Economics Appears Late

Perhaps while the universal propensity to truck and barter is real, prior to 18th century Britain it was the provence of common folk while plunder and coercion were the foundations of power. Smith would then coincide with those in power coming to recognize the value of trucking and bartering

Didn't 5th-century Athens trade a lot of olive oil? Doesn't that count as being produced? Is that an exception to the argument that pre-modern economies are based on plunder and coercion?

Aristotle had ideas about household management. Medieval thinkers like Thomas Aquinas had ideas about usury. Of course modern economists feel, probably rightly, that they have little to learn from these thinkers, and the supply-and-demand, market-clearing model that emerged with Adam Smith is so central to the discipline that the Wealth of Nations is a convenient start-date for the discipline. But I wonder if economics is so different from other fields. Modern physicists don't pay much heed to Aristotle, or Aquinas, either.

bwv may be on to something. After all, prior to the rise of the merchant class in the middle ages, the nobility was dependent on lesser nobels for resources. As the lesser nobles disappear, and the monarchies evolve into modern nation-states, the source of revenue for operations changes. Consequently, it might be a good idea to understand the source?

I would suggest that Arnold Kling (and Tyler Cowen), if they have not read it) that they read Morris Silver’s, Economic Structures in Antiquity’ (Greenwood Press, 1995), which also includes his studied demolition of Karl Polanyi’s thesis that markets did not exist until the mid-19th century (originally published in the Journal of Economic History, 1983).

Silver also wrote other articles and books that demonstrate the prevalence of the ‘propensity to truck, barter, and trade’ across the classical world and long before.

My own research (unpublished) on the ‘Pre-History of Bargaining’, supports Adam Smith’s speculative assertion on the longevity of the said propensity, and its earlier evolution from teamwork for unequal shares of meat from kills to reciprocity behaviour (what I call the quasi-bargain) evident not just among humans –and presumably the hominids before them – and in the behaviours of primates.

I am reading just now a most valuable book bordering on these issues, edited by Paul J. Zak, Moral Markets: the critical role of values in the economy (Princeton University Press), which develops themes contributing to an understanding of the social-evolutionary importance of humans establishing the criteria by which fairness and unfairness is mediated in primate and human relationships.

Now most economists reading Blogs by other economists would never dream of reading such material (the maths is minimal), but if they did it would inform them of greater depth in what they think they are doing practicing economics they way we do now.

The writer has simply shown that he knows little if any history. For example, the ancient Phoenicians were well known for trading, not only locally but also around throughout the Mediterranean. In Exodus the Hebrew slaves in Egypt were making bricks (without straw), and, under Emperor Justinian, the Romans had laws dealing with commercial transactions, property rights and contracts. And let's not forget Marco Polo and his travels to China.

I'm reading Bill Greene's book "Common Genius" and in it he talks about how late intellectuals are to recognizing what is happening in the world. The other thing intellectuals do is come up with theories that, no matter how much evidence to the contrary there is against it. will stick with that theory. I and many others have provided quite a bit of evidence for ancient trade practices, but no amount of evidence seems sufficient for Kling. Never mind the textual evidence I have supplied. Never mind the archeological evidence. Kling has a theory, and he's sticking to it! I guess free market intellectuals are no less prone to this than are Leftist ones. It was not uncommon until the Modern Era for writers to be concerned only with heroes and leaders and not with the common man (who would have been doing the trading). One of the benefits of comedians is that their material was often the common man. This is why I have repeatedly recommended Aristophanes as a source, since Aristophanes repeatedly talks about the disruption of trade as a problem caused by the Athenian war with Sparta. Rather than go into the textual evidence from Aristophanes here, though, I think I will do so over on my blog.

Arnold,

Check out The Growth of Economic Thought, by Henry Spiegel. As the title says, it's not about econ history, but about econ thought. It's surprising how far into the past it goes.

While it's true that the framework to deal with the questions was different, specially until the Middle Ages (and thus the emphasis in the answers on morality/ fairness), the matters of the questions were similar.

Before Smith, came the physiocrats. And before those, the mercantilists, who were talking about trade as early as the 16th century. The Italian cities had their financiers before that... The medieval philosophers worried about the fair price for traded goods, as did Aristotle way before them. Old testament writings deal with labor markets and credit, obviously dressed in theological reasoning. But it's there.

There were no Newtonian mechanics before Newton, but gravity did exist and engineers had been building bridges for millenia. It did mean that we didn't have the right framework to better understand what was already going on and so we tumbled along clumsily, inefficiently. It's not difficult to argue that Smith did something akin: provided a better framework to explain what had been going on for ages and to improve innovation on the field from then on.

p.s. as a blog reading, libertarian, pro-free market economist, I must say that some of the criticisms here against my kin, labeling all of us as blind to history and dogmatically closed, are way off the mark. In fact, a world of entrepreneurial atomistic agents stretching all the way to antiquity, nay, to pre-history, nay, existing as the natural state of the species and even to our ancestors, now that'd be conceptual nirvana to us: given that, institutional evolution towards freer and freer markets (in trade and in politics) could be more easily conceptualized, defended, and promoted.

Pygmy chimpanzees engage in trade. Does that go back far enough for you? :-)

I may have missed it, but what is the situation with your father?

I think Troy and first commenter bwv have nailed it here. Barter and trade has been around for as long as the division of labor, probably well back into hunter-gatherer societies. Markets similar enough to modern ones have probably existed since the inventions of agriculture and currency.

What took until the 18th century was for intellectuals to care enough about the mundane to start studying these practices in earnest.

The claim isn't that there was no trading at all before Adam Smith, it's that there wasn't really such a thing as a "market economy" before the late 18th century. Does a Biblical-era barter/haggle-based bazaar really have that much in common with a modern market economy?

Sean:

During the Bar-Kokhba revolt in 132-135 CE, the Judeans minted their own coins, which must have competed with Roman coins in Syria Palestina.

The ancients would have been puzzled by derivatives, but so are we.

I had faith in those pygmy chimpanzees to lead the way into a better future! ;-)

To Sean: the claim in this piece is twofold: (a) that there was no economic thought/science before Smith; (b) that this is evidence for the lack of "a universal propensity to truck and barter." The lack of modern economies too long before that is a corollary. Arnold has also claimed that the later is true elsewhere.

The problem for these arguments is that there seems to be plenty of evidence of economic thought, of a universal propensity to trade, and of markets qualitatively similar to today's (voluntary trade, enforcement of contracts, regulations, etc) for millennia. Not just the Middle Ages and the Roman Empire, but way before.

And now, back to the pygmy chimpanzees...

They also had no modern science. The world was not considered a source of knowledge. Engineering was little more than trial and error. Mathematics was as ordered as knowledge became. No Newton, no Galileo. No surprise there was no economics. However there was money and trade. Or do you think they issued money because they wanted everyone to have their picture?

the absence of a developed economics until the mid-18th century remains a startling anomaly in the history of ideas. Why was that?

Is it any less startling to consider that biology and psychology as independent fields of study weren’t developed until the mid-to-late 19th century?

A theory that offers a plausible explanation as to what the facts may be is a brainchild. The scientist who gives birth to it has an innate desire to nurture it and see it grow. Consequently, it’s difficult for the scientist to come to terms with a brainchild that is found to be terminally flawed.

In light of all the evidence to the contrary, Dr. Kling’s Plunder Economy Theory, like Darwin’s Theory of Natural Selection, is a theory in crisis.

To suppose that the eye with all its inimitable contrivances for adjusting the focus to different distances, for admitting different amounts of light, and for the correction of spherical and chromatic aberration, could have been formed by natural selection, seems, I freely confess, absurd in the highest degree. - Charles Darwin

Certainly just because there was no theory of natural selection prior to the 19th century, that doesn't mean it didn't occur. It just took a long time for someone to come along and recognize the patterns. But the patterns existed a long time prior to the discovery of those patterns.

Darwin was unfortunately ignorant of complexity theory and emergence and self-organization, so what seemed absurd to him is now easily explained.

Troy,

Darwin was unfortunately ignorant of complexity theory and emergence and self-organization, so what seemed absurd to him is now easily explained.

Easily explained? Darwin conceded that "if it could be demonstrated that any complex organ existed, which could not possibly have been formed by numerous, successive, slight modifications” his theory would “absolutely break down." Modern science has proven that “irreducible complex systems” are pervasive on a cellular level. Surely you’re aware of this, having studied recombinant gene technology.

Although I’m a proponent of intelligent design, I don’t particularly want to argue the merits of irreducible or specified complexity vs. natural selection on this thread. There certainly remain enough unanswered questions, as far as I’m concerned, not to accept either theory as incontrovertible. At a certain point, both require a leap of faith. I simply choose to place mine in the grain of a mustard seed.

Now one civilization I would grant you would be a plunder economy would be the Aztecs. They had no need of money. The Incas were different, relying on reciprocity, but also no need of money.

Incremental changes result in a system moving toward greater chaos until it reaches a critical point where it leaps into a new level of complexity -- as demonstrated by catastrophe theory. Thus modified, Darwin's theory remains intact and so-called irreducible complexity is explained without having to resort to theorizing that God is so incompetent as to not be able to create a world that could evolve without him having to intervene periodically. As a Christian I tend to think my God to be more clever than that.

And below we have how Darwin reconciled the eye with evolution, the paragraph after the one snark quoted.

Yet reason tells me, that if numerous gradations from a perfect and complex eye to one very imperfect and simple, each grade being useful to its possessor, can be shown to exist; if further, the eye does vary ever so slightly, and the variations be inherited, which is certainly the case; and if any variation or modification in the organ be ever useful to an animal under changing conditions of life, then the difficulty of believing that a perfect and complex eye could be formed by natural selection, though insuperable by our imagination, can hardly be considered real.

Markets and trade are not the same as economics as a science. I think Cowen if off on his date; he assumes Adam Smith was the first economist. But the Scholastics of the at least the early modern era had a detailed understanding of economics and championed free markets.

Along with economics, Cowen should ask why it took so long to get to modern science. Modern science first took off with the protestant reformation which emphasized reason because God is reasonable. Protestants set out to rationalize all aspects of life, including economics and science.

Troy: "Incremental changes result in a system moving toward greater chaos until it reaches a critical point where it leaps into a new level of complexity..."

So how does that square the the second law of thermodynamics, which says that in a closed system matter degenerates into lower states of complexity.?

Darwin: "further, the eye does vary ever so slightly, and the variations be inherited, which is certainly the case;"

That's certainly not the case. In the first place, the ratio of beneficial to damaging mutations is about one in a million. Second, natural selection must operate on the whole animal, not just specific mutations. The odds that the blunt tool of natural selection could accidently select for one gene in one member of the population are next to nil. Finally, the idea that a partial eye might in some way benefit an individual is ridiculous and wishful thinking. It takes far more irrational faith to accept Darwinian evolution than intelligent design.

Arnold,

Xenophon wrote about the division of labor in The Childhood of Cyrus. He even wrote a treatise called Economics, although this was about the literal subject - the ways of the home. There was also something approaching free trade in classical Greece, which is why the Megarian Decree hit so hard (and the trade system, interestingly enough, depended on free movement of people, as it was "permanent residents" - metics - who sponsored and arranged most of it).

The Romans...not so much.

Anyone interested in this topic would be well served by reading The Company of Strangers by Paul Seabright. In it he explains how exchange with strangers could have evolved, what aspects of our personalities predisposed us to this behavior, and what institutions arose to further the practice.

He also offers some evidence that sho9ws that exchange between strangers or unrelated bands has occurred for thousands of years and is not a modern development.

The world is not a closed system. A car engine is a closed system. The earth is not. Nor, does it appear, is the universe.

A partial eye is quite beneficial. If you can detect light, you can detect shadows, and thus move away from a predator. And there are many examples of "partial eyes" in nature.

And yes, there are more harmful than beneficial mutations. Which is why evolution takes such a long time. However, complex organisms also developed complex genomes with redundancy and noncoding regions which are able to absorb and neutralize many mutations. In the redundant regions, mutations can accumulate until something interesting occurs. Then there is recombination, DNA repair mechanisms, reverse transcription (RNA into DNA), jumping genes, etc. All of these also affect mutations effects (or lack thereof). THrow in the mechanisms of complex systems, with strange attractors, biotic attractors, emergence through catastrophe cusps, and self-organization, and we have plenty of mechanisms around to explain how evolution occurs. Even so-called "irreducible complexity" is explained -- meaning it's not what you really mean: "unexplainable complexity." Just because a complex system is working as it does, and cannot work without all its parts, that does not mean the system and the origin of its parts are not explainable. An economic system is also "irreducibly complex," but that does not mean God is intervening to make it work.

Incremental changes result in a system moving toward greater chaos until it reaches a critical point where it leaps into a new level of complexity -- as demonstrated by catastrophe theory. Thus modified, Darwin's theory remains intact and so-called irreducible complexity is explained without having to resort to theorizing that God is so incompetent as to not be able to create a world that could evolve without him having to intervene periodically.

These are theory-dependent observations, and pitting one theory against another is useless. Even a cursory review of the literature indicates Irreducible Complexity (IC) as a theoretical proposition remains unsettled. One of the most robust examples to date is the ribosome. Evolutionary biologists have thus far failed in their attempts to get below the ribosome (ie. construct a synthetic ribosome that is functionally capable in the absence of proteins). That’s not to say that it’s impossible. But to date, the only explanation offered by proponents of Evolutionary Theory is the indirect metabolic pathway, more popularly known as “Darwin of the Gaps”, which is the logical equivalent of “God of the Gaps.” In chess, I believe this is referred to as a stalemate.

As a fellow Christian, we really have no quarrel. Couldn’t Adam have been an ape, or perhaps a pygmy chimpanzee?

Troy: "A car engine is a closed system. The earth is not. Nor, does it appear, is the universe."

You're right, the earth is not closed, but the universe? What's outside it?

Troy: "And yes, there are more harmful than beneficial mutations. Which is why evolution takes such a long time."

How is that scientific, or any better than saying "God did it"? No matter how improbable an event, evolutionists just add more time.

Troy: "However, complex organisms also developed complex genomes with redundancy and noncoding regions which are able to absorb and neutralize many mutations."

You're assuming your conclusion. How do you explain that complex organisms developed without the redundancy and noncoding regions?

Troy: "In the redundant regions, mutations can accumulate until something interesting occurs."

Is that the "hopeful monster" theory?

Troy: "Then there is recombination, DNA repair mechanisms, reverse transcription (RNA into DNA), jumping genes, etc. All of these also affect mutations effects (or lack thereof)."

All of which produce 1 million harmful mutations for every beneficial one. But it still doesn't answer the question "how can natural selection 'select' those few beneficial mutations until they can accumulate to a level that sets the whole organism apart from the herd"? The answer is it can't, because it works at the level of the whole organism, not on genes. So natural selection is just as likely to eliminate beneficial mutations as it is to keep them. Of course, you can always resort to time, which means evolutionists worship time instead of a personal God.

Snark: "Couldn’t Adam have been an ape, or perhaps a pygmy chimpanzee?"

Many good Christians follow that compromise, which some call theistic evolution. Dr. Collins of the Human Genome project is one. However, don't think that it wins you any points with evolutionists. And it's impossible to reconcile with the Biblical account of creation, especially the idea of death. Theistic evolution requires billions of years of massive death to get to humans, whereas the Bible claims that death didn't appear until after the creation of humans.

You don't have to have a complete ribosome. The RNA is the enzymatic element and bits and pieces could have done the work. But once you have a ribosome, its efficiency would have resulted in natural selection against those that didn't have complete ribosomes.

As for time, there is plenty of it. 3.5 billion years of biological evolution. Stuart Kauffman shows that that is plenty of time to get plenty of complexity if you take into consideration strange attractors.

The evidence is accumulating if you want to learn about it. But none of this addresses the fact that intelligent design makes the fundamental argument that God was so incompetent that he couldn't create a universe that didn't need him coming in to intervene all the time. The God I believe in just isn't that stupid and incompetent. I believe He created a universe with laws making it possible for everything to emerge naturally. By all means, believe in an incompetent God -- I just don't.