THE ANCIENT

ECONOMIC THOUGHT
The Ancient Economic Thought
The history of economic thought deals with
different thinkers and theories in the field of
political economy and economics from the ancient
world right up to the present day. This field
encompasses many disparate schools of economic
thought some of which are given in the following
slides.

Economic Thoughts of the Greeks:

PLATO— (468-399 BC) in his famous book “The
Republic”, he made mention of specialization as the
reason for and justification of society. The
individual learns and perfects his knowledge and
skills in the art or practice of increasing the
production of material things.
Xenophon(430-355 BC), a student
of Socrates, viewed division of
labor and the allocation of
resources within the latifundia,
(pieces of landed property
covering tremendous areas) as a
way to self sufficiency. He said
that with efficient management of
this large estate, it will eventually
lead to self-sufficiency.
Aristotle—(384-322 BC) divided
the concerns of economics into
two separate fields: one was
oikonomiks and the other
chrematistiks. Oikonomiks dealt
with the production and
consumption of goods whie
chrematistiks encompassed the
activities of money-making as
well some aspects of production.
THE RISE of MERCANTILISM
Mercantilism is an economic theory
that holds the prosperity of a nation
depends upon its supply of capital, and
that the global volume of trade is
“unchangeable”. Economic assets, or
capital, are represented by
bullion(gold, silver, and trade value)
held by he state, which is best
increased through a positive balance of
trade with other nations.
 Mercantilism was established during
the early modern period ( starting in
the 16th to the 18th century, which
roughly corresponded to the emergence
of the nation-state). This led to some of
the first instances of significant
government intervention and control
over market economies, and it was
during this period that much of the
modern capitalist system was
established.
The Physiocrats
The physiocrats are goup of
economists who believed that the
wealth of the nation derived solely from
the value of land agriculture or land
development. Their use of the term
laissez faire meant that the only
legitimate form of government revenue
derived from land. Their theories
originated in France and were most
popular during the second half of the
18th century.
Physiocracy is perhaps the first well
developed theory of economics. The
movement was particularly dominated
by Anne-Robert-Jacques Turgot
(1727-1781) and Francois Quesnay
(1694-1774). It immediately preceded
the first modern school, classical
economics, which began with the
publication of Adam Smith’s The Wealth
of Nations in 1776. The most significant
contribution of the physiocrats was their
emphasis on productive work as the
source of national wealth.
The Laissez-faire Theory

Laissez-faire is French phrase

meaning “let do”. From the
French diction first used by the
18th century physiocrats as an
injunction against government
interference with trade, it became
used as synonym for strict free
market economics during the
early mid-19th century.
It is generally understood to be a
doctrine that maintains that
private initiative and production
are best allowed to roam free,
opposing economic
interventionism and taxation by
the state beyond what is perceived
to be necessary to maintain
individual liberty, peace, security
and property rights.
THE INDUSTRIAL REVOLUTION
and CLASSICAL ECONOMICS

ADAM SMITH (1723-1790) –recognized as

the founder of Classical school, constructed
an explanation on how social behavior is
regulated. His view of economics was shaped
by the world he observed. He saw a world
where each person sought their own
self-interest but was constrained by morality,
markets, and government.
David Ricardo( The Theory of
Comparative Advantage)
Most notable work is his “Principle of
Political Economy and Taxation”.
This book introduces the theory of
comparative advantage. According to
Ricardo’s theory, even if a country could
produce everything more efficiently than
another country, it would reap gains from
specializing in what it was best at producing
and trading with other nations.
Principle of Population

THOMAS ROBERT MALTHUS and the

PRINCIPLE of POPULATION

In his famous book “ An essay on the

Principle of Population” published in 1798 he
made the famous prediction that population
would outrun food supply, leading to the
decrease in food per person. This theory
depended on the idea that population if
unchecked, increases at a geometric rate
where-as the food supply grows at an
arithmetic rate.
MARGINALIST
⚫ SCHOOL

Classical economist theorized

that prices are determined by the
cost of production. Marginalist
economist emphasized that prices
also depend upon the level of
demand, which turn depends
upon the amount of consumer
satisfaction provided by individual
goods and services.
The MARXIST ECONOMICS

The Marxist economic thought

comes from the work of German
economist Karl Marx. In his book
The Capital published in Germany
in 1867, he focused on the labor
theory of value in what he
considered to be the exploitation
of the workers by the capitalists.
THE NEO-CLASSICAL ECONOMICS

A body of theory termed

neo-classical economics or
marginalist economics was
formed about 1870. Neo-classical
economists popularized the term
economics as a substitute for the
earlier termed “political
economy”.
Alfred Marshall was the dominant
figure in British economics from
about 1890 until his death in
1924. His specialty was
microeconomics– the study of
individual markets and industries
In his famous book “ The Principle
of Economics”’ he emphasized
that the price and output of goods
are determined by both supply
and demand.
THE KEYNESIAN ECONOMICS

During the Great depression, John Maynard

Keynes published his most important work,
‘the General Theory of Employment, Interest,
and Money in (1936). On top of the supply of
money he identified the propensity to
consume, inducement to invest, the marginal
efficiency of capital, liquidity preference and
the multiplier effect as the variables which
determine the level of the economy’s output,
employment and level of prices.
Name_____________________ Student No. __________ Score___________
Course ____________________ Date___________

Multiple Choice. Write the letter of the correct answer on the space provided.
______1. He opposed capitalism and he said that it would soon result to business
depression.
a. Karl Marx b. Alfred Marshall c. Adam Smith d. Jeremy
Bentham
______2. He predicted that population would outrun food supply.
a. Adam Smith b. Thomas Malthus c. Socrates d. Jeremy
Bentham
______3. The most important book of Alfred Marshall.
a. Growth Theory b. Principles of Economics c. Das Capital d. Wealth of Nations
______4. The Theory of Comparative Advantage is a famous work of_______.
a. Thomas Malthus b. Adam Smith c. David Ricardo d. Karl Marx
______5. Economics was derived from this Greek word.
a. oikonomia b. ekonometrika c. oikonomustic d. oikonokrus
______6. Field of economics that deals with governments role of collecting taxes how it is
used to give essential services.
a. production b. public finance c. distribution d. consumption
______7. Buying and using goods to satisfy the needs and wants.
a. consumption b. distribution c. production d. exchange
______8. The process of converting raw materials to create finished product
a. exchange b. distribution c. production d. consumption
______9. Branch of economics that analyses the economy as a whole.
a. chrematistiks b. macroeconomics c. microeconomics d.
econometrics
_____10. The apportionment of the wealth of the society.
a. distribution b. consumption c. production d.
exchange
_____11. Exchange in the economy is facilitated by _______________.
a. barter b. money c. titles of
ownerships d. chips
_____12. This branch of economics deals with the study of small or individual
units of the economy.
a. chrematistiks b. microeconomics c. macroeconomics d.
econometrics
_____13. A synonym for strict free market economics.
a. Socialism b. Communism c. Laissez-faire d.
Traditional
_____14. Laissez-faire is a French phrase meaning:
a. free competition b. let alone policy c. market
d. stand alone
______15. The word economics was popularized by neo-classical economists
as substitute for:
a. wealth b. division of labor c. natural resources
d. political economy
⚫ Assignment:
1.Study the basic concepts of demand.
define the following terms:
a. demand
b. demand schedule
c. demand curve
2.Explain the law of demand.
3.What are the non-price determinants in demand ?
4. What is market demand.
5. Compare change in demand and change in quantity
demanded.(shifts in demand )
4. Wat is elasticity of demand? Give the different types of
demand elasticity. Study the procedure on how to compute for
elasticity of demand.