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Economics As Latecomer

Over at EconLog, Arnold Kling replies to a post by Tyler Cowen asking why the development of economics came so late in western intellectual history:

My view is that historically there was a universal propensity for plunder and coercion. It could be that only in the late stages of the British empire, around the time that Adam Smith was writing, that people really began to be accustomed to market economic activity.

In that case, it would not be surprising that economics itself developed late. Conversely, the fact that there was no Greek or Roman Adam Smith is consistent with my view that the Greeks and the Romans did not really have modern market economies.

I'd go in a slightly different direction here; rather than only understanding plunder, production wasn't understood at all.

There wasn't, as near as I can tell, a concept of money beyond currency. Kings would routinely re-issue debased coinage, inflating their way out of debt. When Spain decided to plunder the Americans for gold and silver, mostly what they did was create a global inflation of historic proportions. The problem, of course, is that all they did was create more money chasing the same goods.

I've been listening to the High Middle Ages CDs from the Teaching Company as well, and Prof. Daileader makes a point that towns really did constitute a market. So much so that guils felt it necessary to regulate trade in order to prevent "unfair" competition. Like advertising of any kind. Artisans worked on demand, rather than keeping regular hours. So while the Town was criticized by the Church and the Country for being mean and materialistic, it was such a heavily regulated market so as to be quite unfree. It even benefited from the urban advantage of specialization. Yet it certainly wasn't based on plunder.

But production was severely limited, often by factors outside the control of the producer. Farmers were stuck with the local weather, and villages would starve while villages only a few miles away would have crops rotting. Artisans couldn't scale up before industrialiization, so their production was essentially limited by time, and only variable in a very limited sense. The European population might have doubled between 1000 and 1300, but that amounts to about a 0.3% change each year - so of course business would look like a zero-sum game. Especially since innovation wasn't seen as changing and improving markets so much as undercutting your competition.

Some of these misconceptions persist, especially in the minds of Democrats and rent-seeking businessmen. But for the most part, the conditions had changed by 1776. Progress was obvious within one's lifetime. Production was scalable. Guilds were losing their power, and money was much better-understood.

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