We had our first seminar of the year today. It was by Professor Takeshi Amemiya of Stanford. Takeshi is best known for his econometric research on a wide range of topics, including a series of highly influential theoretical papers in the 1970s and 1980s. His more recent research has been in a very different area -- the economics of ancient Greece. The title of his talk was:
"Economy and Economics of Ancient Greece and Ancient China"
One of the things I took from the talk was how many of the ideas in Adam Smith's Wealth of Nations can be found in these ancient texts, concepts such as the division of labor, supply and demand, the role of prices, monopoly power, wealth accumulation, and so on.
But it was also interesting to see echoes of so many modern debates, e.g. about wealth inequality, taxes, etc., from so long ago. Here are a few quotes from the section "Economic Thoughts" in his slides (there is a timeline in the slides showing when each of the people quoted below lived):
(1) Warriors, Farmers, Craftsmen, and Merchants
In Athens from the 7th to the 6th century BC, the middle and lower class, which engaged in commerce and industry, gradually gained its status, becoming a threat to the aristocrats who depended on farming. Also in China there was a deep-rooted idea that agriculture is primary and commerce and industry are secondary. ... Contempt for commerce and industry, as in Greece, started ... when commerce and industry started growing.
It is noteworthy, however, that in China scholars who defended commerce and industry also emerged. Actually it is surprising that such scholars are not known in Greece. ...
Confucius argued for income equality: “I hear that the man who governs a nation and the man who governs home are more concerned with inequality than scarcity, more concerned with anxiety than poverty.”
B. Guan Zhong
Guan Zhong was a financial adviser to Lord Huan of Qi (?—643). Scholars belonging to the Guan Zhong school kept publishing works in the name of Guan Zi up to the days of Emperor Wu of Early Han.
Guan Zhong believed the four classes should live in separate areas, warriors near the army, farmers near the farm, craftsmen near the government agencies, and merchants near the market. He also believed the four classes should be hereditary in principle, although he would allow an exceptionally stout farmer to be a warrior. ...
He feared the antagonism between the rich and the poor: “When the income inequality exceeds a limit, everything is lost.” (“Five Aids”). Plato said a similar thing in The Laws (744D). Guan Zhong tried to solve this problem by the government’s direct buying selling and its price policy. He encouraged trade across nations. “Show hospitality to the surrounding nations.” (“Book of Questions”) “Please build guest houses for foreign merchants.” (“Gravity Part B”).
C. Mo Zi
“When the lower class works hard, public finance prospers.” (“Heaven’s Will” Part B). He criticized li and yue (morals and music) emphasized by Confucianism as luxury and extravagance. “We should give food to the hungry, clothes to the cold, rest to the laborer, and peace to the disorderly.” (“Against Fate” Part C).
“Therefore the ancient sage kings in their governance appointed the virtuous people for high positions and valued the wise. They appointed even people from the lower three classes as long as they were able and promoted them to peerage, gave them high salaries, and gave them the right to make important political decisions.” (”Merit of Wisdom” Part A) ...
D. Meng Zi
“Those who exert mind rule others, those who exert body are ruled, the ruled feed the rulers, the rulers govern the ruled, and this is universal truth.” (“Lord Wen of Teng Part A”). ...
“There was an ignoble man, who would climb to a high place, look around, and if he finds a place where he is likely to make a profit, goes there and monopolizes the profit. Everyone despised this man, and the government started imposing the merchant tax.” (Gong Sun Chou Part B”).
E. Xun Zi
“A son of a craftsman always succeeds his father’s profession.” (“Influence of a Great Scholar”).
“Man by nature cannot live without forming a group. If a group does not have classes, people quarrel. If people quarrel, they become disordered, and if they are disordered, they fall into trouble. Therefore, life without classes brings the greatest harm, and that with classes brings the greatest benefit.” (“National Wealth”)
“The best way to repair disorder and eliminate harm is to establish classes and group people accordingly.” (“National Wealth”).
“If the descendants of lords and aristocrats do not make an effort to observe morality, they should be relegated to the rank of commoners, and if the descendants of commoners enhance culture and scholarship, adhere to right conduct, and strive for moral life, they should be elevated to the rank of aristocrats and ministers.” (“Kingdom”).
“We should lower the farm tax, unify the market and import-export taxes, minimize recruiting farmers for nonfarm work so that farmers can concentrate on farming, then the wealth of a nation will increase.” (“National Wealth”)
F. Sima Qian (“Biography of Millionaires”)
“Many commoners without a rank, without meddling with politics, without interfering with the lives of people, increased wealth by trading at the right moment. Intelligent people can learn from this.”
“Therefore, farmers provide food, forest guards supply mountain resources, and merchants distribute these goods. The government did not order the collection of the goods. It was done because each person did what he could best and wanted to get what he needed. When the prices are high, that is a sign they will soon become low. Everybody diligently attends to his task and enjoys doing it just as water flows to a lower place. He keeps working days and nights, comes even if he is not called, and supplies goods even if they are not demanded. This stands to reason and is the way it should be.”
After mentioning how various millionaires obtained their fortunes, he concludes, “These people did not get rich because they were given land by the government, nor did they thwart law or did evil things. They observed the law of nature and found the right moment to act and make a profit. They made a fortune by the secondary occupation (commerce) and preserved it by the primary occupation (agriculture). What they got by force, they kept it by civility. As the world changed, they reacted with moderation. That is why it is worthwhile mentioning them.”
G. Sang Hongyang
Sang Hongyang (152BC – 80BC) was the finance minister of Emperor Wu and in 120BC became the officer in charge of salt and iron monopoly. “Salt Iron Debate” is a record of the debate between Sang Hongyang versus the Learned and the Wise chosen from the public regarding the pros and cons of the monopoly of salt and iron, which took place in 81BC and 30 years later recorded by Huan Kuan.
“Wealth is obtained by strategy, and not by labor. Profit comes from power, and not from tillage.” (Salt and Iron Debate “distribution”).
“Xian Gao contributes by selling cattle to Zhou, Wu Gu by lending vehicles in Qin, Gong Shuzi by making use of compasses and measures, and Ou Ye by smelting. Craftsmen perform their tasks in the shops and farmers and merchants trade and benefit each other.” (Ibid.) And yet, in order to convince the Learned, he argues that the monopoly of salt and iron has the benefit of suppressing the avarice of the big merchants.
4 Theory of Prices
Guan Zhong was well aware of the fact that a price is determined by supply and demand, and conversely, supply and demand respond to price (which he calls Theory of Light and Heavy).
“The market determined the level of prices. … By observing the market one can tell whether the nation is orderly or disorderly, whether the supply of goods is sufficient or deficient. But the market itself cannot determine the supply.” (“Riding Horses”). ...
Xenophone states, “An increase in the number of coppersmiths, for example, produces a fall in the price of copper work, and the coppersmiths retire from business. The same thing happens in the iron trade. Again, when corn and wine are abundant, the crops are cheap, and the profit derived from growing them disappears, so that many give up farming and set up as merchants or shopkeepers or money-lenders.”(Ways and Means iv 6). ...