*Over the following weeks I'll be giving summaries and some analysis to the writings of some of the major thinkers in the history of economic thought. The authors will not precede or follow in the tradition of the Austrian school of thought (with the exception of Turgot and Cantillion), although I will analyze the pros and cons of each author from a Misesian perspective to the best of my ability. For a more in depth analysis of each of the following authors, I would recommend Murray Rothbard's two volume text on the history of economic thought.
Aristotle made some of the first
contributions to the study of what is now known as economics, although some of
these contributions were most definitely more advanced than others. For
example, Aristotle recognized in his Politics
one of the basic axioms of economics, mainly that people act in order to obtain
that which they think is good.[i]
These desires are represented through money, which is used by individuals who
purchase what they want or need. [ii]
The more money one makes, the more his services are said to be demanded by
other individuals. Aristotle is touching here on subjective values, although he
does not go into a deep analysis. Rothbard points out however that he does
understand the Austrian insight that “if good A is more valuable than good B,
the loss of good A is considered worse than the loss of good B.”[iii]
Another strong point in the economics of Aristotle is that he breaks from the
view of his teacher Plato, who thought that communal property would bring about
peace. Aristotle counters his teacher by pointing out in a society of communal
ownership, some will receive less than they feel they deserve given the amount
of work they did, while some will receive more than others feel they deserve
given their amount of work.[iv]
While Aristotle was one of the first philosophers to touch on subjects of
political economy, an area which he undoubtedly made tremendous contributions, in
my opinion he did more to help lead scholars astray than to advance the study
of political economy.
Perhaps the most notable and
important mistake Aristotle made with regards to the study of political economy
was that he believed that in order for an exchange to take place, the goods
within the exchange must be equated.[v]
This belief, which is incorrect due to the fact of a double inequality of values in an exchange,
led later thinkers to question when a price is just, since one would infer from
Aristotle’s statement that no one would take part in a transaction in which
they would receive less value than they are giving away. Being unable to
understand that an exchange necessarily involves a double inequality of wants
led him towards dismissing usury as unjust, since the money lent would not be
equated to the money paid back to the lender. It seems Aristotle did not
understand how risk and time preference play a role in the decision for individuals
to lend money. He further led scholars astray in a pre-Ricardian fashion by
splitting the usefulness of a good into the use for exchange and that use which
a good is typically used for (i.e. a shoe is used for wearing).[vi]
While he did not split how value is determined as Ricardo did, he put in place
the precedent for one to understand that there could be two different values
for the same good. It is not a stretch from Aristotle’s writings to conclude
that each use has a different value to an actor, in fact, it is essentially
implicit since if one were to exchange a good instead of use the good for that
which it was intended, one would be in fact placing a higher value on the good
for exchange than the value of the goods intended use.
As we
see throughout the history of economic thought, it is the mistakes of Aristotle
which have a bigger impact on the thinking of later scholars rather than the
correct contributions he made to the study of political economy.
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