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NOTE 1.  The First Philosopher-Economists: the Greeks

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Chapter 1 The First Philosopher-Economists, The Greeks

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It all began, as usual, with the Greeks.

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The ancient Greeks were the first civilized people to use their reason to think systematically

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about the world around them.

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The Greeks were the first philosophers, philo-sophia, lovers of wisdom, the first people to think

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deeply and to figure out how to attain and verify knowledge about the world.

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Other tribes and peoples had tended to attribute natural events to arbitrary whims of the gods.

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A violent thunderstorm, for example, might be ascribed to something that had irritated

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the god of thunder.

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The way to bring on rain, then, or to curb violent thunderstorms, would be to find out

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The Greeks, in contrast, were eager to use their reason, their sense observations and

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and their command of logic, to investigate and learn about their world.

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In so doing, they gradually stopped worrying about the whims of the gods and to investigate

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actual entities around them.

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Led in particular by the great Athenian philosopher Aristotle, 384 to 322 BC, a magnificent and

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Creative Systematizer known to later ages as the Philosopher, the Greeks evolved a theory

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and a method of reasoning and of science which later came to be called the Natural Law.

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1.

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THE NATURAL LAW

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Natural law rests on the crucial insight that to be necessarily means to be something, that

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That is, some particular thing or entity.

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There is no being in the abstract.

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Everything that is, is some particular thing, whether it be a stone, a cat, or a tree.

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By empirical fact, there is more than one kind of thing in the universe.

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In fact, there are thousands, if not millions, of kinds of things.

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Each thing has its own particular set of properties or attributes, its own nature, which distinguishes

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it from other kinds of things—a stone, a cat, an elm tree.

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Each has its own particular nature, which man can discover, study, and identify.

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Man studies the world, then, by examining entities, identifying similar kinds of things,

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and classifying them into categories, each with its own properties and nature.

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If we see a cat walking down the street, we can immediately include it into a set of things,

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or animals, called cats, whose nature we have already discovered and analyzed.

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If we can discover and learn about the natures of entities X and Y, then we can discover

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What happens when these two entities interact? Suppose, for example, that when a certain

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amount of X interacts with a given amount of Y, we get a certain quantity of another

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thing, Z. We can then say that the effect, Z, has been caused by the interaction of X

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and Y. Thus chemists may discover that when two molecules of hydrogen interact with one

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The result is one molecule of a new entity, water. All these entities, hydrogen, oxygen and water, have specific discoverable properties, or natures, which can be identified.

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We see, then, that the concepts of cause and effect are part and parcel of natural law analysis.

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Events in the world can be traced back to the interactions of specific entities.

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Since natures are given and identifiable, the interactions of the various entities will be replicable under the same conditions.

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The same causes will always yield the same effects.

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For the Aristotelian philosophers, logic was not a separate and isolated discipline, but an integral part of the natural law.

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Thus, the basic process of identifying entities, led in classical or Aristotelian logic, to the law of identity.

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A thing is, and cannot be, anything other than what it is. A is A.

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It follows, then, that an entity cannot be the negation of itself.

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Or, put another way, we have the law of non-contradiction.

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A thing cannot be both A and non-A. A is not and cannot be non-A.

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Finally, in our world of numerous kinds of entities, anything must be either A or it won't be.

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In short, it will either be A or non-A. Nothing can be both.

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This gives us the third well-known law of classical logic, the law of the excluded middle.

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Everything in the universe is either A or non-A.

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But if every entity in the universe, if hydrogen, oxygen, stone or cats,

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can be identified, classified, and its nature examined, then so too can man.

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Human beings must also have a specific nature with specific properties that can be studied,

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and from which we can obtain knowledge.

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Human beings are unique in the universe because they can and do study themselves, as well

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as well as the world around them, and try to figure out what goals they should pursue

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and what means they can employ to achieve them.

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The concept of good, and therefore of bad, is only relevant to living entities.

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Since stones or molecules have no goals or purposes, any idea of what might be good for

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or a molecule or stone would properly be considered bizarre.

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But what might be good for an elm tree or a dog makes a great deal of sense.

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Specifically, the good is whatever conduces to the life and the flourishing of the living

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entity.

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The bad is whatever injures such an entity's life or prosperity.

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Thus, it is possible to develop an elm-tree ethics by discovering the best conditions

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— soil, sunshine, climate, etc. — for the growth and sustenance of elm-trees, and

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by trying to avoid conditions deemed bad for elm-trees — elm blight, excessive drought,

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etc.

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A similar set of ethical properties can be worked out for various breeds of animals.

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Thus natural law sees ethics as living entity or species relative.

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What is good for cabbages will differ from what is good for rabbits,

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which in turn will differ from what is good or bad for man.

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The ethic for each species will differ according to their respective natures.

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Man is the only species which can, and indeed must, carve out an ethic for himself.

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Plants lack consciousness and therefore cannot choose or act.

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The consciousness of animals is narrowly perceptual and lacks the conceptual, the ability to frame

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concepts and to act upon them.

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Man, in the famous Aristotelian phrase, is uniquely the rational animal, the species

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that uses reason to adopt values and ethical principles, and that acts to attain these

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ends.

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Man acts, that is, he adopts values and purposes, and chooses the ways to achieve them.

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Man therefore, in seeking goals and ways to attain them, must discover and work within

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the framework of the natural law, the properties of himself and of other entities, and the

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ways in which they may interact.

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Western civilization is in many ways Greek, and the two great philosophic traditions of

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ancient Greece which have been shaping the Western mind ever since have been those of

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Aristotle and his great teacher and antagonist, Plato, 428 to 347 B.C.

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It has been said that every man deep down is either a Platonist or an Aristotelian,

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and the divisions run throughout their thought.

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Plato pioneered the natural law approach, which Aristotle developed and systematized.

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But the basic thrust was quite different.

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For Aristotle and his followers, man's existence, like that of all other creatures, is contingent,

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that is, it is not necessary and eternal.

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Only God's existence is necessary and transcends time.

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The contingency of man's existence is simply an unalterable part of the natural order,

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and must be accepted as such.

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To the Platonists, however, especially as elaborated by Plato's follower, the Egyptian

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Plotinus, 204-270 AD, these inevitable limitations of man's natural state were intolerable and

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must be transcended.

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To the Platonists, the actual, concrete, temporal, factual existence of man was too limited.

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Instead, this existence, which is all that any of us has ever seen, is a fall from grace,

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a fall from the original, non-existent, ideal, perfect, eternal being of man, a godlike being,

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perfect and therefore without limits.

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In a bizarre twist of language, this perfect and never-existent being was held up by the

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The Platonists as the truly existent, the true essence of man, from which we have all

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been alienated or cut off.

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The nature of man, and of all other entities in the world, is to be some thing, and to

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exist in time.

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But in the semantic twist of the Platonists, the truly existent man is to be eternal, to

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to Live Outside of Time and to Have No Limits.

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Man's condition on earth is therefore supposed to be a state of degradation and alienation,

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and his purpose is supposed to be to work his way back to the true, limitless and perfect

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self, alleged to be his original state, alleged, of course, on the basis of no evidence whatever.

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Indeed, evidence itself identifies, limits, and, therefore to the Platonic mind, corrupts.

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Plato's and Plotinus's views of man's allegedly alienated state were highly influential, as

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we shall see, in the writings of Karl Marx and his followers.

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Another Greek philosopher, emphatically different from the Aristotelian tradition, who prefigured

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Richard Hegel and Marx was the early pre-Socratic philosopher Heraclitus of Ephesus, circa 535-475 B.C.

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He was pre-Socratic in the sense of predating Plato's great teacher Socrates, 470-399 B.C.,

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who wrote nothing but has come down to us as interpreted by Plato and by several other

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followers. Heraclitus, who was aptly given the title The Obscure by the Greeks, taught

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that sometimes opposites, A and non-A, can be identical, or, in other words, that A can

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and B, Non-A. This defiance of elemental logic can perhaps be excused in someone like Heraclitus,

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who wrote before Aristotle developed classical logic, but it is hard to be so forbearing

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to his later followers.

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2. The Politics of the Polis

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When man turns the use of his reason from the inanimate world to man himself and to

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social organization, it becomes difficult for pure reason to avoid giving way to the

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biases and prejudices of the political framework of the age.

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This was all too true of the Greeks, including the Socratic, Plato and Aristotle.

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Greek life was organized in small city-states, the polis, some of which were able to carve

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out overseas empires.

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The largest city-state, Athens, covered an area of only about 1,000 square miles, or

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half the size of modern Delaware.

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The key facet of Greek political life was that the city-state was run by a tight oligarchy

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of Privileged Citizens, most of whom were large landowners.

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Most of the population of the city-state were slaves or resident foreigners who generally

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performed the manual labor and commercial enterprise respectively.

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The privilege of citizenship was reserved to descendants of citizens.

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While Greek city-states fluctuated between outright tyrannies and democracies, at its

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As most democratic, Athens, for example, reserved the privileges of democratic rule to 7% of the population, the rest of whom were either slaves or resident aliens.

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Thus, in Athens of the 5th century BC, there were approximately 30,000 citizens out of a total population of 400,000.

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As privileged landowners living off taxes and the product of slaves, Athenian citizens had the leisure for voting, discussion, the arts, and, in the case of the particularly intelligent, philosophizing.

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Although the philosopher Socrates was himself the son of a stonemason, his political views were ultra-elitist.

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In the year 404 BC, the despotic state of Sparta conquered Athens and established a reign of terror known as the Rule of the Thirty Tyrants.

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When the Athenians overthrew this short-lived rule a year later, the restored democracy executed the aged Socrates, largely on suspicion of sympathy with the Spartan cause.

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This experience confirmed Socrates' brilliant young disciple, Plato, the scion of a noble Athenian family, in what would now be called an ultra-right devotion to aristocratic and despotic rule.

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A decade later, Plato set up his Academy on the outskirts of Athens as a think tank, not only of abstract philosophic teaching and research, but also as a fountainhead of policy programs for social despotism.

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System. He himself tried three times unsuccessfully to set up despotic regimes in the city-state

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of Syracuse, while no less than nine of Plato's students succeeded in establishing themselves

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as tyrants over Greek city-states. While Aristotle was politically more moderate than Plato,

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his aristocratic devotion to the polis was fully as evident. Aristotle was born of an

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He had an aristocratic family in the Macedonian coastal town of Stegira and entered Plato's

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Academy as a student at the age of 17 in 367 BC.

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There he remained until Plato's death twenty years later, after which he left Athens and

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eventually returned to Macedonia, where he joined the court of King Philip and tutored

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The Young Future World Conqueror, Alexander the Great

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After Alexander ascended the throne, Aristotle returned to Athens in 335 BC and established

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his own school of philosophy at the Lyceum, from which his great works have come down

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to us as lecture notes written by himself or transcribed by his students.

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When Alexander died in 323 BC, the Athenians felt free to vent their anger at Macedonians

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and their sympathizers, and Aristotle was ousted from the city, dying shortly thereafter.

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Their aristocratic bent and their lives within the matrix of an oligarchic polis had a greater

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impact on the thought of the Socratic than Plato's various excursions into theoretical

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Social Right-Wing Collectivist Utopias, or in his students, Practical Attempts at Establishing

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Tyranny, for the social status and political bent of the Socratic's colored their ethical

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and political philosophies and their economic views.

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Thus, for both Plato and Aristotle, the good for man was not something to be pursued by

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by the individual, and neither was the individual a person with rights that were not to be abridged

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or invaded by his fellows.

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For Plato and Aristotle, the good was naturally not to be pursued by the individual but by

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the polis.

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Virtue and the good life were polis rather than individual oriented.

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All this means that Plato's and Aristotle's thought was statist and elitist to the core,

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a statism which unfortunately permeated classical, Greek and Roman, philosophy, as well as heavily

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influencing Christian and medieval thought.

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Classical natural law philosophy therefore never arrived at the later elaboration, first

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in the Middle Ages and then in the 17th and 18th centuries of the natural rights of the

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individual which may not be invaded by man or by government.

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In the more strictly economic realm, the statism of the Greeks means the usual aristocratic

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exaltation of the alleged virtues of the military arts and of agriculture, as well as a pervasive

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Contempt for Labor and for Trade, and Consequently of Money-Making and the Seeking and Earning

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of Profit.

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Thus Socrates, openly despising Labor as unhealthy and vulgar, quotes the King of Persia to the

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effect that by far the noblest arts are agriculture and war.

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And Aristotle wrote that no good citizens should be permitted to exercise any low mechanical

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Social Change as well as Economic Growth.

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But the Greek and Socratic ethical ideal for the individual was not an unfolding and flowering

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of inner possibilities, but rather a public political creature molded to conform to the

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demands of the polis.

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That kind of social ideal was designed to promote a frozen society of politically determined

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and Status, and certainly not a society of creative and dynamic individuals and innovators.

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3.

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The First Economist, Hesiod and the Problem of Scarcity

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No one should be misled into thinking that the ancient Greeks were economists in the

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modern sense.

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In the course of pioneering in philosophy, their philosophizing on man and his world

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yielded fragments of politico-economic or even strictly economic thoughts and insights.

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But there were no modern-style treatises on economics per se.

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It is true that the term economics is Greek, stemming from the Greek economia.

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But economia means not economics in our sense, but household management, and treatises on

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economics would discuss what might be called the technology of household management.

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Useful perhaps, but certainly not what we would regard today as economics.

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There is furthermore a danger, unfortunately not avoided by many able historians of economic

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Thought of eagerly reading into fragments of ancient sages the knowledge gained by modern

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economics.

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While we surely should not overlook any giants of the past, we must also avoid any presentist

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seizing upon a few obscure sentences to hail alleged but non-existent forerunners of sophisticated

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modern concepts.

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The honor of being the first Greek economic thinker goes to the poet Hesiod, a Boeotian

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who lived in the very early ancient Greece of the middle of the 8th century BC.

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Hesiod lived in the small self-sufficient agricultural community of Ascra, which he

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himself refers to as a sorry place, bad in winter, hard in summer, never good.

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He was therefore naturally attuned to the eternal problem of scarcity, of the niggardliness

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of resources as contrasted to the sweep of man's goals and desires.

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Hesiod's great poem, Works and Days, consisted of hundreds of verses designed for solo recitation

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with musical accompaniment.

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But Hesiod was a didactic poet rather than a mere entertainer, and he often broke out

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of His Storyline to Educate His Public in Traditional Wisdom or in Explicit Rules for

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Human Conduct.

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Of the 828 verses in the poem, the first 383 centered on the fundamental economic problem

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of scarce resources for the pursuit of numerous and abundant human ends and desires.

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Mises adopts the common religious or tribal myth of the Golden Age, of man's alleged

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initial state on earth as an Eden, a paradise of limitless abundance.

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In this original Eden, of course, there was no economic problem, no problem of scarcity,

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because all of man's wants were instantaneously fulfilled.

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But now, all is different, and men never rest from labor and sorrow by day and from perishing

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by night.

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The reason for this low state is in all-encompassing scarcity, the result of man's ejection from

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paradise.

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Because of scarcity, notes Hesiod, labor, materials and time have to be allocated efficiently.

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The theory, moreover, can only be partially overcome by an energetic application of labor

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and of capital.

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In particular, labor, work, is crucial, and Hesiod analyzes the vital factors which may

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induce man to abandon the godlike state of leisure.

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The first of these forces is, of course, basic material need.

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But happily, need is reinforced by a social disapproval of sloth, and by the desire to

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emulate the consumption standards of one's fellows.

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To Hesiod, emulation leads to the healthy development of a spirit of competition, which

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he calls good conflict, a vital force in relieving the basic problem of scarcity.

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To keep competition just and harmonious, Hesiod vigorously excludes such unjust methods of

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acquiring wealth as robbery, and advocates a rule of law and a respect for justice to

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establish order and harmony within society, and to allow competition to develop within

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a matrix of harmony and justice.

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It should already be clear that Hesiod had a far more sanguine view of economic growth,

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of labor, and of vigorous competition than did the far more philosophically sophisticated

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Plato and Aristotle three and a half centuries later.

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4.

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The Presocratics

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Man is prone to error and even folly, and therefore a history of economic thought cannot

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confine itself to the growth and development of economic truths.

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It must also treat influential error, that is, error that unfortunately influenced later

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developments in the discipline.

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One such thinker is the Greek philosopher Pythagoras of Samos, circa 582 to circa 507

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BC, who, two centuries after Hesiod, developed a school of thought which held that the only

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A significant reality is number. The world not only is number, but each number even embodies

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moral qualities and other abstractions. Thus justice to Pythagoras and his followers is

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the number four, and other numbers consisted of various moral qualities. While Pythagoras

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undoubtedly contributed to the development of Greek mathematics, his number mysticism

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could well have been characterized by the 20th century Harvard sociologist Peter Riem

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A. Sorokin as a seminal example of quantophrenia and metromania. It is scarcely an exaggeration

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to see in Pythagoras the embryo of the burgeoning and overweeningly arrogant mathematical economics

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and econometrics of the present day. Pythagoras thus contributed a sterile dead

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End to Philosophy and Economic Thought, one that later influenced Aristotle's pocky and

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fallacious attempts to develop a mathematics of justice and of economic exchange.

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The next important positive development was contributed by the pre-Socratic, actually

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contemporary of Socrates, Democritus, circa 460 to circa 370 B.C.

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This influential scholar from Abdera was the founder of atomism in cosmology, that is,

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the view that the underlying structure of reality consists of interacting atoms.

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Democritus contributed two important strands of thought to the development of economics.

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First, he was the founder of subjective value theory.

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Political values, ethics, were absolute, Democritus taught.

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But economic values were necessarily subjective.

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The same thing, Democritus writes, may be good and true for all men, but the pleasant

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differs from one and another.

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Not only was valuation subjective, but Democritus also saw that the usefulness of a good will

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Democritus also pointed out that if people restrained their demands and curbed their

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desires, what they now possess would make them seem relatively wealthy rather than impoverished.

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Here again, the relative nature of the subjective utility of wealth is recognized.

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In addition, Democritus was the first to arrive at a rudimentary notion of time preference,

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the Austrian insight that people prefer a good at present to the prospect of the good

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arriving in the future.

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As Democritus explains, it is not sure whether the young man will ever attain old age, hence

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the good on hand is superior to the one still to come.

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In addition to the adumbration of subjective utility theory, Democritus's other major

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contribution to economics was his pioneering defense of a system of private property.

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In contrast to Oriental despotisms, in which all property was owned or controlled by the

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emperor and his subordinate bureaucracy, Greece rested on a society and economy of private

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Property.

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Democritus, having seen the contrast between the private property economy of Athens and

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the oligarchic collectivism of Sparta, concluded that private property is a superior form of

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economic organization.

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In contrast to communally owned property, private property provides an incentive for

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Toil and Diligence, since income from communally held property gives less pleasure and the

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expenditure less pain.

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Toil, the philosopher concluded, is sweeter than idleness when men gain what they toil

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for or know that they will use it.