WEBVTT NOTE 1. The First Philosopher-Economists: the Greeks (continued) 1 00:00:00.000 --> 00:00:06.880 5. Plato's Right-Wing Collectivist Utopia 2 00:00:06.880 --> 00:00:12.760 Plato's search for a hierarchical collectivist utopia found its classic expression in his 3 00:00:12.760 --> 00:00:21.280 most famous and influential work, The Republic. There, and later in The Laws, Plato sets 4 00:00:21.280 --> 00:00:28.360 forth the outline of his ideal city-state, one in which right oligarchic rule is maintained 5 00:00:28.360 --> 00:00:35.280 by Philosopher Kings and their Philosophic Colleagues, thus supposedly ensuring rule by 6 00:00:35.280 --> 00:00:39.640 the best and wisest in the community. 7 00:00:39.640 --> 00:00:44.960 Underneath the philosophers in the coercive hierarchy are the guardians, the soldiers, 8 00:00:44.960 --> 00:00:51.280 whose role is to aggress against other cities and lands, and to defend their polis from 9 00:00:51.280 --> 00:00:54.240 external aggression. 10 00:00:54.240 --> 00:01:00.440 With them are to be the body of the people, the despised producers, laborers, peasants 11 00:01:00.440 --> 00:01:06.720 and merchants who produce the material goods on which the lordly philosophers and guardians 12 00:01:06.720 --> 00:01:09.180 are to live. 13 00:01:09.180 --> 00:01:15.040 These three broad classes are supposed to reflect a shaky and pernicious leap, if there 14 00:01:15.040 --> 00:01:17.000 ever was one. 15 00:01:17.000 --> 00:01:21.940 The proper rule over the soul in each human being. 16 00:01:21.940 --> 00:01:29.460 To Plato, each human being is divided into three parts, one that craves, one that fights, 17 00:01:29.460 --> 00:01:36.220 and one that thinks, and the proper hierarchy of rule within each soul is supposed to be 18 00:01:36.220 --> 00:01:44.420 reason first, fighting next, and finally, and the lowest, grubby desire. 19 00:01:44.420 --> 00:01:50.700 The two ruling classes, the thinkers and the guardians that really count, are, in Plato's 20 00:01:50.700 --> 00:01:56.020 is an ideal state to be forced to live under pure communism. 21 00:01:56.020 --> 00:02:00.660 There is to be no private property whatsoever among the elite. 22 00:02:00.660 --> 00:02:06.120 All things are to be owned communally, including women and children. 23 00:02:06.120 --> 00:02:11.620 The elite are to be forced to live together and share common meals. 24 00:02:11.620 --> 00:02:18.460 Since money and private possessions, according to the aristocrat Plato, only corrupt virtue, 25 00:02:18.460 --> 00:02:22.360 They are to be denied to the upper classes. 26 00:02:22.360 --> 00:02:28.020 Marriage partners among the elite are to be selected strictly by the state, which is supposed 27 00:02:28.020 --> 00:02:34.600 to proceed according to the scientific breeding already known in animal husbandry. 28 00:02:34.600 --> 00:02:40.300 If any of the philosophers or guardians find themselves unhappy about this arrangement, 29 00:02:40.300 --> 00:02:45.860 they will have to learn that their personal happiness means nothing compared to the happiness 30 00:02:45.860 --> 00:02:54.340 of the Polis as a Whole, a rather murky concept at best. In fact, those who are not seduced 31 00:02:54.340 --> 00:03:01.380 by Plato's theory of the essential reality of ideas will not believe that there is such 32 00:03:01.380 --> 00:03:09.500 a real living entity as a polis. Instead, the city-state or community consists only of 33 00:03:09.500 --> 00:03:13.100 living, choosing individuals. 34 00:03:13.100 --> 00:03:19.460 To keep the elite and the subject masses in line, Plato instructs the philosopher-rulers 35 00:03:19.460 --> 00:03:26.340 to spread the noble lie that they themselves are descended from the gods, whereas the other 36 00:03:26.340 --> 00:03:30.300 classes are of inferior heritage. 37 00:03:30.300 --> 00:03:36.740 Freedom of speech or of inquiry was, as one might expect, anathema to Plato. 38 00:03:36.740 --> 00:03:42.500 The arts are frowned on, and the life of the citizens was to be policed to suppress any 39 00:03:42.500 --> 00:03:47.500 and many dangerous thoughts or ideas that might come to the surface. 40 00:03:47.500 --> 00:03:54.500 Remarkably, in the very course of setting forth his classic apologia for totalitarianism, 41 00:03:54.500 --> 00:04:05.500 Plato contributed to genuine economic science by being the first to expound and analyze the importance of the division of labor in society. 42 00:04:05.500 --> 00:04:23.500 Since his social philosophy was founded on a necessary separation between classes, Plato went on to demonstrate that such specialization is grounded in basic human nature, in particular its diversity and inequality. 43 00:04:23.500 --> 00:04:31.500 Plato has Socrates say in the Republic that specialization arises because we are not all alike. 44 00:04:31.500 --> 00:04:38.500 There are many diversities of natures among us, which are adapted to different occupations. 45 00:04:38.500 --> 00:04:44.500 Since men produce different things, the goods are naturally traded for each other, 46 00:04:44.500 --> 00:04:49.500 so that specialization necessarily gives rise to exchange. 47 00:04:49.500 --> 00:04:56.500 Plato also points out that this division of labor increases the production of all the goods. 48 00:04:56.500 --> 00:05:02.500 Plato saw no problem, however, in morally ranking the various occupations, 49 00:05:02.500 --> 00:05:10.500 with philosophy, of course, ranking highest and labor or trade being sorted and ignoble. 50 00:05:10.500 --> 00:05:17.500 The use of gold and silver as money greatly accelerated with the invention of coinage in Lydia 51 00:05:17.500 --> 00:05:23.020 in the early seventh century B.C. and coined money quickly spread to Greece. 52 00:05:24.220 --> 00:05:31.100 In keeping with his distaste for money-making, trade and private property, Plato was perhaps 53 00:05:31.100 --> 00:05:39.100 the first theorist to denounce the use of gold and silver as money. He also disliked gold and silver 54 00:05:39.100 --> 00:05:46.540 precisely because they served as international currencies accepted by all peoples. Since these 55 00:05:46.540 --> 00:05:54.140 Precious metals are universally accepted and exist apart from the imprimatur of government. 56 00:05:54.140 --> 00:06:00.600 Gold and silver constitute a potential threat to economic and moral regulation of the polis 57 00:06:00.600 --> 00:06:02.780 by the rulers. 58 00:06:02.780 --> 00:06:09.300 Plato called for a government fiat currency, heavy fines on the importation of gold from 59 00:06:09.300 --> 00:06:15.680 outside the city-state, and the exclusion from citizenship of all traders and workers 60 00:06:15.680 --> 00:06:24.560 One of the hallmarks of an ordered utopia sought by Plato is that to remain ordered 61 00:06:24.560 --> 00:06:29.520 and controlled it must be kept relatively static. 62 00:06:29.520 --> 00:06:36.040 And that means little or no change, innovation or economic growth. 63 00:06:36.040 --> 00:06:43.000 Plato anticipated some present-day intellectuals in frowning on economic growth and for similar 64 00:06:43.000 --> 00:06:44.000 reasons. 65 00:06:44.000 --> 00:06:50.000 Notably, fear of collapse of the domination of the state by the ruling elite. 66 00:06:50.000 --> 00:06:58.000 Particularly difficult in trying to freeze a static society is the problem of population growth. 67 00:06:58.000 --> 00:07:05.000 Quite consistently, therefore, Plato called for freezing the size of the population of the city-state, 68 00:07:05.000 --> 00:07:13.000 keeping the number of its citizens limited to 5,000 agricultural landlord families. 69 00:07:13.000 --> 00:07:19.240 6. Xenophon on Household Management 70 00:07:19.240 --> 00:07:26.160 A disciple and contemporary of Plato was the Athenian-landed aristocrat and army general 71 00:07:26.160 --> 00:07:35.360 Xenophon, 430 to 354 BC. Xenophon's economic writings were scattered throughout such works 72 00:07:35.360 --> 00:07:42.120 as an account of the education of a Persian prince, a treatise on how to increase government 73 00:07:42.120 --> 00:07:48.680 Revenue and a book on economics in the sense of thoughts on the technology of household 74 00:07:48.680 --> 00:07:51.640 and farm management. 75 00:07:51.640 --> 00:07:57.540 Most of Xenophon's adumbrations were the usual Hellenic scorn for labor and trade and 76 00:07:57.540 --> 00:08:03.980 admiration for agriculture and the military arts, coupled with a call for a massive increase 77 00:08:03.980 --> 00:08:09.040 in government operations and interventions in the economy. 78 00:08:09.040 --> 00:08:15.280 These included improving the port of Athens, building markets and inns, establishing a 79 00:08:15.280 --> 00:08:22.440 governmental merchant fleet, and greatly expanding the number of government-owned slaves. 80 00:08:22.440 --> 00:08:28.440 Interspersed in this role of commonplace bromides, however, were some interesting insights into 81 00:08:28.440 --> 00:08:30.840 economic matters. 82 00:08:30.840 --> 00:08:36.400 In the course of his treatise on household management, Xenophon pointed out that wealth 83 00:08:36.400 --> 00:08:43.400 should be defined as a resource that a person can use and knows how to use. 84 00:08:43.400 --> 00:08:50.040 In this way, something that an owner has neither the ability nor the knowledge to use cannot 85 00:08:50.040 --> 00:08:54.320 really constitute part of his wealth. 86 00:08:54.320 --> 00:09:00.160 Another insight was Xenophon's anticipation of Adam Smith's famous dictum that the extent 87 00:09:00.160 --> 00:09:08.160 The extent of the division of labor in society is necessarily limited by the extent of the market for the products. 88 00:09:08.160 --> 00:09:17.160 Thus, in an important addition to Plato's insights on the division of labor, written twenty years after the Republic, 89 00:09:17.160 --> 00:09:25.160 Xenophon says that, in small towns, the same workman makes chairs and doors and plows and tables, 90 00:09:25.160 --> 00:09:29.160 and often the same artisan builds houses. 91 00:09:29.160 --> 00:09:36.280 Whereas in the large cities, many people have demands to make upon each branch of industry, 92 00:09:36.280 --> 00:09:42.840 and therefore one trade alone, and very often even less than a whole trade, is enough to 93 00:09:42.840 --> 00:09:45.120 support a man. 94 00:09:45.120 --> 00:09:52.920 In large cities, we find one man making men's boots only, and another, women's only. 95 00:09:52.920 --> 00:09:59.040 One man lives by cutting out garments, another by fitting together the pieces. 96 00:09:59.040 --> 00:10:06.360 Elsewhere, Xenophon outlines the important concept of general equilibrium as a dynamic 97 00:10:06.360 --> 00:10:08.840 tendency of the market economy. 98 00:10:08.840 --> 00:10:15.080 Thus, he states that when there are too many copper smiths, copper becomes cheap and the 99 00:10:15.080 --> 00:10:22.160 smiths go bankrupt and turn to other activities, as would happen in agriculture or any other 100 00:10:22.160 --> 00:10:29.280 Industry. He also sees clearly that an increase in the supply of a commodity causes a fall 101 00:10:29.280 --> 00:10:32.120 in its price. 102 00:10:32.120 --> 00:10:41.840 7. Aristotle. Private Property and Money. The views of the great philosopher Aristotle 103 00:10:41.840 --> 00:10:47.880 are particularly important because the entire structure of his thought had an enormous and 104 00:10:47.880 --> 00:10:53.680 and even dominant influence on the economic and social thought of the high and late Middle 105 00:10:53.680 --> 00:10:59.200 Ages, which considered itself Aristotelian. 106 00:10:59.200 --> 00:11:05.080 Although Aristotle in the Greek tradition scorned money-making and was scarcely a partisan 107 00:11:05.080 --> 00:11:12.080 of laissez-faire, he set forth a trenchant argument in favor of private property. 108 00:11:12.080 --> 00:11:18.080 Perhaps influenced by the private property arguments of Democritus, Aristotle delivered 109 00:11:18.080 --> 00:11:24.680 a cogent attack on the communism of the ruling class called for by Plato. 110 00:11:24.680 --> 00:11:30.660 He denounced Plato's goal of the perfect unity of the state through communism by pointing 111 00:11:30.660 --> 00:11:38.060 out that such extreme unity runs against the diversity of mankind, and against the reciprocal 112 00:11:38.060 --> 00:11:50.220 Aristotle then delivered a point-by-point contrast of private as against communal property. 113 00:11:50.220 --> 00:11:58.260 First, private property is more highly productive and will therefore lead to progress. 114 00:11:58.260 --> 00:12:03.660 Goods owned in common by a large number of people will receive little attention, since 115 00:12:03.660 --> 00:12:09.380 First people will mainly consult their own self-interest and will neglect all duty they 116 00:12:09.380 --> 00:12:12.380 can fob off onto others. 117 00:12:12.380 --> 00:12:19.300 In contrast, people will devote the greatest interest and care to their own property. 118 00:12:19.300 --> 00:12:25.780 Second, one of Plato's arguments for communal property is that it is conducive to social 119 00:12:25.780 --> 00:12:33.020 peace, since no one will be envious of or try to grab the property of another. 120 00:12:33.020 --> 00:12:39.740 Aristotle retorted that communal property would lead to continuing and intense conflict, 121 00:12:39.740 --> 00:12:45.740 since each will complain that he has worked harder and obtained less than others who have 122 00:12:45.740 --> 00:12:49.940 done little and taken more from the common store. 123 00:12:49.940 --> 00:12:56.900 Furthermore, not all crimes or revolutions, declared Aristotle, are powered by economic 124 00:12:56.900 --> 00:12:58.580 motives. 125 00:12:58.580 --> 00:13:04.460 As Aristotle trenchantly put it, men do not become tyrants in order that they may not 126 00:13:04.460 --> 00:13:06.340 suffer cold. 127 00:13:06.340 --> 00:13:12.720 Third, private property is clearly implanted in man's nature. 128 00:13:12.720 --> 00:13:19.780 His love of self, of money, and of property are tied together in a natural love of exclusive 129 00:13:19.780 --> 00:13:20.780 ownership. 130 00:13:20.780 --> 00:13:28.460 Fourth, Aristotle, a great observer of past and present, pointed out that private property 131 00:13:28.460 --> 00:13:32.020 had existed always and everywhere. 132 00:13:32.020 --> 00:13:39.020 To impose communal property on society would be to disregard the record of human experience 133 00:13:39.020 --> 00:13:43.180 and to leap into the new and untried. 134 00:13:43.180 --> 00:13:48.940 Abolishing private property would probably create more problems than it would solve. 135 00:13:48.940 --> 00:13:56.020 Finally, Aristotle wove together his economic and moral theories by providing the brilliant 136 00:13:56.020 --> 00:14:03.180 insight that only private property furnishes people with the opportunity to act morally, 137 00:14:03.180 --> 00:14:08.580 for example, to practice the virtues of benevolence and philanthropy. 138 00:14:08.580 --> 00:14:14.280 The compulsion of communal property would destroy that opportunity. 139 00:14:14.280 --> 00:14:20.840 While Aristotle was critical of money-making, he still opposed any limitation, such as Plato 140 00:14:20.840 --> 00:14:26.160 had advocated, on an individual's accumulation of private property. 141 00:14:26.160 --> 00:14:33.720 Instead, education should teach people voluntarily to curb their rampant desires, and thus lead 142 00:14:33.720 --> 00:14:38.960 them to limit their own accumulations of wealth. 143 00:14:38.960 --> 00:14:45.440 Despite his cogent defense of private property and opposition to coerced limits on wealth, 144 00:14:45.440 --> 00:14:52.320 the aristocrat Aristotle was fully as scornful of labor and trade as his predecessors. 145 00:14:52.320 --> 00:14:59.240 Unfortunately, Aristotle stored up trouble for later centuries by coining a fallacious, 146 00:14:59.240 --> 00:15:07.040 proto-Galbraithian distinction between natural needs, which should be satisfied, and unnatural 147 00:15:07.040 --> 00:15:11.640 wants, which are limitless and should be abandoned. 148 00:15:11.640 --> 00:15:18.040 There is no plausible argument to show why, as Aristotle believes, the desires filled 149 00:15:18.040 --> 00:15:25.320 by subsistence labor or barter are natural, whereas those satisfied by far more productive 150 00:15:25.320 --> 00:15:32.700 money exchanges are artificial, unnatural and therefore reprehensible. 151 00:15:32.700 --> 00:15:39.460 Activities for monetary gain are simply denounced as immoral and unnatural, specifically such 152 00:15:39.460 --> 00:15:47.320 activities as retail trade, commerce, transportation and the hiring of labor. 153 00:15:47.320 --> 00:15:53.100 Aristotle had a particular animus toward retail trade, which of course directly serves the 154 00:15:53.100 --> 00:15:59.540 consumer and which he would have liked to eliminate completely. 155 00:15:59.540 --> 00:16:06.260 Aristotle is scarcely consistent in his economic lucabrations, for although monetary exchange 156 00:16:06.260 --> 00:16:13.380 is condemned as immoral and unnatural, he also praises such a network of exchanges as 157 00:16:13.380 --> 00:16:19.900 holding the city together through mutual and reciprocal give and take. 158 00:16:19.900 --> 00:16:25.980 The confusion in Aristotle's thought between the analytic and the moral is also shown in 159 00:16:25.980 --> 00:16:28.660 his discussion of money. 160 00:16:28.660 --> 00:16:35.520 On the one hand he sees that the growth of money greatly facilitated production and exchange. 161 00:16:35.520 --> 00:16:43.220 He sees also that money, the medium of exchange, represents general demand and holds all goods 162 00:16:43.220 --> 00:16:45.160 together. 163 00:16:45.160 --> 00:16:51.680 Also money eliminates the grave problem of double coincidence of wants, where each trader 164 00:16:51.680 --> 00:16:56.620 will have to desire the other man's goods directly. 165 00:16:56.620 --> 00:17:03.900 Now each person can sell goods for money. Furthermore, money serves as a store of values 166 00:17:03.900 --> 00:17:11.840 to be used for purchases in the future. Aristotle, however, created great trouble for the future 167 00:17:11.840 --> 00:17:19.380 by morally condemning the lending of money at interest as unnatural. Since money cannot 168 00:17:19.380 --> 00:17:27.740 be used directly and is employed only to facilitate exchanges, it is barren and cannot itself 169 00:17:27.740 --> 00:17:34.520 increase wealth. Therefore the charging of interest, which Aristotle incorrectly thought 170 00:17:34.520 --> 00:17:43.860 to imply a direct productivity of money, was strongly condemned as contrary to nature. 171 00:17:43.860 --> 00:17:49.400 Aristotle would have done better to avoid such hasty moral condemnation and to try to 172 00:17:49.400 --> 00:17:55.560 figure out why interest is, in fact, universally paid. 173 00:17:55.560 --> 00:18:00.980 Might there not be something natural, after all, about a rate of interest? 174 00:18:00.980 --> 00:18:06.940 And if he had discovered the economic reason for the charging and the paying of interest, 175 00:18:06.940 --> 00:18:13.900 Perhaps Aristotle would have understood why such charges are moral and not unnatural. 176 00:18:13.900 --> 00:18:22.620 Aristotle, like Plato, was hostile to economic growth and favored a static society, all of 177 00:18:22.620 --> 00:18:28.700 which fits with his opposition to money-making and the accumulation of wealth. 178 00:18:28.700 --> 00:18:35.540 The insight of old Hesiod into the economic problem as the allocation of scarce means for 179 00:18:35.540 --> 00:18:43.020 for the Satisfying of Alternative Wants was virtually ignored by both Plato and Aristotle, 180 00:18:43.020 --> 00:18:50.340 who instead counseled the virtue of scaling down one's desires to fit whatever means were 181 00:18:50.340 --> 00:18:52.380 available. 182 00:18:52.380 --> 00:18:54.860 8. 183 00:18:54.860 --> 00:18:59.580 Aristotle Exchange and Value 184 00:18:59.580 --> 00:19:05.140 Aristotle's difficult but influential discussion of exchange suffered grievously from his 185 00:19:05.140 --> 00:19:11.900 Aristotle's persistent tendency to confuse analysis with instant moral judgment. 186 00:19:11.900 --> 00:19:18.140 As in the case of charging interest, Aristotle did not remain content to complete a study 187 00:19:18.140 --> 00:19:26.040 of why exchanges take place in real life before leaping in with moral pronouncements. 188 00:19:26.040 --> 00:19:32.340 In analyzing exchanges, Aristotle declares that these mutually beneficial transactions 189 00:19:32.340 --> 00:19:40.060 imply a proportional reciprocity, but it is characteristically ambivalent in Aristotle 190 00:19:40.060 --> 00:19:47.520 whether all exchanges are by nature marked by reciprocity, or whether only proportionately 191 00:19:47.520 --> 00:19:52.060 reciprocal exchanges are truly just. 192 00:19:52.060 --> 00:19:58.360 And of course, Aristotle was never one to raise the question, why do people voluntarily 193 00:19:58.360 --> 00:20:10.760 In the same way, why should people voluntarily pay interest charges if they are really unjust? 194 00:20:10.760 --> 00:20:17.240 To muddle matters further, Aristotle, under the influence of the Pythagorean number mystics, 195 00:20:17.240 --> 00:20:24.040 introduced obscure and obfuscating mathematical terms into what could have been a straightforward 196 00:20:24.040 --> 00:20:25.840 analysis. 197 00:20:25.840 --> 00:20:31.940 The only dubious benefit of this contribution was to give many happy hours to historians 198 00:20:31.940 --> 00:20:39.580 of economic thought, attempting to read sophisticated modern analysis into Aristotle. 199 00:20:39.580 --> 00:20:46.000 This problem has been aggravated by an unfortunate tendency among historians of thought to regard 200 00:20:46.000 --> 00:20:52.460 great thinkers of the past as necessarily consistent and coherent. 201 00:20:52.460 --> 00:20:58.940 That of course is a grievous historiographic error. However great they may have been, any 202 00:20:58.940 --> 00:21:06.240 thinkers can slip into error and inconsistency, and even write gibberish on occasion. Many 203 00:21:06.240 --> 00:21:13.060 historians of thought do not seem able to recognize that simple fact. 204 00:21:13.060 --> 00:21:19.640 Aristotle's famous discussion of reciprocity in exchange in Book 5 of his Nicomachean Ethics 205 00:21:19.640 --> 00:21:23.700 is a prime example of descent into gibberish. 206 00:21:23.700 --> 00:21:30.600 Aristotle talks of a builder exchanging a house for the shoes produced by a shoemaker. 207 00:21:30.600 --> 00:21:37.120 He then writes, the number of shoes exchanged for a house must therefore correspond to the 208 00:21:37.120 --> 00:21:40.680 ratio of builder to shoemaker. 209 00:21:40.680 --> 00:21:46.480 For if this be not so, there will be no exchange and no intercourse. 210 00:21:46.480 --> 00:21:55.680 A. How can there possibly be a ratio of builder to shoemaker, much less an equating of that 211 00:21:55.680 --> 00:21:59.200 ratio to shoes, houses? 212 00:21:59.200 --> 00:22:05.920 In what units can men like builders and shoemakers be expressed? 213 00:22:05.920 --> 00:22:11.620 The correct answer is that there is no meaning, and that this particular exercise should be 214 00:22:11.620 --> 00:22:18.680 may be dismissed as an unfortunate example of Pythagorean quantifrenia, and yet various 215 00:22:18.680 --> 00:22:24.860 distinguished historians have read tortured constructions of this passage to make Aristotle 216 00:22:24.860 --> 00:22:31.900 appear to be a forerunner of the labor theory of value of W. Stanley Jevons or of Alfred 217 00:22:31.900 --> 00:22:33.780 Marshall. 218 00:22:33.780 --> 00:22:39.700 The labor theory is read into the unsupportable assumption that Aristotle must have meant 219 00:22:39.700 --> 00:22:47.540 labor hours put in by the builder or shoemaker, while Joseph Sudeck somehow sees here the 220 00:22:47.540 --> 00:22:55.300 respective skills of these producers, skills which are then measured by their products. 221 00:22:55.300 --> 00:23:01.260 Sudeck eventually emerges with Aristotle as an ancestor of Jevons. 222 00:23:01.260 --> 00:23:06.540 In the face of all this elaborate wild goose chase, it is a pleasure to see the verdict 223 00:23:06.540 --> 00:23:13.540 of Gibberish supported by the economic historian of ancient Greece, Moses I. Finley, and by 224 00:23:13.540 --> 00:23:20.140 the distinguished Aristotelian scholar H. H. Joachim, who has the courage to write, 225 00:23:20.140 --> 00:23:26.780 How exactly the values of the producers are to be determined, and what the ratio between 226 00:23:26.780 --> 00:23:34.620 them can mean, is, I must confess, in the end, unintelligible to me. 227 00:23:34.620 --> 00:23:40.320 Another grave fallacy in the same paragraph in the Ethics did incalculable damage to 228 00:23:40.320 --> 00:23:43.900 future centuries of economic thought. 229 00:23:43.900 --> 00:23:50.980 There Aristotle says that in order for an exchange, any exchange, a just exchange, to 230 00:23:50.980 --> 00:23:59.440 take place, the diverse goods and services must be equated, a phrase Aristotle emphasizes 231 00:23:59.440 --> 00:24:01.720 several times. 232 00:24:01.720 --> 00:24:08.120 It is this necessary equation that led Aristotle to bring in the mathematics and the equal 233 00:24:08.120 --> 00:24:09.840 signs. 234 00:24:09.840 --> 00:24:17.240 His reasoning was that for A and B to exchange two products, the value of both products must 235 00:24:17.240 --> 00:24:22.560 be equal, otherwise an exchange would not take place. 236 00:24:22.560 --> 00:24:29.440 The diverse goods being exchanged for one another must be made equal because only things 237 00:24:29.440 --> 00:24:32.900 of Equal Value will be traded. 238 00:24:32.900 --> 00:24:39.620 The Aristotelian concept of equal value in exchange is just plain wrong, as the Austrian 239 00:24:39.620 --> 00:24:43.840 School was to point out in the late 19th century. 240 00:24:43.840 --> 00:24:51.960 If A trades shoes for sacks of wheat owned by B, A does so because he prefers the wheat 241 00:24:51.960 --> 00:24:57.800 to the shoes, while B's preferences are precisely the opposite. 242 00:24:57.800 --> 00:25:05.320 If an exchange takes place, this implies not an equality of values, but rather a reverse 243 00:25:05.320 --> 00:25:11.000 inequality of values in the two parties making the exchange. 244 00:25:11.000 --> 00:25:17.760 If I buy a newspaper for 30 cents, I do so because I prefer the acquisition of the newspaper 245 00:25:17.760 --> 00:25:25.820 to keeping the 30 cents, whereas the newsagent prefers getting the money to keeping the newspaper. 246 00:25:25.820 --> 00:25:34.760 This double inequality of subjective valuations sets the necessary precondition for any exchange. 247 00:25:34.760 --> 00:25:41.580 If the equation of ratio of builder to laborer is best forgotten, other parts of Aristotle's 248 00:25:41.580 --> 00:25:47.380 analysis have been seen by some historians as predating parts of the economics of the 249 00:25:47.380 --> 00:25:50.100 Austrian School. 250 00:25:50.100 --> 00:25:56.860 Aristotle clearly states that money represents human need or demand, which provides the motivation 251 00:25:56.860 --> 00:26:02.340 for exchange and which holds all things together. 252 00:26:02.340 --> 00:26:08.460 Demand is governed by the use value or desirability of a good. 253 00:26:08.460 --> 00:26:13.580 Aristotle follows Democritus in pointing out that after the quantity of a good reaches a 254 00:26:13.580 --> 00:26:21.820 a certain limit, after there is too much, the use value will plummet and become worthless. 255 00:26:21.820 --> 00:26:28.140 But Aristotle goes beyond Democritus in pointing out the other side of the coin, that when 256 00:26:28.140 --> 00:26:35.140 a good becomes scarcer, it will become subjectively more useful or valuable. 257 00:26:35.140 --> 00:26:40.620 He states in the rhetoric that what is rare is a greater good than what is plentiful. 258 00:26:40.620 --> 00:26:46.660 Thus, gold is a better thing than iron, though less useful. 259 00:26:46.660 --> 00:26:51.340 These statements provide an intimation of the correct influence of different levels 260 00:26:51.340 --> 00:26:58.320 of supply on the value of a good, and at least a hint of the later fully formed Austrian 261 00:26:58.320 --> 00:27:06.360 marginal utility theory of value and its solution of the paradox of value. 262 00:27:06.360 --> 00:27:12.420 These are interesting allusions and suggestions, but a few fragmentary sentences scattered 263 00:27:12.420 --> 00:27:18.220 throughout different books hardly constitute a fully-fledged precursor of the Austrian 264 00:27:18.220 --> 00:27:19.960 School. 265 00:27:19.960 --> 00:27:25.600 But a more interesting harbinger of Austrianism has only come to the attention of historians 266 00:27:25.600 --> 00:27:33.040 in recent years, the groundwork for the Austrian theory of marginal productivity, the process 267 00:27:33.040 --> 00:27:41.200 as by which the value of final products is imputed to the means or factors of production. 268 00:27:41.200 --> 00:27:47.560 In his little-known work, The Topics, as well as in his later Rhetoric, Aristotle engaged 269 00:27:47.560 --> 00:27:53.540 in a philosophical analysis of the relationship between human ends and the means by which 270 00:27:53.540 --> 00:27:56.040 people pursue them. 271 00:27:56.040 --> 00:28:02.800 These means or instruments of production necessarily derive their value from the final products 272 00:28:02.800 --> 00:28:07.160 It's Useful to Man, the Instruments of Action. 273 00:28:07.160 --> 00:28:13.300 The greater the desirability or subjective value of a good, the greater the desirability 274 00:28:13.300 --> 00:28:18.320 or value of the means to arrive at that product. 275 00:28:18.320 --> 00:28:24.920 More important, Aristotle introduces the marginal element into this imputation by arguing 276 00:28:24.920 --> 00:28:32.960 that if the acquisition or addition of a good A to an already desirable good C creates a 277 00:28:32.960 --> 00:28:40.440 more desirable result than the addition of good B, then A is more highly valued than 278 00:28:40.440 --> 00:28:48.280 B. Or, as Aristotle put it, judge by means of an addition, and see if the addition of 279 00:28:48.280 --> 00:28:56.760 A to the same thing as B makes the whole more desirable than the addition of B. Aristotle 280 00:28:56.760 --> 00:29:04.320 also introduces an even more specifically pre-Austrian or pre-Boehm-Bawerkian concept 281 00:29:04.320 --> 00:29:11.840 by stressing the differential value of the loss, rather than the addition of a good. 282 00:29:11.840 --> 00:29:18.680 Good A will be more valuable than B if the loss of A is considered to be worse than the 283 00:29:18.680 --> 00:29:26.940 loss of B. As Aristotle clearly phrased it, that is, the greater good whose contrary is 284 00:29:26.940 --> 00:29:33.300 the greater evil, and whose loss affects us more. 285 00:29:33.300 --> 00:29:38.240 Aristotle also took note of the importance of the complementarity of economic factors 286 00:29:38.240 --> 00:29:48.440 A saw, he pointed out, is more valuable than a sickle in the art of carpentry, but it is 287 00:29:48.440 --> 00:29:53.600 not more valuable everywhere and in all pursuits. 288 00:29:53.600 --> 00:30:00.440 He also pointed out that a good with many potential uses will be more desirable or valuable 289 00:30:00.440 --> 00:30:04.900 than a good with only one use. 290 00:30:04.900 --> 00:30:10.660 Critics of the economic importance of Aristotle's analysis charge that with the exception of 291 00:30:10.660 --> 00:30:17.860 the saw and sickle passage, Aristotle made no economic application of his broad philosophical 292 00:30:17.860 --> 00:30:20.720 treatment of imputation. 293 00:30:20.720 --> 00:30:27.100 But this charge misses the crucial Austrian point, made with particular force and elaboration 294 00:30:27.100 --> 00:30:32.200 by the 20th century Austrian economist Ludwig von Mises. 295 00:30:32.200 --> 00:30:39.840 But economic theory is but a part, a subset, of a broader praxeological analysis of human 296 00:30:39.840 --> 00:30:41.720 action. 297 00:30:41.720 --> 00:30:47.640 By analyzing the logical implications of the employment of means to the pursuit of ends 298 00:30:47.640 --> 00:30:54.640 in all human action, Aristotle brilliantly began to lay the groundwork for the Austrian 299 00:30:54.640 --> 00:31:03.560 and The Theory of Imputation and Marginal Productivity over two millennia later 9. 300 00:31:03.560 --> 00:31:07.600 The Collapse after Aristotle. 301 00:31:07.600 --> 00:31:13.120 It is remarkable that the great burst of economic thinking in the ancient world covered only 302 00:31:13.120 --> 00:31:21.040 two centuries, the 5th and the 4th BC, and only in one country, Greece. 303 00:31:21.040 --> 00:31:26.940 The rest of the ancient world, and even Greece before and after these centuries, was essentially 304 00:31:26.940 --> 00:31:30.140 a desert of economic thought. 305 00:31:30.140 --> 00:31:36.220 Nothing of substance came out of the great ancient civilizations in Mesopotamia and India, 306 00:31:36.220 --> 00:31:42.460 and very little except political thought in the many centuries-long civilization of China. 307 00:31:42.460 --> 00:31:49.060 Remarkably, little or no economic thought emerged out of those civilizations, even though 308 00:31:49.060 --> 00:31:55.740 Although the economic institutions—trade, credit, mining, crafts, etc.—were often 309 00:31:55.740 --> 00:32:00.480 far advanced, and even more so than in Greece. 310 00:32:00.480 --> 00:32:07.660 Here is an important indication that, contrary to Marxists and other economic determinists, 311 00:32:07.660 --> 00:32:13.700 economic thought and ideas do not simply emerge as a reflex of the development of economic 312 00:32:13.700 --> 00:32:16.320 institutions. 313 00:32:16.320 --> 00:32:21.600 There is no way that historians of thought can ever completely penetrate the mysteries 314 00:32:21.600 --> 00:32:29.080 of creativity in the human soul, and thus completely explain this relatively brief flowering 315 00:32:29.080 --> 00:32:31.340 of human thought. 316 00:32:31.340 --> 00:32:36.840 But it is surely no accident that it was the Greek philosophers who provided us with the 317 00:32:36.840 --> 00:32:41.360 first fragments of systematic economic theory. 318 00:32:41.360 --> 00:32:47.560 For philosophy, too, was virtually non-existent in the rest of the ancient world, or before 319 00:32:47.560 --> 00:32:50.280 this era in Greece. 320 00:32:50.280 --> 00:32:56.260 The essence of philosophic thought is that it penetrates the ad hoc vagaries of day-to-day 321 00:32:56.260 --> 00:33:05.240 life in order to arrive at truths that transcend the daily accidents of time and place. 322 00:33:05.240 --> 00:33:11.360 Theory arrives at truths about the world and about human life that are absolute, universal 323 00:33:11.360 --> 00:33:16.940 and eternal, at least while the world and humanity last. 324 00:33:16.940 --> 00:33:21.860 It arrives, in short, at a system of natural laws. 325 00:33:21.860 --> 00:33:28.440 But economic analysis is a subset of such investigation, because genuine economic theory 326 00:33:28.440 --> 00:33:36.240 can only advance beyond shifting day-to-day events by penetrating truths about human action 327 00:33:36.240 --> 00:33:43.080 which are absolute, unchanging and eternal, which are unaffected by changes of time and 328 00:33:43.080 --> 00:33:45.520 place. 329 00:33:45.520 --> 00:33:52.280 Economic thought, at least correct economic thought, is itself a subset of natural laws 330 00:33:52.280 --> 00:33:56.160 in its own branch of investigation. 331 00:33:56.160 --> 00:34:03.200 If we remember the snatches of economic thought contributed by the Greeks, Hesiod on scarcity, 332 00:34:03.200 --> 00:34:10.040 Democritus on subjective value and utility, the influence of supply and demand on value 333 00:34:10.040 --> 00:34:17.020 and on time preference, Plato and Xenophon on the division of labor, Plato on the functions 334 00:34:17.020 --> 00:34:24.680 of money, Aristotle on supply and demand, money, exchange and the imputation of value 335 00:34:24.680 --> 00:34:27.360 from Ends to Means. 336 00:34:27.360 --> 00:34:33.120 We see that all of these men were focusing on the logical implications of a few broadly 337 00:34:33.120 --> 00:34:41.380 empirical axioms of human life, the existence of human action, the eternal pursuit of goals 338 00:34:41.380 --> 00:34:48.520 by employing scarce means, the diversity and inequality among men. 339 00:34:48.520 --> 00:34:54.180 These axioms are certainly empirical, but they are so broad and pervasive that they 340 00:34:54.180 --> 00:35:00.020 They apply to all of human life, at any time and place. 341 00:35:00.020 --> 00:35:07.460 Once articulated and set forth, they impel assent to their truth by a shock of recognition. 342 00:35:07.460 --> 00:35:12.600 Once articulated, they become evident to the human mind. 343 00:35:12.600 --> 00:35:19.460 Since these axioms are then established as certain and apodictic, the processes of logic, 344 00:35:19.460 --> 00:35:26.860 themselves, universal and apodictic and transcending time and place, can be used to arrive at 345 00:35:26.860 --> 00:35:30.660 absolutely true conclusions. 346 00:35:30.660 --> 00:35:36.600 While this method of reasoning, of philosophy and of economics, is both empirical, being 347 00:35:36.600 --> 00:35:43.780 derived from the world, and true, it runs against the grain of modern philosophies of 348 00:35:43.780 --> 00:35:44.940 science. 349 00:35:44.940 --> 00:35:51.980 In modern positivism or neo-positivism, for example, evidence is much narrower, fleeting 350 00:35:51.980 --> 00:35:54.420 and open to change. 351 00:35:54.420 --> 00:36:01.140 In much of modern economics, using the positivist method, empirical evidence is a conjuries of 352 00:36:01.140 --> 00:36:07.860 isolated and narrow economic events, each of which is conceived as homogeneous bits 353 00:36:07.860 --> 00:36:16.780 Evidence of Information Supposedly Used to Test to Confirm or Refute Economic Hypotheses. 354 00:36:16.780 --> 00:36:24.760 These bits, like laboratory experiments, are supposed to result in evidence to test a theory. 355 00:36:24.760 --> 00:36:31.320 Modern positivism is unequipped to understand or handle a system of analysis, whether classical 356 00:36:31.320 --> 00:36:38.100 Theoretical Greek philosophy or economic theory grounded on deductions from fundamental axioms 357 00:36:38.100 --> 00:36:48.400 so broadly empirical as to be virtually self-evident, evident to the self, once they are articulated. 358 00:36:48.400 --> 00:36:54.440 Positivism fails to understand that the results of laboratory experiments are only evidence 359 00:36:54.440 --> 00:37:02.040 Because they too make evident to the scientists, or to others who follow the experiments, that 360 00:37:02.040 --> 00:37:09.500 is, make evident to the self, facts or truths not evident before. 361 00:37:09.500 --> 00:37:14.600 The deductive processes of logic and mathematics do the same thing. 362 00:37:14.600 --> 00:37:22.780 They compel assent by making things evident to people, which were not evident before. 363 00:37:22.780 --> 00:37:29.740 Economic theory, which we have named as praxeological theory, is another way by which truths are 364 00:37:29.740 --> 00:37:33.940 made evident to the human mind. 365 00:37:33.940 --> 00:37:40.900 Even politics, which some scoff at as not purely or strictly economics, impinges heavily 366 00:37:40.900 --> 00:37:43.980 on economic thought. 367 00:37:43.980 --> 00:37:49.660 Politics is, of course, an aspect of human action, and much of it has a crucial impact 368 00:37:49.660 --> 00:37:52.620 on economic life. 369 00:37:52.620 --> 00:38:00.540 All natural law truths about economic aspects of politics may be and have been arrived at, 370 00:38:00.540 --> 00:38:05.940 and cannot be neglected in a study of the development of economic thought. 371 00:38:05.940 --> 00:38:12.540 When Democritus and Aristotle defended a regime of private property, and Aristotle demolished 372 00:38:12.540 --> 00:38:19.420 Plato's portrayal of an ideal communism, they were engaging in important economic analysis 373 00:38:19.420 --> 00:38:25.580 in the process of the nature and consequences of alternative systems of control and ownership 374 00:38:25.580 --> 00:38:28.520 of property. 375 00:38:28.520 --> 00:38:35.720 Aristotle was the culmination of ancient economic thought, as he was of classical philosophy. 376 00:38:35.720 --> 00:38:41.380 Economic theorizing collapsed after the death of Aristotle, and later Hellenistic and Roman 377 00:38:41.380 --> 00:38:45.420 epochs were virtually devoid of economic thought. 378 00:38:45.420 --> 00:38:52.380 Again, it is impossible to explain fully the disappearance of economic thought, but surely 379 00:38:52.380 --> 00:38:58.720 one reason must have been the disintegration of the once proud Greek polis after the time 380 00:38:58.720 --> 00:39:00.900 of Aristotle. 381 00:39:00.900 --> 00:39:06.780 The Greek city-states were subjected to conquest and disintegration beginning with the empire 382 00:39:06.780 --> 00:39:12.700 of Alexander the Great during the life of his former mentor, Aristotle. 383 00:39:12.700 --> 00:39:19.100 Eventually, Greece, much diminished in wealth and economic prosperity, became absorbed by 384 00:39:19.100 --> 00:39:22.100 the Roman Empire. 385 00:39:22.100 --> 00:39:27.300 Small wonder, then, that the only references to economic affairs should be councils of 386 00:39:27.300 --> 00:39:34.140 despair, with various Greek philosophers futilely urging their followers to solve the problem 387 00:39:34.140 --> 00:39:40.700 of aggravated scarcity by drastically curbing their wants and desires. 388 00:39:40.700 --> 00:39:47.300 In short, if you're miserable and poverty-stricken, accept your lot as man's inevitable fate, 389 00:39:47.300 --> 00:39:51.140 and try to want no more than you have. 390 00:39:51.140 --> 00:39:59.700 This council of hopelessness and despair was preached by Diogenes 412-323 B.C., the founder 391 00:39:59.700 --> 00:40:10.020 of the School of Cynics, and by Epicurus 343-270 B.C., the founder of the Epicureans. 392 00:40:10.020 --> 00:40:15.880 Diogenes and the cynics pursued this culture of poverty to such length as to adopt the 393 00:40:15.880 --> 00:40:19.020 name and the life of dogs. 394 00:40:19.020 --> 00:40:23.300 Diogenes himself made his home in a barrel. 395 00:40:23.300 --> 00:40:29.980 Consistent with his outlook, Diogenes denounced the hero Prometheus, who in Greek myth stole 396 00:40:29.980 --> 00:40:37.140 the gift of fire from the gods and thus made possible innovation, the growth of human knowledge, 397 00:40:37.140 --> 00:40:44.980 of the Progress of Mankind. Prometheus, wrote Diogenes, was properly punished by the gods 398 00:40:44.980 --> 00:40:47.780 for this fateful deed. 399 00:40:47.780 --> 00:40:54.220 As Bertrand Russell summed up, Aristotle is the last Greek philosopher who faces the world 400 00:40:54.220 --> 00:41:02.180 cheerfully. After him, all have, in one form or another, a philosophy of retreat. The world 401 00:41:02.180 --> 00:41:09.020 is bad, let us learn to be independent of it. External goods are precarious, they are the 402 00:41:09.020 --> 00:41:13.980 gift of fortune, not the reward of our own efforts. 403 00:41:13.980 --> 00:41:19.860 The most interesting and influential school of Greek philosophers after Aristotle was 404 00:41:19.860 --> 00:41:29.660 the Stoics, founded by Zeno of Clitium circa 336 to 264 BC, who appeared about the year 405 00:41:29.660 --> 00:41:37.020 In the 18th century, the Stoics began teaching at a painted porch, Stoa Poichile, after 406 00:41:37.020 --> 00:41:41.620 which he and his followers were called Stoics. 407 00:41:41.620 --> 00:41:48.180 While the Stoics began as an offshoot of cynicism preaching the quenching of desire for worldly 408 00:41:48.180 --> 00:41:55.660 goods, it took on a new and more optimistic note with Stoicism's second great founder, 409 00:41:55.660 --> 00:42:01.180 Chrysippus 281-208 B.C. 410 00:42:01.180 --> 00:42:07.180 Whereas Diogenes had preached that the love of money was the root of all evil, Chrysippus 411 00:42:07.180 --> 00:42:13.020 countered with the quip that the wise man will turn three somersaults for an adequate 412 00:42:13.020 --> 00:42:14.860 fee. 413 00:42:14.860 --> 00:42:20.900 Chrysippus was also sound on the inherent inequality and diversity of man. 414 00:42:20.900 --> 00:42:27.900 Nothing, he pointed out, can prevent some seats in the theater from being better than others. 415 00:42:27.900 --> 00:42:35.900 But the most important contribution of Stoic thought was in ethical, political and legal philosophy. 416 00:42:35.900 --> 00:42:45.900 For it was the Stoics who first developed and systematized, especially in the legal sphere, the concept and the philosophy of natural law. 417 00:42:45.900 --> 00:43:00.900 It was precisely because Plato and Aristotle were circumscribed politically by the Greek polis that their moral and legal philosophy became closely intertwined with the Greek city-state. 418 00:43:00.900 --> 00:43:07.900 For the Socratic, the city-state, not the individual, was the locus of human virtue. 419 00:43:07.900 --> 00:43:13.200 But the destruction or subjugation of the Greek polis after Aristotle 420 00:43:13.200 --> 00:43:17.900 freed the thought of the Stoics from its admixture with politics. 421 00:43:17.900 --> 00:43:24.900 The Stoics were therefore free to use their reason to set forth a doctrine of natural law 422 00:43:24.900 --> 00:43:33.900 focusing not on the polis, but on each individual, and not on each state, but on all states everywhere. 423 00:43:33.900 --> 00:43:42.260 In short, in the hands of the Stoics, natural law became absolute and universal, transcending 424 00:43:42.260 --> 00:43:48.300 political barriers or fleeting limitations of time and place. 425 00:43:48.300 --> 00:43:55.860 Law and ethics, the principles of justice, became transcultural and transnational, applying 426 00:43:55.860 --> 00:43:59.280 to all human beings everywhere. 427 00:43:59.280 --> 00:44:05.080 And since every man possesses the faculty of reason, he can employ right reason to 428 00:44:05.080 --> 00:44:09.040 understand the truths of the natural law. 429 00:44:09.040 --> 00:44:14.920 The important implication for politics is that the natural law, the just and proper 430 00:44:14.920 --> 00:44:22.360 moral law discovered by man's right reason, can and should be used to engage in a moral 431 00:44:22.360 --> 00:44:29.360 The Stoics were undoubtedly aided in arriving at their cosmopolitan disregard for the narrow interests of the polis by the fact that most of them were Easterners. 432 00:44:52.360 --> 00:45:04.360 Zeno, the founder, described as tall, gaunt and swarthy, came from Clitium on the island of Cyprus. 433 00:45:04.360 --> 00:45:13.360 Many, including Chrysippus, came from Tarsus in Cilicia on the Asia Minor mainland near Syria. 434 00:45:13.360 --> 00:45:19.360 Later Greek Stoics were centered in Rhodes, an island off Asia Minor. 435 00:45:19.360 --> 00:45:28.360 Stoicism lasted 500 years and its most important influence was transmitted from Greece to Rome. 436 00:45:28.360 --> 00:45:36.360 The later Stoics, during the first two centuries after the birth of Christ, were Roman rather than Greek. 437 00:45:36.360 --> 00:45:44.360 The great transmitter of Stoic ideas from Greece to Rome was the famous Roman statesman, jurist and orator, 438 00:45:44.360 --> 00:45:54.620 by Marcus Tullius Cicero, 106 to 43 BC Following Cicero, Stoic natural law doctrines 439 00:45:54.620 --> 00:46:01.360 heavily influenced the Roman jurists of the 2nd and 3rd centuries A.D., and thus helped 440 00:46:01.360 --> 00:46:08.880 shape the great structures of Roman law which became pervasive in Western civilization. 441 00:46:08.880 --> 00:46:14.660 Cicero's influence was assured by his lucid and sparkling style, and by the fact that 442 00:46:14.660 --> 00:46:20.920 he was the first Stoic to write in Latin, the language of Roman law, and of all thinkers 443 00:46:20.920 --> 00:46:26.200 and writers in the West, down to the end of the 17th century. 444 00:46:26.200 --> 00:46:32.400 Moreover, Cicero's and other Latin writings have been far better preserved than the fragmentary 445 00:46:32.400 --> 00:46:36.240 remains we have from the Greeks. 446 00:46:36.240 --> 00:46:41.480 Cicero's writings were heavily influenced by the Greek Stoic leader, the aristocratic 447 00:46:41.480 --> 00:46:50.800 Panetius of Rhodes, circa 185-110 BC, and as a young man, he traveled there to study 448 00:46:50.800 --> 00:47:00.160 with his follower, Poseidonius of Rhodes, 135-51 BC, the greatest Stoic of his age. 449 00:47:00.160 --> 00:47:06.720 There is no better way to sum up Cicero's stoic natural law philosophy than by quoting 450 00:47:06.720 --> 00:47:12.000 what one of his followers called his almost divine words. 451 00:47:12.000 --> 00:47:18.600 Paraphrasing and developing the definition and insight of Chrysippus, Cicero wrote, 452 00:47:18.600 --> 00:47:26.480 There is a true law, right reason, agreeable to nature, known to all men, constant and 453 00:47:26.480 --> 00:47:34.560 is eternal, which calls to duty by its precepts, deters from evil by its prohibition. 454 00:47:34.560 --> 00:47:38.840 This law cannot be departed from without guilt. 455 00:47:38.840 --> 00:47:46.200 Nor is there one law at Rome and another at Athens, one thing now and another afterward. 456 00:47:46.200 --> 00:47:54.280 But the same law, unchanging and eternal, binds all races of man and all times. 457 00:47:54.280 --> 00:48:02.680 There is one common, as it were, master and ruler, God, the author, promulgator and mover 458 00:48:02.680 --> 00:48:04.680 of this law. 459 00:48:04.680 --> 00:48:11.520 Whoever does not obey it departs from his true self, contends the nature of man and 460 00:48:11.520 --> 00:48:16.400 inflicts upon himself the greatest penalties. 461 00:48:16.400 --> 00:48:22.600 Cicero also contributed to Western thought a great anti-statist parable which resounded 462 00:48:22.600 --> 00:48:28.680 through the centuries, a parable that revealed the nature of rulers of state as nothing more 463 00:48:28.680 --> 00:48:31.940 than pirates writ large. 464 00:48:31.940 --> 00:48:38.240 Cicero told the story of a pirate who was dragged into the court of Alexander the Great. 465 00:48:38.240 --> 00:48:44.160 When Alexander denounced him for piracy and brigandage, and asked the pirate what impulse 466 00:48:44.160 --> 00:48:52.020 had led him to make the sea unsafe with his one little ship, the pirate trenchantly replied, 467 00:48:52.020 --> 00:48:58.780 The same impulse which has led you, Alexander, to make the whole world unsafe. 468 00:48:58.780 --> 00:49:04.980 But despite their important contributions to moral and legal philosophy, neither the Stoics 469 00:49:04.980 --> 00:49:11.560 nor other Romans contributed anything else of significance to economic thought. 470 00:49:11.560 --> 00:49:18.860 Roman law, however, heavily influenced and pervaded later legal developments in the West. 471 00:49:18.860 --> 00:49:24.920 One private law elaborated, for the first time in the West, the idea of property rights 472 00:49:24.920 --> 00:49:33.220 as absolute, with each owner having the right to use his property as he saw fit. From this 473 00:49:33.220 --> 00:49:40.000 stemmed the right to make contracts freely, with contracts interpreted as transfers of 474 00:49:40.000 --> 00:49:47.060 titles to property. Some Roman jurists declared that property rights were required by the 475 00:49:47.060 --> 00:49:49.060 The Natural Law. 476 00:49:49.060 --> 00:49:55.180 The Romans also founded the Law Merchant, and Roman law strongly influenced the common 477 00:49:55.180 --> 00:50:02.140 law of the English-speaking countries and the civil law of the continent of Europe. 478 00:50:02.140 --> 00:50:04.300 10. 479 00:50:04.300 --> 00:50:08.220 Taoism in Ancient China 480 00:50:08.220 --> 00:50:13.600 The only other body of ancient thought worth mentioning is the schools of political philosophy 481 00:50:13.600 --> 00:50:15.900 in ancient China. 482 00:50:15.900 --> 00:50:22.300 So remarkable for its insights, ancient Chinese thought had virtually no impact outside the 483 00:50:22.300 --> 00:50:29.960 isolated Chinese empire in later centuries, and so will be dealt with only briefly. 484 00:50:29.960 --> 00:50:36.180 The three main schools of political thought, the Legalists, the Daoists and the Confucians, 485 00:50:36.180 --> 00:50:41.140 were established from the 6th to the 4th centuries B.C. 486 00:50:41.140 --> 00:50:47.100 Roughly the legalists, the latest of the three broad schools, simply believed in maximal 487 00:50:47.100 --> 00:50:53.420 power to the state, and advised rulers how to increase that power. 488 00:50:53.420 --> 00:50:59.300 The Daoists were the world's first libertarians, who believed in virtually no interference 489 00:50:59.300 --> 00:51:05.960 by the state in economy or society, and the Confucians were middle of the roaders on this 490 00:51:05.960 --> 00:51:08.220 critical issue. 491 00:51:08.220 --> 00:51:17.820 The towering figure of Confucius, 551 to 479 BC, whose name was actually Chu-Chung-Ni, 492 00:51:17.820 --> 00:51:24.340 was an erudite man from an impoverished but aristocratic family of the fallen Yin dynasty, 493 00:51:24.340 --> 00:51:28.380 who became grand marshal of the state of Song. 494 00:51:28.380 --> 00:51:34.900 In practice, though far more idealistic, Confucian thought differed little from the legalists, 495 00:51:34.900 --> 00:51:40.860 Since Confucianism was largely dedicated to installing an educated, philosophically-minded 496 00:51:40.860 --> 00:51:45.060 bureaucracy to rule in China. 497 00:51:45.060 --> 00:51:50.740 By far the most interesting of the Chinese political philosophers were the Daoists, founded 498 00:51:50.740 --> 00:51:56.500 by the immensely important but shadowy figure of Lao Tzu. 499 00:51:56.500 --> 00:52:02.020 Little is known about Lao Tzu's life, but he was apparently a contemporary and personal 500 00:52:02.020 --> 00:52:04.860 Social Acquaintance of Confucius. 501 00:52:04.860 --> 00:52:10.020 Like the latter, he came originally from the state of Sung and was a descendant of lower 502 00:52:10.020 --> 00:52:13.780 aristocracy of the Yen dynasty. 503 00:52:13.780 --> 00:52:21.340 Both men lived in a time of turmoil, wars and statism, but each reacted very differently. 504 00:52:21.340 --> 00:52:28.960 For Lao Tzu worked out the view that the individual and his happiness was the key unit of society. 505 00:52:28.960 --> 00:52:35.560 If social institutions hampered the individual's flowering and his happiness, then those institutions 506 00:52:35.560 --> 00:52:39.760 should be reduced or abolished altogether. 507 00:52:39.760 --> 00:52:45.800 To the individualist Lao Tzu, government, with its laws and regulations more numerous 508 00:52:45.800 --> 00:52:52.040 than the hairs of an ox, was a vicious oppressor of the individual, and more to be feared than 509 00:52:52.040 --> 00:52:53.840 fierce tigers. 510 00:52:53.840 --> 00:52:59.840 Government, in some, must be limited to the smallest possible minimum. 511 00:52:59.840 --> 00:53:10.840 Inaction became the watchword for Lao Tzu, since only inaction of government can permit the individual to flourish and achieve happiness. 512 00:53:10.840 --> 00:53:19.840 Any intervention by government, he declared, would be counterproductive and would lead to confusion and turmoil. 513 00:53:19.840 --> 00:53:25.840 The first political economist to discern the systemic effects of government intervention, 514 00:53:25.840 --> 00:53:33.840 Lao Tzu, after referring to the common experience of mankind, came to his penetrating conclusion. 515 00:53:33.840 --> 00:53:41.840 The more artificial taboos and restrictions there are in the world, the more the people are impoverished. 516 00:53:41.840 --> 00:53:48.840 The more that laws and regulations are given prominence, the more thieves and robbers there will be. 517 00:53:48.840 --> 00:53:55.840 The worst of government interventions, according to Lao Tzu, was heavy taxation and war. 518 00:53:56.840 --> 00:54:01.840 The people hunger because their superiors consume an excess in taxation. 519 00:54:02.840 --> 00:54:07.840 And, where armies have been stationed, thorns and brambles grow. 520 00:54:08.840 --> 00:54:12.840 After a great war, harsh years of famine are sure to follow. 521 00:54:13.840 --> 00:54:17.840 The wisest course is to keep the government simple and inactive. 522 00:54:18.840 --> 00:54:23.680 For then, the world stabilizes itself. 523 00:54:23.680 --> 00:54:30.680 As Lao Tzu put it, therefore the sage says, I take no action, yet the people transform 524 00:54:30.680 --> 00:54:32.080 themselves. 525 00:54:32.080 --> 00:54:36.400 I favor quiescence, and the people right themselves. 526 00:54:36.400 --> 00:54:42.440 I take no action, and the people enrich themselves. 527 00:54:42.440 --> 00:54:48.680 Deeply pessimistic and seeing no hope for a mass movement to correct oppressive government, 528 00:54:48.680 --> 00:54:57.880 Lao Tzu counseled the now familiar Daoist path of withdrawal, retreat and limitation of one's desires. 529 00:54:57.880 --> 00:55:15.640 Two centuries later, Lao Tzu's great follower, Chuang Tzu, 369 to circa 286 B.C. built on the master's ideas of laissez-faire to push them to their logical conclusion, individualist anarchism. 530 00:55:15.640 --> 00:55:22.160 The influential Chuang Tzu, a great stylist who wrote in allegorical parables, was therefore 531 00:55:22.160 --> 00:55:26.220 the first anarchist in the history of human thought. 532 00:55:26.220 --> 00:55:32.520 The highly learned Chuang Tzu was a native of the state of Meng, now probably in Honan 533 00:55:32.520 --> 00:55:37.280 province, and also descended from the old aristocracy. 534 00:55:37.280 --> 00:55:43.400 A minor official in his native state, Chuang Tzu's fame spread far and wide throughout 535 00:55:43.400 --> 00:55:50.440 of China, so much so that King Wei of the Chu Kingdom sent an emissary to Chuang Tzu 536 00:55:50.440 --> 00:55:56.520 bearing great gifts and urging him to become the king's chief minister of state. 537 00:55:56.520 --> 00:56:02.580 Chuang Tzu's scornful rejection of the king's offer is one of the great declarations in 538 00:56:02.580 --> 00:56:09.440 history on the evils underlying the trappings of state power and the contrasting virtues 539 00:56:09.440 --> 00:56:12.320 of the private life. 540 00:56:12.320 --> 00:56:18.440 A thousand ounces of gold is indeed a great reward, and the office of chief minister is 541 00:56:18.440 --> 00:56:21.240 truly an elevated position. 542 00:56:21.240 --> 00:56:27.340 But have you, sir, not seen the sacrificial ox awaiting the sacrifices at the royal shrine 543 00:56:27.340 --> 00:56:28.340 of state? 544 00:56:28.340 --> 00:56:34.880 It is well cared for and fed for a few years, comparison with rich brocades, so that it 545 00:56:34.880 --> 00:56:38.600 will be ready to be led into the great temple. 546 00:56:38.600 --> 00:56:44.720 At that moment, even though it would gladly change places with any solitary pig, can it 547 00:56:44.720 --> 00:56:46.240 do so? 548 00:56:46.240 --> 00:56:48.520 So quick, and be off with you. 549 00:56:48.520 --> 00:56:49.680 Don't sully me. 550 00:56:49.680 --> 00:56:55.800 I would rather roam and idle about in a muddy ditch at my own amusement than to be put under 551 00:56:55.800 --> 00:56:59.000 the restraints that the ruler would impose. 552 00:56:59.000 --> 00:57:07.960 I will never take any official service, and thereby I will be free to satisfy my own purposes. 553 00:57:07.960 --> 00:57:14.480 Chuang Tzu reiterated and embellished Lao Tzu's devotion to laissez-faire and opposition 554 00:57:14.480 --> 00:57:16.720 to state rule. 555 00:57:16.720 --> 00:57:21.320 There has been such a thing as letting mankind alone. 556 00:57:21.320 --> 00:57:27.720 There has never been such a thing as governing mankind with success. 557 00:57:27.720 --> 00:57:34.360 Chuang Tzu was also the first to work out the idea of spontaneous order, independently 558 00:57:34.360 --> 00:57:40.840 discovered by Proudhon in the 19th century and developed by F. A. von Hayek of the Austrian 559 00:57:40.840 --> 00:57:42.920 School in the 20th. 560 00:57:42.920 --> 00:57:46.040 Thus, Zhuangzhu. 561 00:57:46.040 --> 00:57:52.200 Good order results spontaneously when things are let alone. 562 00:57:52.200 --> 00:57:58.560 But while people in their natural freedom can run their lives very well by themselves, 563 00:57:58.560 --> 00:58:05.680 But rules and edicts distort that nature into an artificial procrustian bed. 564 00:58:05.680 --> 00:58:10.760 As Chuang Tzu wrote, the common people have a constant nature. 565 00:58:10.760 --> 00:58:15.160 They spin and are clothed, till and are fed. 566 00:58:15.160 --> 00:58:18.920 It is what may be called their natural freedom. 567 00:58:18.920 --> 00:58:25.280 These people of natural freedom were born and died themselves, suffered from no restrictions 568 00:58:55.280 --> 00:59:00.280 Do not need governing. In fact, it should not be governed. 569 00:59:00.280 --> 00:59:08.280 Chuang Tzu, moreover, was perhaps the first theorist to see the state as a brigand writ large. 570 00:59:08.280 --> 00:59:14.280 A petty thief is put in jail. A great brigand becomes a ruler of a state. 571 00:59:14.280 --> 00:59:23.280 Thus the only difference between state rulers and out-and-out robber chieftains is the size of their depredations. 572 00:59:23.280 --> 00:59:36.280 This theme of ruler as robber was to be repeated, as we have seen, by Cicero, and later by Christian thinkers in the Middle Ages, though, of course, these were arrived at independently. 573 00:59:37.280 --> 00:59:52.280 Taoist thought flourished for several centuries, culminating in the most determinedly anarchistic thinker, Pao Ching Yen, who lived in the early fourth century AD, and about whose life nothing is known. 574 00:59:53.280 --> 01:00:07.280 Elaborating on Chuang Tzu, Pao contrasted the idyllic ways of ancient times that had had no rulers and no government, with the misery inflicted by the rulers of the current age. 575 01:00:07.280 --> 01:00:21.280 In the earliest days, wrote Pao, there were no rulers and no officials. People dug wells and drank, tilled fields and ate. When the sun rose, they went to work, and when it set, they rested. 576 01:00:21.280 --> 01:00:29.880 Placidly going their ways with no encumbrances, they grandly achieved their own fulfillment. 577 01:00:29.880 --> 01:00:34.920 In the stateless age, there was no warfare and no disorder. 578 01:00:34.920 --> 01:00:40.960 Where knights and hosts could not be assembled, there was no warfare afield. 579 01:00:40.960 --> 01:00:45.680 Ideas of using power for advantage had not yet burgeoned. 580 01:00:45.680 --> 01:00:48.920 Disaster and disorder did not occur. 581 01:00:48.920 --> 01:00:55.440 Walls and spears were not used. City walls and moats were not built. People munched their 582 01:00:55.440 --> 01:01:00.240 food and disported themselves. They were carefree and contented. 583 01:01:00.240 --> 01:01:08.560 Into this idol of peace and contentment, wrote Pao Qingyan, there came the violence and deceit 584 01:01:08.560 --> 01:01:15.800 instituted by the State. The history of government is the history of violence, of the strong 585 01:01:15.800 --> 01:01:23.000 plundering the weak. Wicked tyrants engage in orgies of violence. Being rulers, they 586 01:01:23.000 --> 01:01:30.560 could give free reign to all desires. Furthermore, the government's institutionalization of violence 587 01:01:30.560 --> 01:01:36.720 meant that the petty disorders of daily life would be greatly intensified and expanded 588 01:01:36.720 --> 01:01:44.160 on a much larger scale. As Powell put it, disputes among the ordinary people are merely 589 01:01:44.160 --> 01:01:50.640 are only trivial matters. For what scope of consequences can a contest of strength between 590 01:01:50.640 --> 01:01:58.300 ordinary fellows generate? They have no spreading lands to arouse avarice, they wield no authority 591 01:01:58.300 --> 01:02:03.760 through which they can advance their struggle, their power is not such that they can assemble 592 01:02:03.760 --> 01:02:11.160 mass followings, and they command no awe that might quell such gatherings by their opponents. 593 01:02:11.160 --> 01:02:17.760 How can they compare with the display of the royal anger which can deploy armies and move 594 01:02:17.760 --> 01:02:25.920 battalions, making people who hold no enmities attack states that have done no wrong? 595 01:02:25.920 --> 01:02:31.800 To the common charge that he has overlooked good and benevolent rulers, Powell replied 596 01:02:31.800 --> 01:02:38.340 that the government itself is a violent exploitation of the weak by the strong. 597 01:02:38.340 --> 01:02:44.180 The system itself is the problem, and the object of government is not to benefit the 598 01:02:44.180 --> 01:02:48.040 people but to control and plunder them. 599 01:02:48.040 --> 01:02:54.900 There is no ruler who can compare in virtue with a condition of non-rule. 600 01:02:54.900 --> 01:03:00.820 Pao Cheng-yen also engaged in a masterful study in political psychology by pointing 601 01:03:00.820 --> 01:03:07.620 out that the very existence of institutionalized violence by the state generates imitative 602 01:03:07.620 --> 01:03:10.420 and Violence Among the People. 603 01:03:10.420 --> 01:03:16.320 In a happy and stateless world, declared Pau, the people would naturally turn to thoughts 604 01:03:16.320 --> 01:03:21.320 of good order, and not be interested in plundering their neighbors. 605 01:03:21.320 --> 01:03:27.460 But rulers oppress and loot the people, and make them toil without rest, and rest away 606 01:03:27.460 --> 01:03:30.420 things from them endlessly. 607 01:03:30.420 --> 01:03:37.420 In that way, theft and banditry are stimulated among the unhappy people, and arms and armor 608 01:03:37.420 --> 01:03:43.020 intended to pacify the public are stolen by bandits to intensify their plunder. 609 01:03:43.980 --> 01:03:47.900 All these things are brought about because there are rulers. 610 01:03:48.860 --> 01:03:55.340 The common idea, concluded Pao, that strong government is needed to combat disorders among 611 01:03:55.340 --> 01:04:00.220 the people, commits the serious error of confusing cause and effect. 612 01:04:00.220 --> 01:04:08.580 The only Chinese with notable views in the more strictly economic realm was the distinguished 613 01:04:08.580 --> 01:04:17.500 second century B.C. historian Su Ma Qian, 145 to circa 90 B.C. 614 01:04:17.500 --> 01:04:22.620 Qian was an advocate of laissez-faire and pointed out that minimal government made for 615 01:04:22.620 --> 01:04:28.280 abundance of food and clothing, as did the abstinence of government from competing with 616 01:04:28.280 --> 01:04:30.600 with Private Enterprise. 617 01:04:30.600 --> 01:04:37.280 This was similar to the Taoist view, but Qian, a worldly and sophisticated man, dismissed 618 01:04:37.280 --> 01:04:43.960 the idea that people could solve the economic problem by reducing desires to a minimum. 619 01:04:43.960 --> 01:04:50.920 People, Qian maintained, preferred the best and most attainable goods and services, as 620 01:04:50.920 --> 01:04:53.900 well as ease and comfort. 621 01:04:53.900 --> 01:04:58.540 Man are therefore habitual seekers after wealth. 622 01:04:58.540 --> 01:05:04.380 Since Chien thought very little of the idea of limiting one's desires, he was impelled 623 01:05:04.380 --> 01:05:10.940 far more than the Daoists to investigate and analyze free market activities. 624 01:05:10.940 --> 01:05:16.860 He therefore saw that specialization and the division of labor on the market produced goods 625 01:05:16.860 --> 01:05:20.860 and services in an orderly fashion. 626 01:05:20.860 --> 01:05:27.620 Each man has only to be left to utilize his own abilities and exert his strength to obtain 627 01:05:27.620 --> 01:05:29.420 what he wishes. 628 01:05:29.420 --> 01:05:36.140 When each person works away at his own occupation and delights in his own business, then, like 629 01:05:36.140 --> 01:05:43.380 water flowing downward, goods will naturally flow ceaselessly, day and night, without being 630 01:05:43.380 --> 01:05:49.900 summoned, and the people will produce commodities without having been asked. 631 01:05:49.900 --> 01:05:54.780 To Qian, this was the natural outcome of the free market. 632 01:05:54.780 --> 01:05:57.140 Does this not ally with reason? 633 01:05:57.140 --> 01:06:00.260 Is it not a natural result? 634 01:06:00.260 --> 01:06:07.420 Furthermore, prices are regulated on the market, since excessively cheap or dear prices tend 635 01:06:07.420 --> 01:06:11.900 to correct themselves and reach a proper level. 636 01:06:11.900 --> 01:06:17.960 But if the free market is self-regulating, asked Qian perceptively, what need is there 637 01:06:17.960 --> 01:06:23.920 Care for Government Directives, Mobilizations of Labor, or Periodic Assemblies. 638 01:06:23.920 --> 01:06:26.500 What need indeed? 639 01:06:26.500 --> 01:06:32.440 Su Ma Qian also set forth the function of entrepreneurship on the market. 640 01:06:32.440 --> 01:06:40.000 The entrepreneur accumulates wealth and functions by anticipating conditions, that is, forecasting 641 01:06:40.000 --> 01:06:42.520 and acting accordingly. 642 01:06:42.520 --> 01:06:48.080 In short, he keeps a sharp eye out for the opportunities of the times. 643 01:06:48.080 --> 01:06:53.560 Finally, Qian was one of the world's first monetary theorists. 644 01:06:53.560 --> 01:06:59.600 He pointed out that increased quantity and a debased quality of coinage by government 645 01:06:59.600 --> 01:07:04.560 depreciates the value of money and makes prices rise. 646 01:07:04.560 --> 01:07:10.400 And he saw, too, that government inherently tended to engage in this sort of inflation 647 01:07:10.400 --> 01:07:11.600 and debasement.