings of the Classical Period in Greece (see section “The Classical Greek Economic Thought”). The economic thought during the Hellenistic period (323–31 b c ) has not been studied extensively. Histories of economic thought, when they refer to ancient thought, usually pass directly from Aristotle or his immediate successors to medieval economic Aristotelianism. It would seem that ancient economic thought, Aristotle having reached its zenith in Aristotle’s Politics , disappeared, only to reappear as a Socrates catalyst for the refl ections of medieval commentators. However, we show that sev- eral Hellenistic schools do refer to economic problems (see section “Economic Thought in Hellenistic Times”). Introduction The Roman writers do belong in the tradition of the European intellectual life. Economic premises and content of Roman law evolved into the commercial law of Since modern economics is generally considered to have begun with the publication the Middle Ages and matured into the Law Merchant adopted into the Common of Adam Smith’s A n Inquiry into the Nature and Causes of the Wealth of Nations in Law system of England on a case-by-case basis, primarily under the aegis of Lord 1776 , a survey and investigation of pre-Smithian economic thought requires some Mansfi eld, Chief Justice of the Court of King’s Bench, 1756–1788 (see section justifi cation. Such an effort must offer both historical and methodological support “The Roman Heritage”).2 for its contribution to the study of the history of modern economics. The economic ideas of the Roman philosophers, and particularly of Plato and Most of the histories of economics that give attention to the pre-Smithian Aristotle against usury and wealth, infl uenced the Christian Fathers of the East, who background ignore the economic thought of Hellenistic and Byzantine Times, as belong to the Mediterranean tradition. Their aim is broadly to refl ect upon the well as Islamic economic ideas, although the Mediterranean crucible was the parent first- and second-generation Church literature to provide assistance in dealing of the Renaissance, while Muslim learning in the Spanish universities was a major with the new and baffl ing range of problems with which the Church of their day source of light for non-Mediterranean Europe. Another motivation, and a bit more was confronted. Of considerable importance among the issues which the Fathers fundamental, has to do with the “gap” in the evolution of economic thought alleged faced was the problem of the unequal distribution of wealth and similar related by Joseph Schumpeter (1883–1950) in his classic, H istory of Economic Analysis economic issues.3 They refl ected heavily in their works the ideas of the classical (1954): “The Eastern Empire survived the Western for another 1,000 years, kept Greek philosophers. going by the most interesting and most successful bureaucracy the world has ever seen. Many of the men who shaped policies in the offi ces of the Byzantine emperors were of the intellectual cream of their times. They dealt with a host of legal, monetary, 1 S chumpeter (1 954 [1994], pp. 73–74). commercial, agrarian and fi scal problems. We cannot help feeling that they must 2 L owry ( 1973, 1987b , p. 5). have philosophized about them. If they did, however, the results have been lost. 3 K arayiannis and Drakopoulos-Dodd ( 1998 , p. 164). 10 C.P. Baloglou 2 The Tradition of Economic Thought in the Mediterranean World… 11 Another central issue of the Byzantine History was that the scholars did get by the works entitled “On wealth (peri ploutou)” and “On household economics (peri occupy of the social and economic problems of the State. The ideology of these oikonomias).” In the post-Socratic demarcation of disciplines, ethics was the study of scholars remained constantly in the patterns of the “Kaiserreden” (speeches to personal and interindividual behavior; politics was the discourse on the ordering of Emperors), which were written systematically in the fourteenth and fi fteenth the public sphere; and the term oikonomia referred to the material organization of the century (see section “The Byzantine Economic Thought: An Overview”).4 household and of the estate, and to supplementary discourses on the fi nancial affairs While the infl uence of Islamic science and mathematics on European develop- of the city-state (polis-state) administration. Greek economic thought formed an ments has been widely accepted, there has been a grudging resistance to investigate integral but subordinated part of the two major disciplines, ethics and politics. The cultural infl uences; the troubadour and “courtly love” tradition is a case in point. We discourse of the organization of the Oikos and the economic ordering of the polis was tend to forget that the court of Frederick II in the “Two Sicilies” in the twelfth cen- not conceived to be an independent analytical sphere of thought.7 tury held open house for Muslim, Christian, and Jewish scholars. Also, there was the sustained Spanish bridge between North Africa and Europe that maintained cul- tural interaction through the Middle Ages when many scholastic doctors read Homo Oeconomicus: Oikonomia as an Art Effi ciency Arabic. 5 The main characteristic of the Islamic economic thought is that the Greek and Iranian heritages fi gure most prominently in its literary tradition (see section The word “Oikonomia” comes from “Oikos” and “nemein.” The root of the verb “Arab-Islamic Economic Thought”). “ n έ m e i n (nemein)” is nem (n e m -) and the verb “nemein” which very frequently appears in Homer means “to deal out, to dispense.” From the same root derive the words n o m ή, n o m e ύ V (a fl ock by the herdman), and n έ m e s i V (retribution, i.e., the distribution of The Classical Greek Economic Thought what is due). This interpretation comes from Homer’s description of the Cyclops, who were herdmen (n o m e ί V ) ( H omer, O dyssey , ix, 105–115). According to J.J. Rousseau About 5,000 years ago, the Mediterranean region became the cradle of a number of (1712–1778), the second word means decreeing of rules legislation: “The word econ- civilizations. Egypt, Mesopotamia, Syria, and Persia fi gure in the history books as omy comes from o ί k o V , house, and from n ό m o V , law, and denotes ordinarily nothing creative incubators of our cultural heritage. Their palace and temple complexes but the wise and legitimate government of the house for the common benefi t of the were of an unparalleled grandeur and arouse our awe even today. Their civilizations whole family. The meaning of the term has later been extended to the government of had relatively developed economies, with surplus production effi ciently mobilized the great family which is the state.” 8 This term means Household Management – the and redistributed for the administrative and religious establishment. Their scribal ordering, administration, and care of domestic affairs within a household; husbandry schools produced a great number of manuals with detailed instructions for the run- which implies thrift, orderly arrangement, and frugality, and is, in a word, “economi- ning of the complex system. But, in their compact worldview, there was no space for cal.” Here, in the primary sense of the root, oikonomos ( o i k o n ό m o V ) means house an autonomous body of political thought and still less for one of economic thought. 6 manager, housekeeper, or house steward; oikonomein ( o i k o n o m e i n ) means “to man- Classical Greece made a quantum leap in the humanization of arts and philosophy. age a household” or “do household duties,” and oikonomia ( o i k o n o m ί a ) refers to the Its rationalism came as a challenge to the mythical worldview and to the religious task or art or science of household management. 9 According to Aristotle, the second legends and liturgies. Aristotle states that very precisely and appropriately by the word has the meaning of arrangement, and consequently, their harmonization for their following sentence: “o i Έ l l h n e V d i a t o f e ύ g e i n t h n ά g n o i a n e f i l o s ό f h s a n better result (Aristotle, Politics I 10, 1258 a21–26). […] d i a t o e i d έ n a i t o e p ί s t a s q a i e d ί w k o n k a i o u c r ή s e ώ V t i n o V έ n e k a ” The epic “Works and Days” seems to have been built around the central issue of (M etaphysics A 983 b11). economic thought: the fundamental fact of human need (W orks and Days , 42ff). It The Greek rhetoricians and scholars were also the fi rst to write extensively on follows the implications of that primordial fact into all its ramifi cations in the life of problems of practical philosophy like ethics, politics, and economics. This is proved a Greek peasant. The problem, Hesiod teaches his brother, is to be solved not by means that nowadays would be labeled as “political” by force and fraud, bribery, and willful appropriation, but by incessant work in fair competition, by moderation, honesty and knowledge of how and when to do the things required in the course of 4 v an Dieten ( 1979 , pp. 5–6, not. 16). seasons (W orks and Days , 107–108), how to adjust wants to the resources available 5 L owry ( 1996 , pp. 707–708). 6 B aeck (1997, p. 146). It is evident that we meet descriptions of economic life and matters in Zoroaster’s law-book and in the Codex Hammurabi. Cf. Kautz ( 1860 , pp. 90–91). In the Talmudic 7 B aeck (1994, pp. 47–49). tradition, the ethical aspect of the labor has been praised. Cf. Ohrenstein and Gordon (1 991 , pp. 275–287). For an overview of the economic ideas of the population round the Mediterranean, 8 R ousseau ( 1755 , pp. 337–349 [1977, p. 22]). see Spengler (1 980 , pp. 16–38) and Baloglou and Peukert (1 996 , pp. 19–21). 9 R eumann ( 1979 , p. 571).

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