HISTORY OF ECONOMIC THOUGHT - ARISTOTLE

NOTES FOR THE STUDENTS OF BS ECONOMICS (HONOR)
HISTORY OF ECONOMIC THOUGHT

1. ARISTOTLE
COURSE INSTRUCTOR: USAMATAHIR
ECONOMICS DEPARTMENT | GOVERNMENT POSTGRADUATE COLLEGE JHELUM
ECONOMICS DEPARTMENT | GPGCJ [UT]
1

2. ARISTOTLE
ECONOMICS DEPARTMENT | GPGCJ [UT]
2

3. Wrote more than 200 books
Astronomy
Poetry
Political Science
Weather
ECONOMICS DEPARTMENT | GPGCJ [UT]
3

4. •Aristotle:
•He was an analytical economist. He was pupil of Plato and Tutor of
Alexander. But he is different from Plato.
•The state: state like a family and the village
•Man is by nature is a political animal.
•The state is possible because all man live together in a society.
•The aim of state is promotion of good life
•His ideal state was different from Plato.
•Plato advocate communism
•Aristotle attacks the communism.
ECONOMICS DEPARTMENT | GPGCJ [UT]
4

5. Aristotle's main contributions to economic thinking concerned the exchange
of commodities and the use of money in this exchange.
People's needs, he said, are moderate, but people's desires are limitless.
Hence the production of commodities to satisfy needs was right and natural.
whereas the production of goods in an attempt to satisfy unlimited desires
was unnatural.
ECONOMICS DEPARTMENT | GPGCJ [UT]
5

6. Aristotle accepted that when goods are produced to be sold in a
market, it can be difficult to determine if this activity is satisfying
needs or inordinate desires.
but he assumed that if a market exchange is in the form of barter, it is
made to satisfy natural needs and no economic gain is intended.
Using the medium of money, however, suggests that the objective of
the exchange is monetary gain, which Aristotle condemned.
ECONOMICS DEPARTMENT | GPGCJ [UT]
6

7. One of the interesting points Aristotle made is that the problem of
scarcity can be addressed by reducing consumption, by changing
human attitudes. This is a powerful idea for the various Utopians and
socialists who hope to end societal conflicts by eliminating the
conflicts that are inherent in scarcity.
ECONOMICS DEPARTMENT | GPGCJ [UT]
7

8. •Aristotle was in the favor of familyand private property.
•He recognized the justification of slavery.
•There was rulers and ruled, The ruler consist of military class, statesman, magistrates and
priests.
•Private property:Private property is superior on five ground.
1.Progress
2.Peace
3.Pleasure
4.Practice
5.Philanthropy
ECONOMICS DEPARTMENT | GPGCJ [UT]
8

9. Private Property
•He argue that community property will not be looked as carefully as private property.
•Private Property Is superior on five grounds.
i.Progress:
•Private Property is more productive. Goods hold by large number of people receive little care.
•Property should be in certain sense common , but as general rule private for everyone.
ii.Peace:
•Communal property does not give social peace. Quarrels are bound to develop, when the
principle of “equal wages for work” does not follow.
ECONOMICS DEPARTMENT | GPGCJ [UT]
9

10. •It may possible that someone getting less wage but doing more effort.
iii.Practice:
The practical experience proves that private property is a good thing.
The institution of communal property is not workable.
iv.Pleasure:
Private property will give pleasure to owner.
ECONOMICS DEPARTMENT | GPGCJ [UT]
10

11. v.Philanthropy:
The private property promote good-will among citizen.
Aristotle was against the imposition of ceiling on private property
He would plead for checking the growth of population.
If population is not check, then it leads to poverty which is the main reason of crime.
He suggest that the private property should be combined with common use, at least among
friends.
ECONOMICS DEPARTMENT | GPGCJ [UT]
11

12. SALAVERY:
 Aristotle view on slavery are similar to those plato.
• Aristotle justify the slavery by saying that some people were slaves by
nature.
• He regarded slavery as natural phenomenon.
• But in his own days some slaves were slaves not by nature but by law.
The economic idea of Aristotle were as under.
a)The scope of economics:
 The world economics is a Greek origin and literally means
“management of household”
b)According to Aristotle Economy is divided into two parts.

ECONOMICS DEPARTMENT | GPGCJ [UT]
12

13. THE SCOPE OF ECONOMICS :
1.Economy Proper:
The Management Of Household
2.The Science Of Supply:
It Is Concern With Art Of Acquisition
The Economy Proper Deals With
The Development Of City State From The Viallage& The
Household.
The Science Of Supply Deals With
The Needs Of The Household Are Met.
ECONOMICS DEPARTMENT | GPGCJ [UT]
13

14. 2-The Analysis Of Exchange:
Aristotle speaks two forms of exchange ; one natural and other unnatural.
The naturalform of exchange is merely an extension of the management of
household and meant for satisfaction of men's natural wants.
The unnatural form of exchange aims at monetary gains
While discussing this problem, Aristotle speaks two kinds of uses .one is proper use and
the other is improper use
ECONOMICS DEPARTMENT | GPGCJ [UT]
14

15. The proper use is satisfaction of natural wants.
The improperuse occur when goods are exchanges for monetary use.
E.g. shoes is use for wear, and for exchange as well.
So he said foundations of two economic concepts
oValue in use
oValue is exchange
He has given the some ideas of labour, cost theory, but he was not able to state
explicitly.
He also give the concept of justice in prices.
“An exchange is just when each gets exactly as much as gives the other”
ECONOMICS DEPARTMENT | GPGCJ [UT]
15

16. Aristotle define monopoly as “ The position in a
market of a single seller”.
He condemn it as unjust.
MONOPOLY:
ECONOMICS DEPARTMENT | GPGCJ [UT]
16

17. 3-The Theory Of Money:
He explain “what money is” and “what money does”.
Aristotle Explain the one function of money, i.e.; medium of exchange.
Aristotle explain the other function of money (store of value and
measure of value) as well.
Aristotle advocate a non-communist society.
Naturally a society where exchange of goods and services take
place.
First there would be barriers, but because of double coincidence of
wants, there is need of some commodity as a medium of exchange.
ECONOMICS DEPARTMENT | GPGCJ [UT]
17

18. Metals like iron and silver are good for this purpose.
In the beginning , money was defined simply by size and weight.
Aristotle anticipate “ Knapp, state Theory of money” which tells that
money is a creature of law.
Aristotle was also aware of difference between money and wealth.
ECONOMICS DEPARTMENT | GPGCJ [UT]
18

19. INTEREST:
Aristotle condemn interest.
Money was only a medium of exchange .It has no business to
increase from hand to hand.
Interest is unjust.
At the time of Aristotle , Money barrowed by the poorer class , for
consumption purpose.
ECONOMICS DEPARTMENT | GPGCJ [UT]
19

20. The modern Theory of interest based on productive investment.
He was the first analytical economist.
ECONOMICS DEPARTMENT | GPGCJ [UT]
20