What is history of Economic Thought Why study History of Economic Thought Three General Beliefs in the study of History of Economic Thought History of Economic Thought Vs Economic Thought Period /Timeline of History of Economic Thought

1. Outline
of
History of Economic Thought
Presented by
Dr. Devyanee K. Nemade
Assistant Professor
Department of Agricultural Economics &
Statistics
Dr. PDKV, Akola

2.  What is history of Economic Thought
 Why study History of Economic Thought
 Three General Beliefs in the study of History of
Economic Thought
 History of Economic Thought Vs Economic
Thought
 Period /Timeline of History of Economic Thought

3. History of Economic Thought
 It deals with different thinkers and theories in the
subject that became political economy and later
economics, from the ancient world to the present
day.
 It deals with the origin and development of
economic ideas and their Interrelations.
 It is not a history of what actually happened in the
past but rather a history of theories about how the
economy works.

4.  It deals with the development of economic ideas;
Economic History is the study of the economic
development of a nation or country.
 According to H. L. Bhatia includes the doctrines
and generalizations of various thinkers which deal
with the economic phenomena of our life.
 History of Economic thought is not a history of
What actually happened in the past but rather a
history of theories about how the economy works.

5. Why study the History of Economic Thought
 Aids in the understanding of Economics.
 Provides an introduction to part of Intellectual
history.
 Provides a perspective of our past in the
development of economic thought and relates this
past to current economic thought.
 Illustrate how ideas develop and change within
academic discipline.
 Helps create more critical attitudes and abilities.

6. Period /Timeline of History of Economic Thought
1. Ancient Time(776 - 300 BC)
2. Medieval Time & Islamic Golden Age
(5th to 15th Century)(500 to 1500 century)
3. The age of Reason(1770-1820)
4. Industrial & Economic Revoluation(1820-1929)
5. War & Depression(1929-1945)
6. Post war Economics(1945-1970)
7. Contemporary Economics(1970- Present)

7. IMPORTANCE OF HISTORY OF ECONOMIC THOUGHT
 The study of history of economic thought
clearly shows that there is a certain unity in
economic thought and this unity connects us
with ancient times.
 The study helps us to avoid committing the
same mistakes of the earlier economic thinkers.
 The significance of history of economic thought
is that it is an important tool of Knowledge.

8. Continue……
 The study will help students realize that economics
is different from economists.
 It helps students to know that economic ideas are
conditioned by time, place and circumstances.
 The study enables us to know the economic thinker
responsible for the formulation of certain important
economic principles and concepts.
 The study of History of economic thought will help
us to understand the origin of economics as a
discipline.

9. Continue……
 The study will help students to know that economic
ideas have been instrumental to the shaping of
economic and political policies of different
countries of the world.
 A study of the History of economic thought will help
to provide a broad basis for comparison of
different economic ideas. It will enable a person to
have a well-balanced and reasonable judgment.

10. Ancient Economic Thought
 The Ancient Economic Thought is not based on any
systematic paradigm. In ancient times economic thought
was not organised. It was scattered and haphazard.
 Economic thought during this period was mixed with
ethics and philosophy. The economic thought of the
ancient times was not scientific.
 Economics did not then grow as a full-fledged subject if
study. No systematic thinking on economic thought of
the ancient period can be discussed under different
schools of thought, such as,
Hebrew school of thought,
Greek school of thought,
Roman school of thought and
The Medieval economic thought.

11. Continue………….
 The study of the Ancient of Economic Thought
may not appear to be fascinating to modern
student but there can be little doubt that for a
clear understanding of economic theories.
 It gives us an insight into the life, habit and
customs of ancient communities and also
provides a wider spectrum of the growth of
modern economics.

12. Continue……….
 It shows the origin of economic thought and the
factors responsible for its development. Ideas
are passed from one generation to another with
the necessary modification and adoptions.
 The study of ancient economic thought do not
provide only the necessary bridge between
ancient and modern economic thought. It is a
very important link between the old and the new.

13. Hebrews Economic Thought (2500BC.- 150BC):
 The Old Testament of the Bible discusses the Hebrew
economic ideas.
 During the Hebrew period, agriculture was given the
most important place in society. Agriculture, of
course, was traditional.
 Trade and commerce were not fully developed but
King Solomon gave sufficient incentive for the
development of trade and commerce.
 The Hebrew women were experts in weaving and
spinning.
 There were special arrangements to help the poor
people by granting them tithe as was permitted under
the law of the land.
 There was no tax system in the Hebrew society.

16. Hebrews Economic Thought (2500BC.- 150BC:
 The Hebrews belong to the ancient civilizations of
the world.
 Their period dates back to 2500 B.C
 The philosophers of those time were real
founders of all social theories even though their
writings were in a scattered form.
 Division of labour, Market, Exchange, Money etc.
were the institutions of those times.
 Economic problems were never studied
separately.

17. Continue……….
 Economic problems were never studied
separately.
 Economics, Politics, Ethics and philosophy were
interconnected.
 But the religion and Ethics were given greater
importance. Economic life was controlled by
priests.
 They gave importance to agriculture.
 The Hebrews had definite ideas on subjects
such as interest, agriculture, property taxation
etc.

18. ECONOMIC IDEAS OF THE HEBREWS:
 Interest:
The Hebrews were told or directed not to
collect interest on money from the poor because
they borrow money mainly for the purpose
consumption. The rule was modified in the time of
King Solomon when charging of interest at low
rates was justified.
In that time, the export of food grains was
prohibited and in times of scarcity and famine,
hoarding of food grains was not permitted. Thus
the concept of just price included correct weight,
competitive price and reasonable rate of profit.

19. Continue………..
 Property –
The Hebrews in those days used land as their
main form of property. They measured wealth in
lands, slaves, talents, silvers and other precious
metals.
Money:
The Hebrews seemed to have understood the
functions of money. Money was used mainly in the
form of bullion. There was no question of stamped
money.

20. Continue………..
 Agriculture:
Hebrews gave preference to agriculture. A
Hebrew maxim runs as follows, “Although trading
gives greater profit, there may be loss in a moment.
Therefore never hesitate to buy land”
 Taxes :
Taxes did not exist in the Hebrew economy.
Labour service was utilized for the construction of
bridges, roads and other public utility services.

21. Greek Economic Thought
The Greek economic thought considered the
science of economics of home management.
And secondly also as the art of wealth-
getting and wealth-spending.
The Greek economic thought was developed
mainly by the three writers:
Early Economists:
- Plato(427 -347 BC)
- Aristotle (384 – 422 BC) and
- Xenophone(440 -355 BC)

25.  Planto was a Greek Philosopher who was born
in Athens in an aristocratic family.
 His famous writing, “The Republic and The laws”
are the most important of economic thought.
Economic Ideas of Plato:
 Plato’s main contribution was his account of
division of labour.
 Plato believed that the essential needs of
mankind are food, clothing and shelter.

26.  Plato’s interest was mainly in the development of
the economy.
 Plato also advocated for the increasing amount of
specialization in production.
Plato conceived of two types of classes:
 The guardians and auxiliaries.
 According to Plato, the guardian class should not
work for profit or accumulate proper work for profit
and accumulative property.
 However, only the lowest classes, farmers and
artisans, were allowed to work for profit and
accumulate property.

27.  Plato recognized the value of money as medium
of exchange. He did not favour the idea of
allowing gold and silver to be common to men.
Instead Plato suggested the use of domestic
coins for payment of wages and other
transactions.
 Plato prohibited interest taking for loans in the
ancient Greek. But later on he permitted interest
taking as a penalty for delayed payment.

28. Aristotale:

30. Who was Aristotle?
 Ancient Greek Philosopher Aristotle together
with Socrates and Plato, laid much of the
ground work for western philosophy.
 Aristotle covered a wide range and subject
including Biology(Father of), Zoology(Father of),
Music, theatre, Physics, Politics, rhetoric,
linguistics much, much more.
 It is said of Aristotle that he was probably the
last person to known everything there was to be
known in his own time.

32.  The most important contribution of Aristotle to the
development of economic thought was his ideas on the
meaning and nature of economics.
 Accoding to him, Oeconomicus aims at the management
of the household economy and Chrmatisptics is
concerned with wealth-generation and spending.
 Aristotle was against Plato’s ideas on property
communism. He was also a supporter of the slavery
system.
 Aristotle considered value in use and value in exchange.
 Money was a useful way of facilitating exchange. Money
was medium of exchange.
 Aristotle was in favour of private property, and he was
against the joint use of property.

37. Xenophon(440 -355 BC)
 The main economic ideas of Xenophone are
contained in his book Cyropaedia.
 This book contains a good discussion on the division
of labour.
 He has also discussed about the management of the
domestic economy.
 He was in favour of Agriculture.

38.  He was of the view that mines can be an important
source of wealth for the development of a nation.
 He urged for the organization of joint-stock
companies.
 He also recommended a large population for the
prosperity of Athens.
 According to Xenophon, merchants and Ship-owners
were considered highly valuable citizens because
they brought wealth to the city.

39. Roman Economic Thought:

41. Roman Economy

42. The Roman economic thought was meagre and not
original.
 It was mainly derived from the Greek economic
thought.
 It was against money making.
 It has a high regard for Agriculture.
 In Roman thinkers were in fabour of cultivation of
small plots of land.
 Large scale farming was not favoured by the Roman
thinkers.
 The Roman writer, Pliny, was in favour of using gold
as money.

43. Continue………………..
Roman economic thinkers such as Cicero,
Seneca, Pliny, Cato and Verro.
 Cicero was in favour of wholesale trade and agriculture
but he was opposed to usury.
 Cato thought agriculture to be the most important
profession.
 Pliny wrote on the use of money and its importance in
the development of a nation.
 Columella was in favor of small scale farming and
pointed out the superiority of free labour over the slave
labour.
 Verro was an industrial economist.

44. Medieval Economic Thought
 The Medieval writers are also called Doctors or
Scholars.
 The Medieval thought was based on moral
questions of right and wrong, justice and natural
law.
 The most important single writer who was
responsible for the development of Medieval
thought was St. Thomas Aquinas.

46. Thomas Aquinas
 Doctor of Church
(“Doctor Angelicus” and “Doctor Communis”)
 Italian, Dominican friar.
 Immensely influential philosopher,
theologian and jurist.

47.  According to Aquinas, value is nothing but the just
price.
 The price should include the cost of production, risk
and carriage charges.
 Aquinas also supported the division of labour in
society.
 Aquinas condemned usury. But he was in favour of
providing compensation for damages and delay to
the lenders.
 Although internal and international trade were
developing during the period of Aquinas.

48.  Aquinas was in favour of private property
because it was consistent with the natural law of
the land.
 According to Aquinas, a state has to perform
many important functions such as the
maintenance and building of road, providing a
good system of coinage, weights and measures
and for eliminating poverty, apart from
maintaining the regular law.

49. Mercantilism
 Mercantilism is a national economic policy that
is designed to maximize the exports of nation.
Mercantilism was dominant in modernized parts
of Europe from the 16th to the 18th Centuries.
 The goals was to increase a nation’s wealth by
imposing government regulation .
 It was believed national strength could be
maximized by limiting imports and maximizing
exports.

51. Mercantilist policy have included,
 For bidding colonies to trade with other nations.
 Banning the export of gold and silver, even for
payments.
 Export subsidies.
 Promoting manufacturing with research or direct
subsidies.
 Limited wages.
 Maximizing the use of domestic resources.

52. Main ideas or Characteristics of Mercantilism:
 The fundamental aim of the mercantilists was to
make the country strong. The strength of the
country was found in the wealth of the country,
especially that portion of wealth which consisted of
precious metals like gold and silver.
 In the 16th century, the only form of wealth, most
useful and generally acceptable was gold and
silver. Naturally the mercantilist attached more
importance to gold and silver.

53. Continue…………….
 For conducting wars money was essential. Three
things were required for war: Money, More money
and Still more money.
 Mercantilists believed that trade depended on
plentiful of money.
 Money was also needed for development of
exchange economy.
 Money in those days was identified with capital.

54. Continue…………….
 Population:
Mercantilists encouraged large population for
making the nation militarily strong and for increasing
its productive capacity.
 Natural Resources:
The mercantilists wanted to utilize all the
natural resources to the maximum extent so as to
produce more, export more and import less. They
also attached importance to agriculture in order to
solve the food problem.

55. Continue…………….
 Wages and Rent:
The mercantilists discussed the problems
of production only. So they did not give much
importance to the problems of distribution,
especially to wages and rent.

56. Thomas Mun
(1571 to 1641)

57.  Born: 17 Jun 1571, Londan
 Field: International Trade
 Contribution: English Economic Policy
 Thomas Mun was one of the directors of the
British East India Company.
 He is an English writer on economics and is
often referred to as the last of the early
mercantilists.

58.  England was to become wealthy by exporting
more goods than the imported.
 England must reduce the consumption of all
imported goods.
 Unused agricultural land should be cultivated.
 Exporters should gain max benefit by
obtaining high prices for essential goods and
lower prices for more competitive goods.

60. Phisiocrates:
 Phsiocrates were a group of Economists who
believed that the wealth of Nations was derived
solely from Agriculture.
 Their theories originated in France and were
most popular during the Second half of the 18th
century Phisiocracy was perhaps the First well
developed theory of Economics.

61. Continue……….
 The Phisiocrates saw the true wealth of a
nation as determined by the surplus of
Agricultural Production over and above
that needed to support Agriculture.

62. Key Concept:
 Individualism and Laissez fair
 Private Property
 Diminishing returns
 Investment Capital

63. Famous Physiocrates:
 Richard Cantillon
 Francois Quesnay
 Anne Robert Jacques Turgot
 Jean Claude Morie
 Victor de Riqueti
 Count de Mirabeau
 Pierre Samuel du Pont de Nemours
 Stanislow Staszic

68.  Classical economics, developed in the 18th &
19th Centuries, included a value theory and
distribution theory.
 The value of a product was thought to depend
on the costs involved in producing that product.
 The explanation of costs in classical economics
was simultaneously and explanation of
distribution.
 A landlord received rent, workers received
wages and capitalist tenant farmer received
profit on their investment.

69. Adam Smith
 Adam Smith is considered to be the father
of economics.
 They believed in science of natural laws.
 Adam Smith proposes natural law in
economic affairs.

71.  Wrote: Wealth of Nations.
 Labaour is the source of a Country’s wealth.
 Wealth should be increased by the division of labour.
 Free competition ensured that prices were set freely.
 Encouraged free international trade.
 Role of the Government – defense, education &
Education.
 Favoured taxation of rent to fund government and
developed canons of tax: Equity, economy,
convenience and certainty.

72. The Wealth of Nations
(Benefits of free trade)
 The pursuit of self interest, “What benefits the
individual best benefited the society.”
 Division of Labour:
Increased productivity increased the
wealth in a country. Example with the manufacture
of Pins.
 Productivity of labour depends upon
technological progress of a country and which
in turn depends upon the division labour.

73. Continue………..
The labour of value theory:
The value of an item was equal to the
amount of labour that went in the producing the
product. The value of anything is equal to the
labour it can save you.
Benefits of division of labour:
 Increase dexterity of workers.
 Saving time required to produce commodity.
 Invention of better machine and equipment.

74. Laissez Fair:
Adam Smith’s theory based on laissez fair
which requires that state should not impose any
restriction on freedom of an individual.
The theory of economic development rest
on following:
1. Saving
2. Division of labour
3. Wide extent of market
4. Saving or capital accumulation is the starting
point of this theory.

75. Production:
Importance of technology for
improvement in productivity and which is possible
only if sufficient capital is available.

85.  He believed that since workers generated all the
income they deserved all the profits.
 The exploited working class would grow in numbers,
organize themselves, revolt and over throw
capitalists.
 The workers would then redistribute wealth.
 He downplayed the role of land, labour, capital and
especially enterprise in generating income and
profit.

86. Criticism of Karl Marx
 Despite what Marx believed, the growth of Unions
ensured protection of working class and improved
the Middle and Professional classes emerged.
 Technology did not lead to mass unemployment.
 Labour is useless without land or capital.
 He falsely predicted that the advances of technology
would lead to mass unemployment.
 However, Predictions on emergence of Oligopolies
and trade cycles came true.

98. Economics have actually been
around for hundreds of years, creating
new financial systems and coming up
with new and exciting philosophies that
have helped shape the economies for
their countries. It is ten famous
economists and their contributions.

99. Although the ideas of the economist
might seem like a new one, economists
have actually been around for hundreds of
years, creating new financial systems and
coming up with new and exciting
philosophies that have helped shape the
economies for their countries, as well as
others.