This document contains a summary of the lectures, slides, knowledge-clips and other relevant information from the modules given on canvas. Relevant images, causal relationships and concept terms are all in the document.
Economic Challanges E_EBE1_EC
Module 2
Ancient Greece, few aspects:
- Overwhelmingly agricultural base of peasant farming
- The city as solely importer of luxury goods for its upper class
- Center of consumption and not of production
- Reliance on unpaid slave labor
- Wealth follows political, military or religious power
*in a capitalist system power follows wealth
- Greek thinkers were interested in efficient organization and administration for making
warfare possible.
- Anthropocentric view of the world: mens staat in het middelpunt
- Private household management was called Oikonomikos (--> ‘economics’)
Xenophon (c. 427-355 B.C.)
- Pupil of Socrates
- He wrote a book Oikonomikos about household management and agriculture
- “Increase of economic surplus is accomplished through skill, order and the division of labor”
- His concept of wealth;
Nowadays we use the exchange value (the value with which the good exchanges on the
market for other goods). But Xenophon suggest using the use value to calculate the wealth.
Only the products that are of use are included, of a person is experiencing the utility. (‘even
land is not wealth if it makes us starve instead of supporting us’)
Plato and the Republic:
- Abstract thinker
- He attributed the emergence of a city to specialization and an administrative control
- The ideal state was ruled by a philosopher-king
- Which is why its discussable if Plato is even an economist because he didn’t agree with the
free working of the market.
Aristotle:
- Pupil of Plato, wrote a lot about economic topics with a strong normative perspective
- The purpose of things (telos); strife for happiness (eudaimonia)
- According to Aristotle there are three types of justice:
.distributive justice: goods are distributed in proportion to merit (tot verdienste, waarde)
.corrective justice: previous injustices demand compensation
.reciprocal justice: exchange is just if it’s voluntary (wederkerige rechtvaardigheid)
- Besides the exchange that determines the price there is ‘harmonic mean’. Range between
lowest price the seller is willing to accept and highest price the buyer is prepared to pay.
- Two types of economic activity being housekeeping and profitmaking. Housekeeping is
natural. The telos of money is the simplification of trade and not demanding interest, which
is why profitmaking is unnatural.
Collapse of the Roman Empire -> catastrophic disorganization -> the medieval economic life.
The manorial system found its place (leenstelsel / feodalisme)
*local lords were centre of political, military and social power
*land was divided amongst vassals (leenmannen) in exchange for loyalty, military aid and taxes
*vassals in turn employ peasants and serfs (horigen en lijfeigenen)
Overall: low productivity, aimed at self-sufficiency, division of surplus by predetermined quotas
*guilds: a cartel kind of. They impose general rules on production methods, prices and wages. They
are meant to discourage competition and preserve order in the industry.
, Thomas Aquinas
- Ethical aspects of prices -> doctrine of the just price. The just price is the current price, which
depends on location, time and risk of transportation.
- The price varies according to the needs (indigentia) but if the demand side will stop
production if the market price is not covering the production costs.
To change from a medieval society to a market system three things will have to change:
1. General acceptance of profit-making being legitimate
2. Economic life needs to be monetized every taste must have a monetary reward
3. The laws of demand and supply have to take over the role of lords and guilds, guiding
economic activity
The price of a good consists of three parts, which parts?
The labor it costs in time, the severeness of the labor, the degree of dexterity and ingenuity it costs
Why division of labor leads to higher productivity:
Improvement of dexterity increases the quantity
Time loss caused by moving from one work to another (different place, tools, movement)
People find it easier to innovate if their mind is directed towards that single thing
Module 4
There are some powerful changes in European feudalism:
Urbanization, the Crusades, Rise of commerce between nation-states, age of Exploration (influx of
precious metals into Europe), change of religious climate and change of religious climate
The consequences are:
Separation of economic from social life, factors of production (land, labor and capital), formation of
different social classes (laborers, capitalists and landowners), emergence of profit motive in society
Mercantilism is a period between feudalism and liberalism. It’s an economic image with the goal to
maximize exportation and minimalize importation. So imports are restricted to raw materials and no
luxury goods. International trade as a zero-sum game. One person’s gain is equivalent to another
person’s loss. Mercantilists are advisers to European monarchs in the 16 th-18th century. For example;
Thomas Mun and Baptiste Colbert. At this time the wealth of a nation was entirely dependable on
the amounts of silver and gold (bullionism).
Mercantilism caused a shift in economic thinking from justice to materialism, the birth of capitalism.
There are three people criticizing mercantilism:
David Hume (1711-1776) price-specie flow mechanism
Positive trade balance (exports>imports) will cause inflation through more gold flow inward
than outward. This stimulates imports so the trade balances will be automatically adjusted.
Adam Smith (1723-1790)
True wealth should be measured by standard of living of consumers. So the basket of goods
and services that a country provides for consumption for its people.
David Ricardo (1772-1823) comparative advantage
International trade a win-win situation.
Situation in France around 1700:
Because of expensive wars, king Louis XIV, hunger and underconsumption (high taxes) France was in
a bad place. The country was self-sufficient and hated foreign influences.
Taille: property taxes (onroerend goed)
Aides: sales tax, confined mostly to wine
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