history of economics

History Of Economics

The role of money has changed significantly as different economic forms have come into or fallen out of use over the millennia of human existence. In pre-capitalist societies, money was used primarily as a means of exchange -- it was not seen as having any real intrinsic value itself, but was simply useful as a marker of stored value to be exchanged for necessary commodities. Often in such societies, money was ignored altogether in many transactions, and commodities were simply exchanged for one another without the middle-man of money. Even when money was used, it was purely an intermediary in an exchange of commodities. That is, things or services of practical value were always the goal on both sides of any business transaction; the acquisition of money itself was not important or even necessarily possible. A simple way to describe this type of economy is as one that produces for use.

Producing for gain is more the realm of the capitalist society. In this system, which can seem like the most reasonable way only because we are so used to it, money is actually often of higher importance than the commodities it can be traded for. This illustrates money's purpose as a store of value. Instead of money being an intermediary between an exchange of commodities, commodities become intermediaries in an exchange of money. For instance, in a pre-capitalist system, a carpenter might sell a chair, then take that money and buy a tool so he can continue making chairs -- in essence, the chair was traded for the tool, with money as an intermediary. In a capitalists system, the carpenter would use money to buy a tool, make a chair with it, and sell that chair for far more than the tool cost. The basic actions are the same, but the goal is very different -- in the first system, the carpenter just wishes to remain useful; in the second system, he wants to obtain more value in the form of money.

2) Aristotle lived in a time long before capitalism, and even before the market system had really taken hold. As such, it should come as no surprise that his view of economics was different than ours today. Foremost among these differences was a lack of a word for the economy; Polanyi asserts that people were far less concerned with their means of livelihood than they were with family and other social institutions, saying that "the economy was not designated by any one word conveying the significance of food supply for man's animal survival."

Another characteristic of ancient economies (or non-economy, as it might (not) have been viewed then) that Paloanyi points out is the fact that for many people of the time, the actual location of their habitat was really not connected in any strong way to the economy or business of the time, and so was of little economic importance. But the home was very important for other reasons, again overshadowing the economy. Now people buy homes based on where they can find jobs, or even experience forced moves from their jobs -- this would have been unthinkable then.

A third interesting factor of early economies is the goal of self-sufficiency that individuals had. Large amounts of wealth were not really attainable, and the basic goal of the time was to have everything you needed. This was the definition of success, whereas poverty meant you were dependent on someone else, not just underprivileged. This leads to a fourth point Polanyi makes, specifically about kinship-organized societies. These groups especially tended to have little extraneous wealth, so there were very few exchanges that actually changed economic status. Such exchanges almost always marked major occasions, like proposals and/or weddings. The principles of exchange in these times were either utilitarian or symbolic, and not part of the gray area they occupy today.

3) the Balance of Trade period of mercantilism was a long-running and concentrated effort made by the major governments of the world to protect their own economic interests and those of their citizen merchants. In fact, at this time it was thought that whatever was good for an individual merchant was also good for the nation. Different policies were employed that had different ways of balancing trade and increasing profits, with different effects on the economy both for the merchants themselves, and for the rest of a country's population.

The balance of trade referred to efforts to keep the level of exports balanced with -- or more preferably above -- the level of imports, so there would be more wealth flowing into the country than out of it. In addition, countries would try to import mostly raw materials, which were cheaper, and export the more expensive finished products that had the added value of work. Thus, the rise of capitalism and mercantilism is intimately tied with the beginnings of industrialization.