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Economic Thoughts in Ancient Times

List of Philosophers Contributing in Evolution of Economic Thoughts Before Adm Smith

Philosophers and Thinkers Before Evolution of Market Economy

Name of the PhilosopherPlace of Origin Time duration



1792 BC- 1750 BC



371 BC- 283 BC



551 BC- 479 BC

Guan Zhong


725 BC-645 BC



750 BC-650 BC



431 BC-354 BC



385 BC-323 BC

Abu Hamid al-Ghazali


1058 AD-1111 AD

Ibn Khaldun


1332 AD-1406 AD

The Scholastics


1000 AD-1700 AD

Plato and Aristotle

Plato and Aristotle

A famous story of Joseph in Egypt, Ancient Indian, Chinese, Greek, Islamic, English Philosophers and their economic thoughts

Economic Thoughts in Ancient Times

There was little formal analysis of human activity until merchant capitalism developed in Western Europe during the fifteenth century. The modern economic theory finds the source of all economic problems in relative scarcity. Scarcity is a result of our desire to consume more goods and services than our society can produce. Modern economies are market economies; thus, the modern economic theory focuses on how markets help to deal with the problems of scarcity and gives much less attention to the use of force, authority, and tradition. The early pre-classical thinkers reflected on aspects of their economic lives but gave the greatest attention to nonmarket-allocating mechanisms. Unlike modern economists, who are especially concerned with the efficiency of resource allocation, the early Western pre-classical thinkers considered the consequences of various types of economic activities for justice and the quality of life.

People were not dependent on others to produce the goods they consumed or on markets to acquire these goods, but were for the most part self-sufficient. Thus, early pre-classical writers were not interested in markets because of the relative unimportance of markets in the daily activities of people. One of the most significant differences between early pre-classical and modern orthodox economic thought concerns the mechanism for resource allocation. In a premarket setting, thinkers focused on the use of authority as an allocator of resources.

The early writers had little notion of the meaning and implications of scarcity and how markets coordinated individual activities. This saying does not denigrate the accomplishments of these intellectuals, for it was a long and tortuous road to recognizing the meaning and implications of scarcity and realizing that an economy existed that was capable of analysis. Historians of economic ideas acknowledge that the early writers identified a number of concepts and tools that enabled later writers to understand the developing market economy.

Two important themes emerge from early pre-classical doctrine. One concerns the level of inquiry appropriate for analyzing society. These writers believed that it was inappropriate to separate any particular activity like economic activity, from all other activities. The very ability to make such abstract separation represents part of the intellectual apparatus necessary for the “birth” of economics and the other social sciences.

The second theme is the focus on broad philosophical issues, giving particular attention to questions of fairness, justice, and equity. The pre-classical writers examined exchange and price with the purpose of evaluating their fairness, justice, and equity. Such concern makes sense in a premarket society. These two themes—the illegitimacy of abstraction and the focus on equity—can also be found within a good deal of heterodox economic writing from the eighteenth century to the present.

A famous story of Joseph in Egypt

Some elementary economic theories have been known and generally accepted for centuries, and we can find expressions of them in some oldest written sources that we possess. a famous example from the Old Testament is the story of Joseph in Egypt. Joseph interpreted one of the Pharaoh’s dreams as a prediction that seven fat years would be followed by seven lean years. action on the authority of the pharaoh, he used to predict as a basis for purchasing and building up the storage of grain during the fat years. by acting in this way, he managed to have grain for distribution to the people when the lean years actually arrived. this story can be understood as an example of the analysis of price formation as a result of the interplay of supply and demand. Joseph saw that a reduction in the future supply of grain would lead to higher prices and economic hardship, and he used this insight to buy grain when prices were low in order to provide a greater supply when the lean years arrived. (Sandmo, 2011)

Hammurabi: Babylonian empire and King (1792 BC- 1750 BC)

Before the invention of capitalism economic science, there were certain ideas about the economy in the most educated members of the ancient world or middle ages and they were concerned only with certain aspects of the economy and more normative. The first historical information relating to a systematic aspect of economics was found in ancient Babylon and which was law and the king of law Hammurabi.

They strengthened private property and land, recognized private ownership of land, tools and that resulted in the division of classes in the society. society was divided into three classes and the king Hammurabi had made first written rule in the history of human civilization for all the classes of people and he made the law that if a person bought a son of human hands or servant, man or silver or gold or whatever without witnesses or a contract, this man was regarded as a thief and must be killed.

They used to regulate the recruitment relation, rent, trade through law indicating that there was a lack of money and commodity relations. They had believed that law was the power of god and god has given the authority to the state to implement the law and the responsibility of the state is to protect and strengthen the property of individuals. they had also limited the activities of moneylenders and debt slavery through law.

Chanakya: Ancient Indian Philosopher (371 BC- 283BC)

Chanakya was an ancient Indian teacher, philosopher, economist, jurist, and royal advisor. he was the pioneer of Indian politics and economics. He believed that the establishment of rule of law, an impartial judicial system, private property rights, an incentive mechanism to ensure efficiency and honesty of government officials, and establishment of dharma through the moral and spiritual rules of human behavior, were the key ingredients for the creation of a prosperous economy. He describes the requirement of having strong government finances and an able army.

He also suggested that the government/king should be responsible to increase prosperity, ensure judicial fairness, and provide national security. He also described the role and duties of other key positions in the government such as Police chief, Chief Justice, Treasurer, Minister, and others and the role played by them would lead the economic path of the state. Chanakya had covered the wider meaning of wealth in his book and he suggested that agriculture and animal husbandry should be given more importance for production variation and then the government should have to regulate trade to collect more tax and thereby they could make a balanced budget for the state by increasing revenue and decreasing cost. He also talked about the responsibility of the government to make appropriate laws and rules to honor labor, discourage slavery system, ensure provisions of social security and state welfare. he also said that law should base on the economic and social structure of society. Thus, Chanakya advocated for a progressive economy with the help of rule, moral duty, and work.

Confucius: Ancient Chinese Philosopher (551BC- 479BC)

Confucius was an ancient Chinese philosopher, politician and the first teacher of Chinese history. from the caretaker of sheep and horse, he had worked on various positions for the government as well. He emphasized personal and governmental morality, the correctness of social relationships, justice, kindness, and sincerity. He believed that God is the primary cause of the world, but he does not interfere in the public life of the phenomenon, obeying natural laws that open mind and are protected by civil laws, components of natural rights. it is, therefore, necessary to maintain social order based on unquestioning obedience to authority. Confucius demanded of the rulers to put each person in his place in society, according to its position.

He also said that people should work hard to consume less and to seek comfort and according to him the source of wealth of the people is work and for the state, it is the people and wealth of supreme rulers. he condemned the ruler's habit of excessive accumulation of wealth and advised to reduce tax for workers and not to tale any tax from farm works, take care of improvement of people's welfare. he also suggested that there should not be any discrimination on the basis of gender and social status and every person has to give due respect to their mother and father, their teachers, the sovereign or king, the earth, and the god.

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Guan Zhong: Ancient Chinese Philosopher (725 BC-645 BC)

He has presented a number of ideas that are central to the economic supply/demand theory. Others include his anticipation of the quantity theory, his discussion of countercyclical fiscal policy, and his appreciation for the workings of the market. Guan Zhong argued that when good was abundant, it became light, and its price would fall. When it was locked away it became heavy, and its price would rise. There would be movements of goods into and out of markets based on their lightness and heaviness, with a definite tendency toward one price ‘equilibrium price’. Thus, the light/heavy theory is a statement of the law of supply and demand. Guan Zhong also used this light/ heavy theory to develop a quantity theory of money, asserting that when money was heavy, its price should rise (prices of goods would fall), and when money was light, its price would fall (prices of goods would rise).

To stop that fluctuation, he advised that the state should buy goods when money was heavy (thereby holding the price level up) and sell goods when it was light (thereby holding the price level down). This would not only help stabilize the price level but also make money for the government. His understanding of the market led him to conclude, 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.

Thus, the writings of Guan Zhong indicate that there is a universality to ideas of supply and demand that transcends time and place. However, when it comes to policy, the thoughts reflected in Guan Zi also suggest that economic insights have no direct policy implications independent of institutional structure. Guan Zhong actively structured policy to fit the institutional structure of his time, but with activism that worked with market forces, not against them.

Hesiod: Ancient Greek Philosopher (750 BC-650 BC)

The ideas of Hesiod were orally presented during the eighth century BC. The most important work attributed to Hesiod is an accounting of the birth of the gods, Theogony. According to Hesiod, scarcity does not arise from a human condition related to limited resources and unlimited desires; rather, it was one of the evils released when Pandora opened the box. Hesiod’s economic ideas are presented in Works and Days, in which he initiates a pursuit of economic questions that continued for two centuries. Being a farmer, Hesiod was interested in inefficiency. Economists use the concept of efficiency in a number of contexts. It is measured as a ratio of outputs to inputs. The early writers were not interested in inefficiency at the level of society because they had no real insight into the concept of scarcity, its implications, and an economy.

Xenophon: Ancient Greek Philosopher (431BC-354BC)

The word economics, derived from Greek, was used by Xenophon as the title of his book Oeconomicus. As used by the Greeks, however, the term refers to efficient management at the level of the producer or the household. Hesiod, Xenophon, and other early writers were pursuing a set of problems relating to efficiency at the level of the producer and the household that had to be tackled before the much more difficult and less obvious issues of efficiency for an entire economy could be dealt with. It is interesting that economics as a discipline was quite well developed before a full and complete understanding of efficiency at the level of the firm and household was established.

Xenophon, writing some four hundred years after Hesiod, took the concepts of efficient management much farther than Hesiod and applied them at the level of the household, the producer, the military, and the public administrator. This brought him insights into how efficiency can be improved by practicing a division of labor. Attention to the division of labor was continued by other Greek writers, including Aristotle, and, later, by the scholastics.

Aristotle: Ancient Greek Philosopher (385 BC-323 BC)

Aristotle is the philosophical thinker of ancient Greek and had contributed to the evolution of economic thought with his influential ideas. He added the reasoning in economic issues and thoughts. Aristotle’s teacher Plato had argued that the ruling class of his ideal society, the soldiers and philosophers, should not possess the private property but should hold communal property to avoid conflicts over property that might divert their attention from more important issues. However, Aristotle believed that private property served as a useful function in society and that no regulations should be made to limit the amount of property in private hands. The best contributing of Aristotle may be his attempt to analyze exchange transaction between two individuals. Through Ethics he recognized that exchange or trade can only come about if there is a potential surplus from the transaction in which both parties can share. He understands the importance of money as a means to simplify exchange transactions by allowing all prices to be expressed in the same units. His work also contains formulations that, with some goodwill can be seen as an early statement of the principle of diminishing marginal utility. But neither Aristotle nor the other philosophers of ancient Greece or Rome made any attempt to understand the economic system as a whole. Aristotle said that people's need is moderate but people’s desires are limitless. Hence the production of commodities to satisfy needs was right and natural, whereas the production of goods in an attempt to satisfy unlimited desires was unnatural. He assumed the market exchange in the form of barter and can satisfy natural needs and no economic gain is intended.

Arab-Islamic Thought

Arab-Islamic writes and thinkers assumed economic activities as the small part of one’s salvation. There was no separate formal economic analysis as there is today; rather the medial Islamic scholars examined economic issues in the broader context of their religious view.

They saw all the human activities as interrelated and took under the governance of Divine law thus articulation of an analytical framework was difficult. One of the very early focal points of their attempt to study economic activity was taxation. The major thinker's view can be expressed as:

Abu Hamid al-Ghazali (1058AD-1111AD)

He was among the most significant intellectual Muslim thinkers of middle age and his writings are known to have influenced St. Thomas Aquinas. He had also expressed his philosophical, ethical, economic, sociological factors withing the religious framework as directed by time and framework. Among the main contribution of him, the evolution of the market through voluntary exchange was significant and his insight was markets link and coordinate economic activities with the evolution of work specialization and division of labor. He also talked about major economic issues like public expenditure, taxation, and borrowing, interest, and usury and how best to levy taxes to the societies.

Ibn Khaldun (1332 AD-1406 AD)

Ibn Khaldun, known as the father of social sciences and considered one of the early economic theorists. He has influenced many schoolers including 17th-century Ottoman historians who used his theories to analyze the growth and decline of the Ottoman empire. In the 19th century, European schoolers also acknowledged his works and considered one of the greatest philosophers of the middle ages. However, he was not interested in purely economic question but he talked about socio-economic dynamism that we call it development cycle nowadays. His famous book Muqaddimah was considered one of the ambitious books of middle ages and some said that was the first attempt of the art of philosophy in history. It deals with Islamic methodology, science, history, economics, and sociology. His work was regarded as the beginning of Islamic economics. In the sector of economics, he talked about government expenditure and he suggested the government that expenditure on arms should be reduced to get the increased economy. He also talked about stabilization policies of his time, population, profit, supply, demand, price, surplus, capital formation, etc.

The Scholastics (1100AD-1700AD)

The group of thinkers including priests and teachers of medieval universities in the thirteenth century are known as scholastics or schoolmen. Their approach to studying economics was ethical and has significant relevance in the 21st century as well. They tried to develop the concept of just price or equilibrium price on the basis of social interest or interest of the society. They tried to find out the answer in moral and ethical grounds and they themselves did not find their ethical answer adequate and started to acquire empirical knowledge of how transactions actually occurred and how the market functioned. Their study led them to the view that the just price was the natural price. The natural price is the outcome of free and effective competition, unaffected by monopoly, or deceitful behavior.

Initially, Catholic Posterity seemed 'interest' was as the exploitation of the weak by the strong. But the scholastics gradually developed a more balanced view of this question. Interest was justified if it reflected actual cost like risk incurred by the creditors in lending money or in the form of rate of return that creditor had to forgo by not being able to undertake investment on his own account. In such a way the economic thoughts of scholastics were somehow patchy, but they attempted to establish a more systematic body of economic thought, and they placed the important space in the history of economic thought.


Almost all the ancient thinkers like Chinese, Greek, Arab Islamic, and Scholastic did not track economics as the separate subject rather they all were much engaged on more ideological and philosophical issues. The market system of their time was not organized and developed as not so they were not able to consider the natural phenomenon and focused on the ethical grounds of pricing like fairness, justice, and equity. However, their attempt to give an insight into the economic aspects of their time had helped to develop the foundation for later writers. The Greek philosophers confined the study up to household management like Hesiod and Xenophon studied the resources and their allocation but failed to talk about efficiency and division of labor. Aristotle and others talked about the role of private property and incentives. These are the major number of things had happened before the evolution of the market economy from Europe to the whole world.


Sandmo, Angar. (2011). Economics Evolving A History of Economic Thought. New Jersey: Princeton University Press.

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