In the
history of economic thoughtThe history of economic thought deals with different thinkers and theories in the subject that became political economy and economics from the ancient world to the present day...
,
ancient economic thought refers to the ideas from people before the Middle Ages.
Ancient Near East
Economic organization in the earliest civilizations of the
fertile crescentThe Fertile Crescent is a region in the Near East, incorporating the Levant and Mesopotamia, and often incorrectly extended to Egypt. Mesopotamia is considered the cradle of civilization and saw the development of the earliest human civilizations and is the birthplace of writing and the wheel.The...
was driven by the need to efficiently grow crops in river basins. The Euphrates and Nile valleys were homes to earliest examples of codified measurements written in base 60 and
Egyptian fractionAn Egyptian fraction is the sum of distinct unit fractions, such as . That is, each fraction in the expression has a numerator equal to 1 and a denominator that is a positive integer, and all the denominators differ from each other. The sum of an expression of this type is a positive rational...
s.
Egyptian keepers of royal granaries, and absentee Egyptian landowners reported in the
Heqanakht papyriThe Heqanakht Papyri or Heqanakht Letters , written around 2,000 BCE, have been placed in historical context since 1954, per Cerny, Jareslav . "Prices and Wages in Egypt in the Ramesside Period." Journal of World History, 1, 903–21...
. Historians of this period note that the major tool of accounting for agrarian societies, the scales used to measure grain inventory, reflected dual religious and ethical symbolic meanings. The Erlenmeyer tablets give a picture of Sumerian production in the Euphrates Valley around 2,200-2,100 BC, and show an understanding of the relationship between grain and labor inputs (valued in "female labor days") and outputs and an emphasis on efficiency. Egyptians measured work output in man-days. The development of sophisticated economic administration continued in the Euphrates and Nile valleys during the Babylonian Empire and Egyptian Empires when trading units spread through the Near East within monetary systems. Egyptian fraction and base 60 monetary units were extended in use and diversity to Greek,
early Islamic cultureThe Islamic Golden Age or the Islamic Renaissance, is traditionally dated from the 9th to 13th centuries for 400 years C.E., but has been extended to the 15th century by recent scholarship...
, and medieval cultures. By 1202 AD Leonardo of Pisa
FibonacciLeonardo of Pisa , also known as Leonardo Pisano, Leonardo Bonacci, Leonardo Fibonacci, or, most commonly, simply Fibonacci, was an Italian mathematician, considered by some "the most talented mathematician of the Middle Ages".Fibonacci is best known to the modern world for:* The adoption of the...
use of zero and Vedic-Islamic numerals, motivated Europeans to apply zero as an exponent, birthing modern decimals 350 years later.
The city states of
SumerSumer was a civilization and historical region in southern Iraq . It is the earliest known civilization in the world and is known as the Cradle of Civilization...
developed a trade and market economy based originally on the
commodity moneyCommodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money....
of the
ShekelShekel , also rendered sheqel, refers to one of many ancient units of weight and currency. The first known usage is from Mesopotamia around 3000 BC. One explanation is given for the origination of this word as to have originally applied to a specific mass of barley, and the first syllable of the...
which was a certain weight measure of
barleyBarley is a cereal grain derived from the annual grass Hordeum vulgare. It serves as a major animal feed crop, with smaller amounts used for malting and in health food. It is used in soups, stews and barley bread in various countries, such as Scotland and in Africa...
, while the Babylonians and their city state neighbors later developed the earliest system of
economicsEconomics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
using a
metricIn mathematics, a metric or distance function is a function which defines a distance between elements of a set. A set with a metric is called a metric space. A metric induces a topology on a set but not all topologies can be generated by a metric...
of various commodities, that was fixed in a legal code. The early law codes from Sumer could be considered the first (written) economic formula, and had many attributes still in use in the current
price systemIn economics, a price system is any economic system that effects its distribution of goods and services with prices and employing any form of money or debt tokens. Except for possible remote and primitive communities, all modern societies use price systems to allocate resources...
today... such as codified amounts of
moneyMoney is anything that is generally accepted as payment for goods and services and repayment of debts. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment...
for business deals (interest rates), fines in money for 'wrong doing', inheritance rules, laws concerning how private property is to be taxed or divided, etc. For a summary of the laws, see
Babylonian lawArchaeological material for the study of Babylonian law is singularly extensive. So-called "contracts" exist in the thousands, including a great variety of deeds, conveyances, bonds, receipts, accounts, and most important of all, actual legal decisions given by the judges in the law courts...
.
Earlier collections of (written) laws, just prior to Hammurabi, that could also be considered rules and regulations as to economic law for their cities include the
codex of Ur-NammuThe Code of Ur-Nammu is the oldest known tablet containing a law code surviving today. It was written in the Sumerian language ca. 2100-2050 BC...
, king of
UrUr was a city in ancient Sumer, located at the site of modern Tell el-Mukayyar in Iraq's Dhi Qar Governorate....
(ca. 2050 BC), the Codex of
EshnunnaEshnunna was an ancient Sumerian city and city-state in lower Mesopotamia. Although situated in the Diyala Valley north-east of Sumer proper, the city nonetheless belonged securely within the Sumerian cultural milieu....
(ca. 1930 BC) and the codex of
Lipit-IshtarLipit-Ishtar , was the fifth ruler of the first dynasty of Isin, and ruled from around 1934 BCE to 1924 BCE. Some documents and royal inscriptions from his time have survived, but he is mostly known because Sumerian language hymns written in his honor, as well as a legal code written in his name ,...
of
IsinIsin was a city of lower Mesopotamia, which flourished during the 20th century BC. No kings of Isin are known from the Sumerian period, and the "Dynasty of Isin" refers to Amorite states in lower Mesopotamia that attained independence with the decline of the Third dynasty of Ur. The dynasty of...
(ca. 1870 BC).
Ancient Greco-Roman World
Some prominent classical scholars assert that relevant economic thought did not arise until the enlightenment, as early economic though was based on metaphysical principles which are incommensurate with contemporary dominant economic theories such as neo-classical economics. However, several ancient Greek and Roman thinkers made various economic observations, especially
AristotleAristotle was a Greek philosopher, a student of Plato and teacher of Alexander the Great. He wrote on many subjects, including physics, metaphysics, poetry, theater, music, logic, rhetoric, politics, government, ethics, biology, and zoology.Together with Plato and Socrates , Aristotle is one of...
and
XenophonXenophon , son of Gryllus, of the deme Erchia of Athens, also known as Xenophon of Athens and Xenophon of Thebes, was a soldier, mercenary, and a contemporary and admirer of Socrates...
. Many other Greek writings show understanding of sophisticated economic concepts. For instance, a form of Gresham’s Law is presented in
AristophanesAristophanes , son of Philippus, of the deme Cydathenaus, was a prolific and much acclaimed comic playwright of ancient Athens. Eleven of his forty plays have come down to us virtually complete...
’ Frogs, and beyond
PlatoPlato , was a Classical Greek philosopher, mathematician, writer of philosophical dialogues, and founder of the Academy in Athens, the first institution of higher learning in the Western world...
's application of sophisticated mathematical advances influenced by the
PythagoreansPythagoreanism is a term used for the esoteric and metaphysical beliefs held by Pythagoras and his followers, the Pythagoreans, who were much influenced by mathematics and probably a very inspirational source for Plato and Platonism....
is his appreciation of
fiat moneyFiat money is money declared by a government to be legal tender. The term derives from the Latin fiat, meaning "let it be done". Fiat money achieves value because a government demands it in payment of taxes and says it should be used within the country as a "tender" to pay all debts...
in his
LawsThe Laws is Plato's last and longest dialogue. The question asked at the beginning is not "What is law?" as one would expect. That is the question of the Minos...
(742a–b) and in the pseudo-Platonic dialogue, Eryxias.
Bryson of HeracleaBryson of Heraclea was an ancient Greek mathematician and sophist who contributed to solving the problem of squaring the circle and calculating pi.-Life and work:...
was a neo-platonic who is cited as having heavily influenced early Muslim economic scholarship.
Xenophon
The influence of
BabyloniaBabylonia was a civilization in Lower Mesopotamia , with Babylon as its capital. Babylonia emerged when Hammurabi created an empire out of the territories of the former kingdoms of Sumer and Akkad...
n and Persian thought on Greek administrative economics is present in the work of Greek historian Xenophon. Discussion of economic principles are especially present in his Oeconomicus, his biography of
Cyrus the GreatCyrus the Great , also known as Cyrus II of Persia and Cyrus the Elder, was the first Zoroastrian Persian Shāhanshāh...
, Cyropaedia,
HieroHiero is a minor work by Xenophon, set as a dialogue between Hiero, tyrant of Syracuse, and the lyric poet Simonides about 474 B.C.E. In it Xenophon argues that a tyrant does not have any more access to happiness than a private person.The dialogue—like many of Xenophon's works—does...
, and
Ways and MeansWays and Means may refer to:* Committee of Ways and Means of the UK parliament* United States House Committee on Ways and Means* "Ways and Means" , an episode of the television series The West Wing...
. Hiero is a minor work which includes discussion of leaders stimulating private production and technology through various means including public recognition and prizes. Ways and Means is a short treatise on economic development, and showed an understanding of the importance of taking advantage of economies of scale and advocated laws promoting foreign merchants. The Oeconomicus discusses the administration of agricultural land. In the work, subjective personal value of goods is analyzed and compared with
exchange valueIn political economy and especially Marxian economics, exchange value refers to one of four major attributes of a commodity, i.e., an item or service produced for, and sold on the market...
. Xenophon uses the example of a horse, which may be of no use to a person who does not know how to handle it, but still has exchange value. Although this broadens the idea of value based in individual use to a more general social concept of value that comes through exchange, scholars note that this is not a market theory of value. In Cyropaedia Xenophon presents what in hindsight can be seen as the foundation for a theory of fair exchange in the market. In one anecdote, the young Cyrus is to judge the fairness of an exchange made between a tall and a short boy. The tall boy forces the pair to exchange tunics, because the tall boy's tunic is too short, shorter than the short boys, which is too tall for him. Cyrus rules the exchange fair because it results in a better fit for both boys. Cyrus' mentors were not pleased with Cyrus' basing his decision on the values involved, as a just exchange must be voluntary. Later in the biography, Xenophon discusses the concept of division of labor, referencing specialized cooks and workers in a shoemaking shop. Scholars have noted that Adam Smith's early notes about this concept "read like a paraphrase of Xenophon's discussion of the role of the carpenter as a "jack of all trades" in small cities and as a specialist in large cities. Marx attributes to Cyropaedia the idea that the division of labor correlates to the size of a market. Xenophon also presents an example of mutual advantage from exchange in a story about Cyrus coordinating an exchange of surplus farmland from Armenians, who were herders, and surplus grazing land from Chaldeans, who were farmers.
Aristotle
Allocation of scarce resources was a moral issue to Aristotle, and in book I of his
Politics, Aristotle expresses that consumption was the objective of production, and the surplus should be allocated to the rearing of children, and personal satiation ought to be the natural limit of consumption. (To Aristotle, the question was a moral one: in his era child mortality was high.) In transactions, Aristotle used the labels of "natural" and "unnatural". Natural transactions were related to the satisfaction of needs and yielded wealth that was limited in quantity by the purpose it served. Un-natural transactions aimed at monetary gain and the wealth they yielded was potentially without limits. He explained the un-natural wealth had no limits because it became an end in itself rather than a means to another end—satisfaction of needs. This distinction is the basis for Aristotle's moral rejection of usury. Later, in book VII Chapter 1 of
Politics, Aristotle asserts and some interpret this as capturing a concept of diminishing marginal utility, thought there has been marked disagreement about the development and rôle of marginal utility considerations in Aristotle's value theory. Certainly this book formulates an ordinal hierarchy of values, which later appeared in Maslow's contribution to motivation theory.
Aristotle's
Nicomachean EthicsNicomachean Ethics is the name normally given to the most well-known work by Aristotle on ethics...
, particularly book V.v, has been called the most economically provocative analytic writing in ancient Greece. Therein, Aristotle discusses justice in distribution and exchange. Still considering isolated exchanges rather than markets, Aristotle sought to discuss just exchange prices between individuals with different subjective values for their goods. Interestingly, Aristotle suggested three different proportions to analyze distributive, corrective, and reciprocal or exchange transactions: the arithmetic, the geometric, and the harmonic. The harmonic proportion is interesting, as it implies a strong commitment to the subjective values of the traders. Sixth century A.D. philosopher Boethius used the example of 16 as the
harmonic meanIn mathematics, the harmonic mean is one of several kinds of average. Typically, it is appropriate for situations when the average of rates is desired....
of 10 and 40. 16 is the same percentage larger than 10 as it is smaller than 40 (60 percent of 10 is 6, while 60 percent of 40 is 24). Thus if two bargainers have subjective prices for a good of 10 and 40, Aristotle points out that in exchange, it is most fair to price the good at 16, due to the equality proportional differences from their price to the new price. Another interesting nuance in this analysis of exchange is that Aristotle also saw a zone of consumer surplus or mutual advantage to both consumers that had to be divided.
Roman law
Early Greek and Judaic law follow a voluntaristic principle of just exchange; a party was only held to an agreement after the point of sale. Roman law developed the
contractIn law, a contract is a binding legal agreement that is enforceable in a court of law. That is to say, a contract is an exchange of promises for the breach of which the law will provide a remedy....
recognizing that planning and commitments over time are necessary for efficient production and trade. The large body of law was unified as the
Corpus Juris CivilisThe Corpus Juris Civilis is the modern name for a collection of fundamental works in jurisprudence, issued from 529 to 534 by order of Justinian I, Eastern Roman Emperor....
in the 530s AD by Justinian. who was Emperor of the Eastern Roman Empire from 526-565 AD. In Institutiones, the principle of just trade is stated as "tantum bona valent, quantum vendi possunt" ("goods are worth as much as they can be sold for").
Ancient India
Chulavamsa records that
Parakramabahu IParākramabāhu I was king of Sri Lanka from 1153–1186. During his reign from his capital Polonnaruwa, he unified the three sub kingdoms of the island, becoming one of the last monarchs in Sri Lankan history to do so...
of Sri Lanka had debased the currency of
Ancient Sri LankaTraditionally, the recorded history of Sri Lanka boasts of 25 chronicled centuries. However, the inhabitation of the country goes back much further, to the Balangoda People, about 32,000 - 3000 BCE...
in order to produce monies to support his large scale infrastructure projects.
Parakramabahu IParākramabāhu I was king of Sri Lanka from 1153–1186. During his reign from his capital Polonnaruwa, he unified the three sub kingdoms of the island, becoming one of the last monarchs in Sri Lankan history to do so...
also pioneered
free tradeFree trade is a type of trade policy that allows traders to act and transact without interference from government. According to the law of comparative advantage the policy permits trading partners mutual gains from trade of goods and services....
during his reign, a war was fought with Burma to defend free trade.
Chanakya
ChanakyaChanakya was an adviser and a prime minister to the first Maurya Emperor Chandragupta , and was the chief architect of his rise to power. Kautilya and Vishnugupta, the names by which the ancient Indian political treatise called the Arthaśāstra identifies its author, are traditionally identified...
(c.
350 BC-Persian Empire:* Sidon, the centre of the revolt against Persia, seeks help from its sister city of Tyre and from Egypt but gets very little.* Idrieus, the second son of Hecatomnus, succeeds to the throne of Caria on the death of Artemisia II, the widow of his elder brother Mausolus...
-
275 BC-Egypt:* The Museum of Alexandria is founded by the Egyptian King Ptolemy II.-Roman Republic:* When Pyrrhus returns from Sicily, he finds himself vastly outnumbered by a superior Roman army under the command of consul Manius Curius Dentatus...
) considered economic issues. He was a professor of
political sciencePolitical science is a social science concerned with the theory and practice of politics and the description and analysis of political systems and political behavior. It is often described as the pragmatic application of the art and science of politics defined as "who gets what, when and how",...
at the Takshashila University of
ancient IndiaThe known history of India - the name in this context includes the areas now known as India, Pakistan and Bangladesh - begins with the Indus Valley Civilization, which spread and flourished in the north-western part of the Indian subcontinent, from c. 3300 to 1300 BCE. Its Mature Harappan period...
, and later the
Prime MinisterA prime minister is the most senior minister of cabinet in the executive branch of government in a parliamentary system. The position is usually held by, but need not always be held by, a politician. In many systems, the prime minister selects and can dismiss other members of the cabinet, and...
of the
MauryanThe Maurya Empire was a geographically extensive and powerful empire in ancient India, ruled by the Mauryan dynasty from 321 to 185 B.C.E....
emperor
Chandragupta MauryaChandragupta Maurya , sometimes known simply as Chandragupta , was the founder of the Maurya Empire. Chandragupta succeeded in bringing together most of the Indian subcontinent. As a result, Chandragupta is considered the first unifier of India and its first genuine emperor...
. He wrote the
ArthashastraThe Arthashastra is an ancient Indian treatise on statecraft, economic policy and military strategy which identifies its author by the names Kautilya and , who are traditionally identified with The Arthashastra (IAST: Arthaśāstra) is an ancient Indian treatise on statecraft, economic policy and...
("
Science of Material Gain" or "'Science of political economy
" in SanskritSanskrit is a historical Indo-Aryan language, one of the liturgical languages of Hinduism and Buddhism, and one of the 22 official languages of India. It is also declared as a classical language by the government of India....
), which can be considered a precursor to Machiavelli's The PrinceIl Principe is a political treatise by the Florentine public servant and political theorist Niccolò Machiavelli. Originally called De Principatibus , it was originally written in 1513, but not published until 1532, five years after Machiavelli's death...
. Many of the topics discussed in the Arthashastra
are still prevalent in modern economics, including its discussions on the management of an efficient and solid economy, and the ethicsEthics is a branch of philosophy which seeks to address questions about morality, such as what the fundamental semantic, ontological, and epistemic nature of ethics or morality is , how moral values should be determined , how a moral outcome can be achieved in specific situations , how moral...
of economics. Chanakya also focuses on issues of welfare (for instance, redistribution of wealth during a famine) and the collective ethics that hold a society together.
The Arthashastra
argues for an autocracyA autocracy is a form of government in which the political power is held by a self-appointed ruler. The term autocrat is derived from the word autokratōr...
managing an efficient and solid economy. The qualities described is in effect that of a command economy. It discusses the ethicsEthics is a branch of philosophy which seeks to address questions about morality, such as what the fundamental semantic, ontological, and epistemic nature of ethics or morality is , how moral values should be determined , how a moral outcome can be achieved in specific situations , how moral...
of economicsEconomics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
and the duties and obligations of a kingKing may be a title for a head of state.King may also refer to:-Places:* King, Ontario, Canada* King, Indiana, United States* King, North Carolina, United States* King, Lincoln County, Wisconsin, United States...
. The scope of Arthaśāstra
is, however, far wider than statecraft, and it offers an outline of an entire civil and criminal code and bureaucraticBureaucracy is the collective organizational structure, procedures, protocols, and set of regulations in place to manage activity, usually in large organizations and government...
framework for administering a kingdom, with a wealth of descriptive cultural detail on topics such as mineralogy, mining and metals, agriculture, animal husbandry and medicine. The Arthaśāstra
also focuses on issues of welfareThere are two main interpretations of the idea of a welfare state:* A model in which the state assumes primary responsibility for the welfare of its citizens...
(for instance, redistribution of wealth during a famine) and the collective ethics that hold a society together.
Chanakya says that artha (sound economies) is the most important quality and discipline required for a
RajarshiRajarshi or Rajarishi is, in Hinduism and Hindu mythology, a royal saint and rishi.-Order:A Rajarshi is a king who turned into a royal sage, or rishi...
, and that
dharmaThe term , is an Indian spiritual and religious term, that means one's righteous duty or any virtuous path in the common sense of the term. A Hindu's Dharma is affected by a person's age, class, occupation, and sex. In Indian languages it can be equivalent simply to "religion", depending on context...
& kama are both dependent on it. Chanakya writes on the economic duties of a king:
According to Chanakya, a conducive atmosphere is necessary for the state's economy to thrive. This requires that a state's law and order be maintained. Arthashastra specifies fines and punishments to support strict enforcement of laws (the Dandaniti).
Qin Shi Huang
Ideal and effective economic policy was long sought for in ancient China, one of the greatest early reformers being the Emperor
Qin Shi HuangQin Shi Huang , personal name Ying Zheng , was king of the Chinese State of Qin from 246 BCE to 221 BCE during the Warring States Period. He became the first emperor of a unified China in 221 BCE. He ruled until his death in 210 BCE at the age of 50.Qin Shi Huang remains a controversial figure in...
(r.
221 BC-Carthage:* The Carthaginian general Hasdrubal is murdered by a Celtic assassin while campaigning to increase the Carthaginian hold on Spain. Following the assassination of Hasdrubal, Hannibal, the son of the Carthaginian general, Hamilcar Barca, is proclaimed commander-in-chief by the army and his...
-
210 BC-Roman Republic:* Following the death of his father, Publius Cornelius Scipio, and his uncle, Gnaeus Cornelius Scipio Calvus, at the hands of the Carthaginians, the young Publius Cornelius Scipio takes over command of the Roman troops in Spain...
), who standardized coin currency throughout the old Warring States once he unified them under a strong central bureaucracy (which the
Zhou DynastyThe Zhou Dynasty followed the Shang Dynasty and was followed by the Qin Dynasty in China. The Zhou dynasty lasted longer than any other dynasty in Chinese history—though the actual political and military control of China by the dynasty only lasted during the Western Zhou...
had always lacked).
Wang Anshi
However, one of the greatest economic reformers in China lived during the medieval
Song DynastyThe Song Dynasty was a ruling dynasty in China between 960 and 1279; it succeeded the Five Dynasties and Ten Kingdoms Period, and was followed by the Yuan Dynasty. It was the first government in world history to issue banknotes or paper money, and the first Chinese government to establish a...
(960-1279 AD), that being
ChancellorThe Chancellor , variously translated as Prime Minister, Premier or Chief Councillor, was a generic name given to the highest-ranking official in the imperial government in ancient China...
Wang AnshiWang Anshi was a Chinese economist, statesman, chancellor and poet of the Song Dynasty who attempted controversial, major socioeconomic reforms...
(1021-1086). Espousing heated reaction by conservative ministers at court, Wang Anshi's political faction of the New Policies Group enacted a series of reforms that centered around military reform, bureaucratic reform, and economic reform. The latter included low-cost loans for farmers (whom he considered the backbone of the Chinese economy in terms of production of goods and greatest source of the land tax), replacing the
corveeCorvée is labor, often but not always unpaid, that people in power have authority to compel their subjects to perform, unless commuted in some way, such as by a cash payment; sometimes this was an option of the payer, sometimes of the payee, and sometimes not an option...
labor service with a tax instead, enacted government monopolies on crucial industries producing
teaTea is the agricultural product of the leaves, leaf buds, and internodes of the Camellia sinensis plant, prepared and cured by various methods...
,
saltA salt, in chemistry, is an ionic compound, and can result from the neutralization reaction of acids and bases. Salts are ionic compounds composed of cations and anions so that the product is electrically neutral...
, and
wineWine is an alcoholic beverage typically made of fermented grape juice. The natural chemical balance of grapes is such that they can ferment without the addition of sugars, acids, enzymes or other nutrients. Wine is produced by fermenting crushed grapes using various types of yeast. Yeast consumes...
, introduction of a local
militiaThe term militia is commonly used today to refer to a military force composed of ordinary citizens to provide defense, emergency law enforcement, or paramilitary service, in times of emergency without being paid a regular salary or committed to a fixed term of service. It is a polyseme with...
to ease the budget spending on the official standing army of 1 million troops, and the establishment of a Finance Planning Commission staffed largely by political loyals so that his reforms could pass quickly with less time for conservatives to oppose it in court. Reformers and conservatives would oust each other from power once they had the support of the emperor.
Medieval Islamic world
To some degree, the early Muslims based their economic analyses on the Qu'ran (such as opposition to riba, interest), and from
sunnahSunnah is an Arabic word that means habit or usual practice. The Muslim usage of this term refers to the sayings and living habits of Muhammad, the main prophet of Islam....
, the sayings and doings of
MuhammadMuhammad ibn ‘Abdullāh , is the founder of the religion of Islam [ إِسْلامْ ] and is regarded by Muslims as a messenger and prophet of , the last and the greatest law-bearer in a series of Islamic prophets as taught by the...
.
Early Muslim thinkers
Al-GhazaliAbū Ḥāmid Muḥammad ibn Muḥammad al-Ghazālī , often Algazel in English, was born and died in Tus, in the Khorasan province of Persia. He was an Islamic theologian, jurist, philosopher, cosmologist, psychologist and mystic of Persian origin, and remains one of the most celebrated scholars in the...
(1058–1111) classified economics as one of the sciences connected with religion, along with metaphysics, ethics, and psychology. Authors have noted, however, that this connection has not caused early Muslim economic thought to remain static. Persian philosopher Nasir al-Din al-Tusi (1201-1274) presents an early definition of economics (what he calls hekmat-e-madani, the science of city life) in discourse three of his Ethics:
Many scholars trace the history of economic thought through the Muslim world, which was in a
Golden AgeThe Islamic Golden Age or the Islamic Renaissance, is traditionally dated from the 9th to 13th centuries for 400 years C.E., but has been extended to the 15th century by recent scholarship...
from the 8th to 13th century and whose
philosophyEarly Islamic philosophy or classical Islamic philosophy is a period of intense philosophical development beginning in the 2nd century AH of the Islamic calendar and lasting until the 6th century AH...
continued the work of the
GreekAncient Greece is the civilisation belonging to the period of Greek history lasting from the Greek Dark Ages ca. 1100 BC and the Dorian invasion, to 146 BC and the Roman conquest of Greece after the Battle of Corinth. It is generally considered to be the seminal culture which provided the...
and
HellenisticHellenistic civilization represents the zenith of Greek influence in the ancient world from 323 BC to about 146 BC ; note, however that Koine Greek language and Hellenistic philosophy and religion are also indisputably elements of the Roman era till Late Antiquity...
thinkers and came to influence Aquinas when Europe "rediscovered" Greek philosophy through Arabic translation. A common theme among these scholars was the praise of economic activity and even self-interested accumulation of wealth. Persian leader
Shams al-Mo'ali Abol-hasan Ghaboos ibn WushmgirShams al-Mo'ali Abol-hasan Ghaboos ibn Wushmgir was the Ziyarid ruler of Gurgan and Tabaristan . He was the son of Vushmgir and a daughter of the Bavandi Ispahbad Sharvin....
(Qabus) (d. 1012) advises his son in the work
Qabus namaQabus nama or Qabus nameh [variations: Qabusnamah, Qabousnameh, Ghabousnameh, or Ghaboosnameh, in Persian: قابوسنامه, book of Qabus] is a major work of Persian literature from the eleventh century ....
:
Persian philosopher
Ibn MiskawayhAbu 'Ali Ahmad ibn Muhammad ibn Ya'qub Ibn Miskawayh, also known as Ibn Miskawayh was a prominent Persian philosopher, scientist, poet and historian from Ray, Iran. He was active politically during the Buwayhid era....
(b. 1030) notes:
This view is in conflict with an idea
Joseph SchumpeterJoseph Alois Schumpeter was an economist and political scientist born in Moravia, then Austria-Hungary, now Czech Republic. He popularized the term "creative destruction" in economics.-Life:...
called the great gap. The great gap thesis comes out of Schumpeter's 1954 History of Economic Analysis
which offers a break in economic thought during the five hundred year period between the decline of the Greco-Roman civilizations and the work of Thomas Aquinas (1225-1274). However in 1964, Joseph Spengler's "Economic Thought of Islam: Ibn Khaldun" appeared in the journal Comparative Studies in Society and History and took a large step in bringing early Muslim scholars to the contemporary West.
The influence of earlier
GreekGreek philosophy focused on the role of reason and inquiry. Many philosophers today concede that Greek philosophy has shaped the entire Western thought since its inception...
and
Hellenistic thoughtHellenistic philosophy is the period of Western philosophy that was developed in the Hellenistic civilization following Aristotle and ending with Neoplatonism.-Platonism:...
on the Muslim world began largely with
AbbasidThe Abbasid Caliphate was the third of the Islamic Caliphates of the Islamic Empire. It was ruled by the Abbasid dynasty of caliphs, who built their capital in Baghdad after overthrowing the Umayyad caliphs from all but Al Andalus....
caliphThe Caliph is the head of state in a Caliphate, and the title for the leader of the Islamic Ummah, an Islamic community ruled by the Shari'ah. It is a transliterated version of the Arabic word which means "successor" or "representative"...
al-Ma'munAbū Jaʿfar Abdullāh al-Māʾmūn ibn Harūn was an Abbasid caliph who reigned from 813 until his death in 833...
, who sponsored the translation of
GreekGreek , an independent branch of the Indo-European family of languages, is the language of the Greeks. Native to the southern Balkans, it has the longest documented history of any Indo-European language, spanning 34 centuries of written records. In its ancient form, it is the language of classical...
texts into
ArabicArabic is a Central Semitic language, thus related to and classified alongside other Semitic languages such as Hebrew and the Neo-Aramaic languages. In terms of speakers, the Arabic macrolanguage is the largest member of the Semitic language family. It is spoken by more than 280 million people as...
in the 9th century by
SyriaSyria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the west, Turkey to the north, Iraq to the east, Jordan to the south and Israel to the southwest....
n
ChristianA Christian is a person who adheres to Christianity, an Abrahamic, monotheistic, religion based on the life and teachings of Jesus of Nazareth, who Christians believe was the Messiah prophesied in the Old Testament/Hebrew Bible, and the Son of God.The term "Christian" is also used adjectivally to...
s in
BaghdadBaghdad is the capital of Iraq and of Baghdad Governorate, with which it is coterminous. Having a municipal population estimated at 6.5 million, it is the largest city in Iraq and the second largest in the Arab World....
. But already by that time numerous Muslim scholars had written on economic issues, and early Muslim leaders had shown sophisticated attempts to enforce fiscal and monetary financing, use deficit financing, use taxes to encourage production, the use of credit instruments for banking, including rudimentary savings and checking accounts, and contract law.
Among the earliest Muslim economic thinkers was
Abu YusufYaqub ibn Ibrahim al-Ansari, better known as Abu Yusuf was a student of legist Abu Hanifah who helped spread the influence of the Hanafi school of Islamic law through his writings and the government positions he held.-Biography:...
(731-798), a student of the founder of the Hanafi Sunni School of Islamic thought, Abu Hanifah. Abu Yusuf was chief jurist for Abbasid Caliph
Harun al-RashidHārūn al-Rashīd was the fifth and most famous Abbasid Caliph...
, for whom he wrote the Book of Taxation
(Kitab al-Kharaj). This book outlined Abu Yusuf's ideas on taxation, public finance, and agricultural production. He discussed proportional tax on produce instead of fixed taxes on property as being superior as an incentive to bring more land into cultivation. He also advocated forgiving tax policies which favor the producer and a centralized tax administration to reduce corruption. Abu Yusuf favored the use of tax revenues for socioeconomic infrastructure, and included discussion of various types of taxes, including sales tax, death taxes, and import tarrifs.
Early discussion of the benefits of division of labor are included in the writings of
al-FarabiAbū Naṣr al-Fārābi , known in the West as Alpharabius Abū Naṣr al-Fārābi (أبو نصر محمد الفارابي - Abū Naṣr Muḥammad al-Fārābi; in some sources also mentioned as محمد بن محمد بن أوزلغ الفارابي - Muḥammad ibn Muḥammad (ibn Tarḫān) ibn Awzlaġ al-Fārābi), known in the West as...
(873–950),
QabusShams al-Mo'ali Abol-hasan Ghaboos ibn Wushmgir was the Ziyarid ruler of Gurgan and Tabaristan . He was the son of Vushmgir and a daughter of the Bavandi Ispahbad Sharvin....
,
Ibn Sina, known as Abū Alī Sīnā or Ibn Sīnā , and commonly known in English by his Latinized name Avicenna , was a Persian polymath and the foremost physician and philosopher of his time...
(Avicenna) (980–1037),
Ibn MiskawayhAbu 'Ali Ahmad ibn Muhammad ibn Ya'qub Ibn Miskawayh, also known as Ibn Miskawayh was a prominent Persian philosopher, scientist, poet and historian from Ray, Iran. He was active politically during the Buwayhid era....
,
al-GhazaliAbū Ḥāmid Muḥammad ibn Muḥammad al-Ghazālī , often Algazel in English, was born and died in Tus, in the Khorasan province of Persia. He was an Islamic theologian, jurist, philosopher, cosmologist, psychologist and mystic of Persian origin, and remains one of the most celebrated scholars in the...
, Nasir al-Din al-Tusi (1201–74),
Ibn KhaldunIbn Khaldūn or Ibn Khaldoun Ibn Khaldūn or Ibn Khaldoun Ibn Khaldūn or Ibn Khaldoun (full name, , , (May 27, 1332 AD/732 AH – March 19, 1406 AD/808 AH) was a North African polymath — an astronomer, economist, historian, Islamic scholar, Islamic theologian, hafiz, jurist, lawyer,...
(1332-1406), and Asaad Davani (b. 1444). Among them, the discussions included division of labor within households, societies, factories, and among nations. Farabi notes that each society lacks at least some necessary resources, and thus an optimal society can only be achieved where domestic, regional, and international trade occur, and that such trade can be beneficial to all parties involved. Ghazali was also noted for his subtle understanding of monetary theory and formulation of another version of
Gresham's LawGresham's law is commonly stated: "Bad money drives out good", but more accurately stated: "Bad money drives out good under legal tender laws."...
.
The power of
supply and demandSupply and demand is an economic model based on price, utility and quantity in a market. It concludes that in a competitive market, price will function to equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and...
was understood to some extent by various early Muslim scholars as well. Ibn Taymiyyah illustrates:
Other important Muslim scholars who wrote about economics include
al-MawardiAbu al-Hasan Ali Ibn Muhammad Ibn Habib al-Mawardi, known in Latin as Alboacen , was an Arab Muslim jurist of the Shafii school; he also made contributions to Qur'anic interpretations, philology, ethics, and literature...
(1075–1158), Ibn Taimiyah (1263–1328), and
al-MaqriziTaqi al-Din Ahmad ibn 'Ali ibn 'Abd al-Qadir ibn Muhammad al-Maqrizi ; Arabic: , was an Egyptian historian more commonly known as al-Maqrizi or Makrizi...
.
Capitalist market economy
The origins of
capitalismCapitalism is an economic and social system in which the means of production are privately controlled; labor, goods and capital are traded in a market; profits are distributed to owners or invested in technologies and industries; and wages are paid to labor...
and
free marketA free market describes a market without economic intervention and regulation by government except to regulate against force or fraud. The terminology is used by economists and in popular culture. A free market requires protection of property rights, but no regulation, no subsidization, no single...
s can be traced back to the
CaliphateThe term caliphate refers to the first form of government inspired by Islam. It was initially led by Muhammad's disciples as a continuation of the political authority the prophet established, known as the 'rashidun caliphates'. It represented the political unity of the Muslim Ummah, and was the...
, where the first
market economyA market economy is economy based on the division of labor in which the prices of goods and services are determined in a free price system set by supply and demand....
and earliest forms of
merchant capitalismMerchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economy and social system. The earliest stages of merchant capitalism were developed in the medieval Islamic world from the 9th century, and in medieval Europe from the...
took root between the 8th-12th centuries, which some refer to as "Islamic capitalism". A vigorous
monetary economyThe monetary economy is that part of a society's economic system where products and services are traded in exchange for money.A monetary economy stands in contrast to an economy based on bartering or to an economy where goods are not traded, i.e. where the goods are produced and consumed by the...
was created on the basis of the expanding levels of
circulation of a stable high-value
currencyIn economics, the term currency can refer either to a particular currency, for example the US dollar, or to the coins and banknotes of a particular currency, which comprise the physical aspects of a nation's money supply...
(the
dinarThe Dinar is the name of the official currency in several countries. The Gold Dinar was a coin dating back to the early days of Islam, issued by many rulers, and the Islamic gold dinar is a modern revival of it as a coin or unit of account, separate from the currencies listed below...
) and the integration of monetary areas that were previously independent. Innovative new
businessA business is a legally recognized organization designed to provide goods and/or services to consumers. Businesses are predominant in capitalist economies, most being privately owned and formed to earn profit that will increase the wealth of its owners and grow the business itself...
techniques and forms of business organisation were introduced by
economistAn economist is an expert in the social science of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
s,
merchantA merchant is a businessman who trades in commodities that they do not produce themselves, in order to earn a profit.Merchants can be of two types:# A wholesale merchant operates in the chain between producer and retail merchant...
s and traders during this time. Such innovations included the earliest trading companies, credit cards,
big businessBig Business is a term used to describe large corporations, in either an individual or collective sense. The term first came into use in a symbolic sense subsequent to the American Civil War, particularly after 1880, in connection with the combination movement that began in American business at...
es,
contractIn law, a contract is a binding legal agreement that is enforceable in a court of law. That is to say, a contract is an exchange of promises for the breach of which the law will provide a remedy....
s, bills of exchange, long-distance
international tradeInternational trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product . While international trade has been present throughout much of history , its economic, social, and political...
, the first forms of
partnershipA partnership is a type of business entity in which partners share with each other the profits or losses of the business. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the...
(mufawada
) such as limited partnershipA limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...
s (mudaraba
), and the earliest forms of creditCredit is the provision of resources by one party to another party where that second party does not reimburse the first party immediately, thereby generating a debt, and instead arranges either to repay or return those resources at a later date. It is any form of deferred payment...
, debtDebt is that which is owed; usually referencing assets owed, but the term can also cover moral obligations and other interactions not requiring money. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned...
, profitAccounting profit is the difference between price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.A key difficulty in measuring profit is in defining costs...
, lossLoss may refer to:*A negative difference between retail price and cost of production*An event in which the team or individual in question did not win.*Loss , a pitching statistic in baseball...
, capitalIn economics, capital or capital goods or real capital are factors of production used to create goods or services that are not themselves significantly consumed in the production process. Capital goods may be acquired with money or financial capital...
(al-mal
), capital accumulationMost generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth...
(nama al-mal
), circulating capitalCirculating capital is a term used by classical economists such as Adam Smith, David Ricardo and Karl Marx. It refers to physical capital and operating expenses, i.e., short-lived items that are used in production and used up in the process of creating other goods or services. This is roughly equal...
, capital expenditureCapital expenditures are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year...
, revenueIn business, revenue or revenues is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. Some companies also receive revenue from interest, dividends or royalties paid to them by other companies...
, chequeA cheque, also spelled check , is a negotiable instrument[Although cheques are regulated in most countries as negotiable instruments, in many countries they are not actually negotiable, viz., the payee cannot endorse the cheque in favour of a third party...]
s, promissory noteA promissory note, referred to as a note payable in accounting, or commonly as just a "note", is a contract where one party makes an unconditional promise in writing to pay a sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms...
s, trusts (waqf), startup companies,
savings accountSavings accounts are accounts maintained by retail financial institutions that pay interest but can not be used directly as money...
s, transactional accounts,
pawnA pawn is a peon, or other powerless person. It is often a word used to describe someone or something that is used or manipulated.It can also refer to:* Pawn , the weakest and most numerous piece in the game...
ing,
loanA loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
ing,
exchange rateIn finance, the exchange rates between two currencies specifies how much one currency is worth in terms of the other. It is the value of a foreign nation’s currency in terms of the home nation’s currency...
s,
bankA bank is a financial institution licensed by a government. Its primary activities include borrowing and lending money.Many other financial activities were allowed over time. For example banks are important players in financial markets and offer financial services such as investment funds...
ers,
money changerMoney changer is a trade involving exchanges of coins in different denomination. It is thought generally to be the origin of modern banking in Europe....
s,
ledgerA ledger or lieger , is the principal book for recording transactions...
s,
depositDeposit may refer to:*Deposit account, the liability owed by the bank to its depositor*Damage deposit taken in relation to rental or an item or property*Deposit , New York*Deposit , New York...
s,
assignmentsAn assignment is a term used with similar meanings in the law of contracts and in the law of real estate. In both instances, it encompasses the transfer of rights held by one party—the assignor—to another party—the assignee...
, the
double-entry bookkeeping systemDouble-entry bookkeeping system ensures the integrity of the financial values recorded in a financial accounting system. It does this by ensuring that each individual transaction is recorded in at least two different nominal ledgers of the financial accounting system and so implementing a double...
, and
lawsuitA lawsuit is a civil action brought before a court of law in which a plaintiff, a party who claims to have received damages from a defendant's actions, seeks a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
s.
OrganizationAn organization is a social arrangement which pursues collective goals, which controls its own performance, and which has a boundary separating it from its environment...
al
enterprisesA business is a legally recognized organization designed to provide goods and/or services to consumers. Businesses are predominant in capitalist economies, most being privately owned and formed to earn profit that will increase the wealth of its owners and grow the business itself...
similar to
corporationA corporation is a legal entity separate from the shareholders and employees. In British tradition it is the term designating a body corporate, where it can be either a corporation sole or a corporation aggregate...
s independent from the
stateA sovereign state is a political association with effective internal and external sovereignty over a geographic area and population which is not dependent on, or subject to any other power or state...
also existed in the medieval Islamic world. Many of these early capitalist concepts were adopted and further advanced in medieval Europe from the 13th century onwards.
The systems of
contractIn law, a contract is a binding legal agreement that is enforceable in a court of law. That is to say, a contract is an exchange of promises for the breach of which the law will provide a remedy....
relied upon by
merchantA merchant is a businessman who trades in commodities that they do not produce themselves, in order to earn a profit.Merchants can be of two types:# A wholesale merchant operates in the chain between producer and retail merchant...
s was very effective. Merchants would buy and sell on
commissionThe payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. Payments often will be calculated on the basis of a percentage of the goods sold...
, with money
loanA loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
ed to them by wealthy
investorAn investor is any party that makes an investment.The term has taken on a specific meaning in finance to describe the particular types of people and companies that regularly purchase equity or debt securities for financial gain in exchange for funding an expanding company...
s, or a joint
investmentInvestment or investing is a term with several closely-related meanings in business management, finance and economics, related to saving or deferring consumption. Investing is the active redirection of resources: from being consumed today, to creating benefits in the future; the use of assets to...
of several merchants, who were often Muslim, Christian and Jewish. Recently, a collection of documents was found in an
EgyptEgypt , officially the Arab Republic of Egypt, is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Western Asia...
ian
synagogueA synagogue is a Jewish house of prayer....
shedding a very detailed and human light on the life of medieval Middle Eastern merchants. Business
partnershipA partnership is a type of business entity in which partners share with each other the profits or losses of the business. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the...
s would be made for many
commercial venturesA joint venture is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise...
, and bonds of
kinshipKinship is a relationship between any entities that share a genealogical origin, through either biological, cultural, or historical descent. In anthropology the kinship system includes people related both by descent and marriage, while usage in biology includes descent and mating...
enabled trade
networkA social network is a social structure made of individuals called "nodes," which are tied by one or more specific types of interdependency, such as friendship, kinship, financial exchange, dislike, sexual relationships, or relationships of beliefs, knowledge or prestige.Social network analysis...
s to form over huge distances. Networks developed during this time enabled a world in which
moneyMoney is anything that is generally accepted as payment for goods and services and repayment of debts. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment...
could be promised by a
bankA bank is a financial institution licensed by a government. Its primary activities include borrowing and lending money.Many other financial activities were allowed over time. For example banks are important players in financial markets and offer financial services such as investment funds...
in
BaghdadBaghdad is the capital of Iraq and of Baghdad Governorate, with which it is coterminous. Having a municipal population estimated at 6.5 million, it is the largest city in Iraq and the second largest in the Arab World....
and cashed in
SpainSpain , officially the Kingdom of Spain , is a country located in southwestern Europe on the Iberian Peninsula.
[The Spanish constitution does not establish any official denomination of the country, even though España , Estado español and Nación española are used interchangeably...]
, creating the
chequeA cheque, also spelled check , is a negotiable instrument[Although cheques are regulated in most countries as negotiable instruments, in many countries they are not actually negotiable, viz., the payee cannot endorse the cheque in favour of a third party...]
system of today. Each time items passed through the cities along this extraordinary network, the city imposed a
taxTo tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law.Taxes are also imposed by many subnational entities...
, resulting in high prices once reaching the final destination. These innovations made by Muslims and Jews laid the foundations for the modern
economic systemAn economic system is the system of production, distribution and consumption of goods and services of an economy. Alternatively, it is the set of principles and techniques by which problems of economics are addressed, such as the economic problem of scarcity through allocation of finite productive...
.
Ibn Khaldun
| When civilization [population] increases, the available labor again increases. In turn, luxury again increases in correspondence with the increasing profit, and the customs and needs of luxury increase. Crafts are created to obtain luxury products. The value realized from them increases, and, as a result, profits are again multiplied in the town. Production there is thriving even more than before. And so it goes with the second and third increase. All the additional labor serves luxury and wealth, in contrast to the original labor that served the necessity of life. |
| Ibn Khaldun on economic growth Economic growth is a term used to indicate the increase of total GDP. It is often measured as the rate of change of gross domestic product . Economic growth refers only to the quantity of goods and services produced; it says nothing about the way in which they are produced...
|
Perhaps the most well known Islamic scholar who wrote about economics was Ibn Khaldun of
TunisiaTunisia , officially the Tunisian Republic , is a country located in North Africa. It is bordered by Algeria to the west and Libya to the southeast. Tunisia is located southwest of the island of Sicily and south of Sardinia. Its size is almost 165,000 km² with an estimated population of just...
(1332–1406), considered a father of modern
economicsEconomics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, Ibn Khaldun wrote on economic and political theory in the introduction, or
MuqaddimahThe Muqaddimah, or the Muqaddimah of Ibn Khaldun , or the Prolegomena in Greek, is a book written by the North African historian Ibn Khaldun in 1377 which records an early Muslim view of universal history...
(Prolegomena
), of his History of the World
(Kitab al-Ibar
). In the book, he discussed what he called asabiyyah`Asabiyya or asabiyah refers to social solidarity with an emphasis on unity, group consciousness, and social cohesion, originally in a context of "tribalism" and "clanism", but sometimes used for modern nationalism as well, resembling also communitarism...
(social cohesionStructural cohesion is the sociological and graph theory conception and measurement of cohesion for maximal social group or graphical boundaries where related elements cannot be disconnected except by removal of a certain minimal number of other nodes. The solution to the boundary problem for...
), which he sourced as the cause of some civilizations becoming great and others not. Ibn Khaldun felt that many social forces are cyclic, although there can be sudden sharp turns that break the pattern. His idea about the benefits of the division of labor also relate to asabiyya, the greater the social cohesion, the more complex the successful division may be, the greater the economic growth. He noted that growth and development positively stimulate both supply and demand, and that the forces of supply and demand are what determine the prices of goods. He also noted macroeconomic forces of population growth,
human capitalHuman capital refers to the stock of skills and knowledge embodied in the ability to perform labor so as to produce economic value. It is the skills and knowledge gained by a worker through education and experience...
development, and technological developments effects on development. In fact, Ibn Khaldun thought that population growth was directly a function of wealth.
Although he understood that money served as a standard of value, a medium of exchange, and a preserver of value, he did not realize that the value of gold and silver changed based on the forces of supply and demand. He also introduced the concept known as the Khaldun-Laffer Curve (the relationship between tax rates and tax revenue increases as tax rates increase for a while, but then the increases in tax rates begin to cause a decrease in tax revenues as the taxes impose too great a cost to producers in the economy).
See also
- History of economic thought
The history of economic thought deals with different thinkers and theories in the subject that became political economy and economics from the ancient world to the present day...
- Schools of economics
Schools of economic thought describes the variety of approaches in the history of economic theory noteworthy enough to be described as a 'school of thought'. While economists do not always fit into particular schools, particularly in modern times, classifying economists into schools of thought is...
- History of money
The history of money spans thousands of years. Numismatics is the scientific study of money and its history in all its varied forms.Many items have been used as commodity money such as naturally scarce precious metals, conch shells, barley, beads etc., as well as many other things that are thought...
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