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THE ANCIENTS

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  1. THE ANCIENTS HERE WE CAN START WAY BACK IN HISTORY -- AND IF WE HAD MORE INFORMATION WE COULD GO BACK EVEN FURTHER

  2. WE START WITH THE CHINESE ---  725 – 645 B.C. • THEN GO TO THE GREEKS • OF COURSE THE LATER CHRISTIANS WERE REFERRING BACK TO JUDAH, THE ISRAELITE KINGS, ISAIAH, AND HIS THOUGHTS ABOUT PRICING AND BEHAVIOR • THEN TO ROME AND ROMAN THOUGHT AND THE COLLAPSE OF ROME • WE CAN GO TO ISLAMIC THOUGHT • THE SCHOLASTICS OF THE CHRISTIAN ERA • THE FEUDAL ERA • THESE ALL COME PRIOR TO THE FORERUNNERS, THE CLASSICALS, AND THE NEOCLASSICALS

  3. ** ADDITIONAL IDEA** --- NOT IN THE TEXT The light/heavy theory In Anticipation of the quantity theory of money ( a la John Locke – a forerunner of the Classicals) Idea of the pervasive idea of supply and demand Guan Zhong and the book Guan Zi (725-645 BC) Guan Zhong argued that when a good was abundant, it became light, and its price would fall--- when the good was “locked away”, it became heavy, and the good’s price would rise There are movements of goods into and out of markets based on their lightness and heaviness, with a tendency toward one price– equilibrium --- hence a statement of the law of supply & demand

  4. Guan Zhong used the light/heavy idea to anticipate a quantity theory ---- when money was heavy (less abundant), its price would rise (prices of goods would fall), and when money was light, it’s price would fall (goods prices would rise) ---The policy to modify this fluctuation: the state should buy goods when money was heavy (thereby holding the price level up) and sell goods when it was light (thereby holding prices of goods down) ---- This policy stabilizes the price level, but makes money for the government {Early Stabilization policy here} -- markets, market equilibrium, and equilibrium price ideas --supply and demand are not strictly western economic ideas --economic ideas are universal --change the institution and one changes the policy

  5. A TRANSELATED QUOTEGuan Zhong “INDEED, IT IS THE NATURE OF MEN THAT WHENEVER THEY SEE PROFIT, THEY CANNOT HELP CHASING AFTER IT, AND WHENEVER THEY SEE HARM, THEY CANNOT HELP RUNNING AWAY. WHEN THE MERCHANT ENGAGES IN TRADE AND TRAVELS TWICE THE ORDINARY DISTANCE IN A DAY, USES THE NIGHT TO EXTEND THE DAY, AND COVERS A THOUSAND LI WITHOUT CONSIDERING IT TOO FAR, IT IS BECAUSE PROFIT LIES AHEAD. WHEN THE FISHERMAN PUTS OUT TO SEA, THE SEA MAY BE TEN THOUSAND-REN DEEP, AND WHEN HE HEADS INTO ITS WAVES AND STRUGGLES AGAINST ITS TIDES, RAISES HIS SMALL MAST AND SAILS OUT A HUNDRED LI, NEVER LEAVING THE WATER FROM MORNING TO NIGHT, IT IS BECAUSE PROFIT LIES IN THE WATER. THUS, WHEREVER PROFIT LIES, EVEN THOUGH IT BE ATOP A THOUSAND-REN PEAK, THERE IS NO PLACE PEOPLE WILL NOT CLIMB. EVEN THOUGH IT IS AT THE BOTTOM OF THE DEEPEST DEPTHS, THERE IS NO PLACE PEOPLE WILL NOT ENTER.

  6. INDEED, THOSE WHO ARE SKILLED IN GOVERNMENT CONTROL THE PRESENCE OF WEALTH SO THAT THE PEOPLE ARE NATURALLY CONTENT. WITHOUT PUSHING THEM, THEY GO; WITHOUT PULLING THEM, THEY COME. WITHOUT TROUBLE OR WORRY, THE PEOPLE ENRICH THEMSELVES. IT IS LIKE A BIRD SITTING ON ITS EGGS; THERE IS NEITHER SHAPE NOR SOUND, BUT THE YOUNG SUDDENLY APPEAR QUITE COMPLETE” GUAN ZHONG, GUAN ZI, VOL. II, TRANSELATED BY W. ALLYN RICKETT (PRINCETON, N.J.: PRINCETON UNIVERSITY PRESS, 1998), pp. 219-220. MAINSTAY OF ECONOMIC BEHAVIOR?? --- PROFIT MAXIMIZATION??

  7. WHAT OF CHINA TODAY? • Xi Jinping takes over as party leader • Warns party leaders of corruption in higher echelons – threatens 6 decade hold over the nation • China’s most serious problems are domestic issues • Socialism with Chinese characteristics • No stopping of the opening up of China • Cooperate with non-CPC parties to bring about health reform & non party commerce

  8. WHAT OF CHINA TODAY? • Hu Jintao – outgoing party leader • China’s growth will come back • Development of the west and northwest • China will work to bolster global economic growth • Hu’s father died after being accused of being a “capitalist” during the “cultural revolution” • Deng Xiaoping --- the reformer • He abandoned many elements of the communist elements and adopted many free enterprise practices – studied in France – spent time in the soviet Union --- then back to china to lead the cpc

  9. SOME EARLY GREEK THOUGHT --- PRICES NOT DERIVED FROM SCARCITY --- MARKETS ARE WITHIN THE “GOD’S” TERRITORY Hesiod, the farmer and Greek thought on efficiency found in his Works and Days An accounting of the birth of the gods is in Theogony --- here Hesiod suggests that scarcity does not arise from a human condition related to limited resources and unlimited desires, rather it is one of the evils released from Pandora’s Box when opened! TEXT CH 1 The instructor tried to tell his mother this story upon stealing licorice from his mother’s stash!! The price? Not only the willow but the pinch bar across the hindy!! Hesiod was interested in maximum efficiency of the individual, or of the household Efficiency is later applied to public affairs

  10. Xenophon the word Economics derives from the title of Xenophon’s book Oeconomicus OR OIKONOMIKOS STILL NON-MARKET LIKE THOUGHT – BUT LABOR VALUE LATER BECOMES A FUNCTION OF LABOR EFFICIENCY OR LABOR PRODUCTIVITY – SEE THE LATER NEOCLASSICAL THOUGHT Oeconomicus refers to efficient management at the level of the producer and/or household Xenophon extended efficiency to the level of the military and the public administrator Xenophon suggests division of labor induces efficiency Men interact with nature rather than with each other

  11. Hesiod is in the 8th Century BC Xenophon writes some 400 years later Division of labor was continued by other Greek writers, including Aristotle, and later by the scholastics at the break-out of the medieval period Thence used by Adam Smith and others

  12. ARISTOTLE <<<< The Student of Plato IF EXCHANGE IS VOLUNTARY, THEN EXCHANGE IS JUST TEXT CH 1 Aristotle philosophical thinking and economic thinking The Master Philosopher TEXT CH 2 Plato Was against allowing for private property— Humans have more lofty things to think about ST. Thomas Aquinas and the Churchmen later use some of these ideas Democratis (460 – 370 BC) On division of labor Communal property vs. private property debates DISTRIBUTIVE JUSTICE --- PROPORTIONALITY --- GEOMETRIC PROPORTION --- GEOMETRIC MEAN (MULTIPLY QUANTITIES AND THEN TAKE THEIR nTH ROOT) AN INFLUENCE FROM THE PYTHAGOREANS

  13. Remember the Pythagorean theorem from high school mathematics? Recall a2 + b2 =c2 THE SUM OF THE SQUARE OF THE SIDES = THE SQUARE OF THE HYPOTENUSE -- so how long is the hypotenuse? The Pythagorean theorem: The sum of the areas of the two squares on the legs (a and b) equals the area of the square on the hypotenuse (c). 2√c2 GEOMETRIC MEAN 2√2 × 8 = 4. ANOTHER FORM OF AVERAGE, BUT IN SPACE, DEALING WITH SQUARES The Greeks used the geometric mean to measure average efficiency and a crude measure of average GNP (gross national product)

  14. What about the old definition of economics ??? The study of satisfying human wants against the scarcity of resources (inputs)!!! The allocation of limited resource to unlimited wants?? Where did that statement come from?? --Aristotle— People’s needs are moderate People’s desires are limitless hence, the production of commodities to satisfy needs is quite natural, whereas the production of goods in an attempt to satisfy unlimited desires is unnatural He admits that it is hard to distinguish goods sold for needs and goods sold for unlimited desires

  15. Aristotle’s teacher, Plato, had argued for the ruling class to not hold private property --- the soldiers and the philosophers – the ruling class of society, should hold communal property to avoid conflicts over property that might divert their attention from more important issues { so what kind of government graft is that!! – the soldiers conquer, and take over the land! For wealth? For power? Is this government monopoly??} Aristotle suggested that private property serves a useful function and that no regulation should limit private property in the hands of private parties He condemns the pursuit of economic gain while endorsing the right to private property Aristotle’s main contribution came through his understanding of the exchange of commodities and the use of money in this exchange

  16. How does all this relate to demand? And Demand Elasticity?? So, what kind of “crap” is this philosophy?? --Aristotle— Barter is a sign of exchange for needs Use of money suggests the exchange is for monetary gain Economics should be viewed in the broader context The problem of scarcity can be modified by reducing consumption and changing human attitudes– a concept taken up by the Utopians in later periods What about drug control in our own time??