A Brief History of Economics

Artful Approaches to the Dismal Science

E Ray Canterbery

• Publisher: WSPC
• Year: 2010
• Print ISBN: 9789814304801
• eBook ISBN: 9789814365178
• Edition: 2
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Blending past and present, this brief history of economics is the perfect book for introducing students to the field.

A Brief History of Economics illustrates how the ideas of the great economists not only influenced societies but were themselves shaped by their cultural milieu. Understanding the economists' visions — lucidly and vividly unveiled by Canterbery — allows readers to place economics within a broader community of ideas. Magically, the author links Adam Smith to Isaac Newton's idea of an orderly universe, F Scott Fitzgerald's The Great Gatsby to Thorstein Veblen, John Steinbeck's Grapes of Wrath to the Great Depression, and Tom Wolfe's The Bonfire of the Vanities to Reaganomics. The second edition is right up-to-date with a lively discussion of the economic crises of 2007–2010.

Often humorous, Canterbery's easy style will make the student's first foray into economics lively and relevant. Readers will dismiss “dismal” from the science.

Contents:

• Introduction
• Feudalism and the Evolution of Economic Society
• Adam Smith's Great Vision
• Bentham and Malthus: The Hedonist and the “Pastor”
• The Distribution of Income
• Ricardo versus Malthus
• The Cold Water of Poverty and the Heat of John Stuart Mill's Passions
• Karl Marx
• Alfred Marshall: The Great Victorian
• Thorstein Veblen Takes on the American Captains of Industry
• The Jazz Age: Aftermath of War and Prelude to Depression
• John Maynard Keynes and the Great Depression
• The Many Modern Keynesians
• The Monetarists and the New Classicals Deepen the Counterrevolution
• Economic Growth and Technology: Schumpeter and Capitalism's Motion
• The Many Faces of Capitalism: Galbraith, Heilbroner, and the Institutionalists
• The Rise of the Casino Economy
• The Global Economy
• Climbing the Economist's Mountain to High Theory
• The Housing and Credit Crises of 2008
• The Great Recession of 2007–2010
• The Future of Economics

Readership: Undergraduate and foundation level students, and laymen.

1

FEUDALISM AND THE EVOLUTION OF ECONOMIC SOCIETY

Seeing why the study of capitalism and free markets did not entrance the clergy of the Middle Ages is easy. Markets, as they were to reappear, did not then exist. Among what economists today would call “factors of production,” land dominated to the virtual exclusion of all else. Those who sought wealth and power sought land. Usually, however, unlike most modern economies, land normally was not for sale. In this way feudalism, a land-centered way to organize production, commanded medieval times.

European feudalism was not only an economic system, but an extremely complex social and political system as well, taking different forms in different parts of Europe during the Middle Ages. Its general outlines nonetheless remained stable, a stability that gave order where anarchy otherwise would have prevailed. Since the system was noticeably kinder and gentler to the landholding aristocracy than to others, feudalism did not give way easily to the marketplace.

Still, Europe always has had a great variety of resources and climates and different types of crops and livestock so that the potential for exchanging dissimilar commodities was always there once travel was made relatively safe. Merchants must be able to travel safely so they can sell their goods in different towns. And society must be peaceful enough so there can be towns. Thus, law and order became the central virtue contributing to the decline of feudalism and the rebirth of markets.

Travel on the road to market economies took place over several centuries. Although it is impossible to specify the moment in history when the transformation from feudalism to a market system was complete, we can identify the major forces that brought about the change. As we shall see, even as the winds of change carried the seeds of the market, its full flowering was slowed by a force called mercantilism. Finally, only the surprising duo of Isaac Newton and Adam Smith could put society back on the road to harmony.

THOMAS AQUINAS AND THE WORLD VIEW

During the Middle Ages, the world view was dominated by the idea of the Cosmos, an all-encompassing harmony, a unified whole in which God's presence and spirit were embodied in all living things. Moreover, each part of the Cosmos had its own immutable place in the Great Chain of Being. God had ranked his creatures from the most inferior ascending upward. Trees outranked herbs. Every herb, tree, bird, beast, and fish had a particular place and use given to it by God, the Creator.

This medieval world view fit very neatly with feudalism, a highly structured economic system in which everyone had a specific place. In this world view there was no conflict between “rational knowledge” and faith. In the Summa Theologica of Thomas Aquinas (1225–1274), a complete and authoritative statement of medieval economic thought, the proper life required that each class perform its obligations according to the laws of God and nature.

This world view, however, did not mean that no “economic thinking” took place. Aquinas deplored lending money for interest and trading for profit, but he expressed no preference for the equal distribution of private property. In fact, the main test for the propriety of any exchange of goods and services was whether or not the exchange threatened the class hierarchy. A just price, in Aquinas's view, was a price that suitably supported the seller in his social rank. Since Aquinas's economic views are complexly intertwined with his religious faith, a science claiming to separate itself from religion was not born until the Renaissance.

We now begin, then, the long journey on the road to today's capitalism and to modern economics. Our first major stop —after a short detour through the Ancient World —will be real-world Feudalism, the dominant economic system of precapitalistic Europe. It characterized the almost 1,000 years between the collapse of the Western Roman Empire (A.D.476) and the fall of the Eastern (Byzantine) Roman Empire (A.D.1453), the Middle Ages.

Historians are more or less forced to lump together huge spans of time and give them titles, such as the Ancient World or the Middle Ages, in order to give the past a coherent order; but obviously the transition from one period to another is not that simple. The Roman Empire, for example, did not die giving birth to the Middle Ages. A great deal of Roman civilization survived in one form or another, changing as medieval civilization began to develop. Some of Rome's economic legacies contributed to the growth of feudalism.

UP FROM ANTIQUITY

Feudalism in Western Europe grew out of the slave economy of the Western Roman Empire. Slaves, of course, are of no economic use unless they produce enough of the necessities of life —food, clothing, and housing—to enable them to do their daily work, plus a little more. During antiquity, slaves were the main producers of the “little more,” or a surplus. The city of Athens in ancient Greece is celebrated as the birthplace of democracy, but even at its most “democratic,” at least one-third of its population were slaves. Athenian women had few property rights, were married without consent, and lived under the guardianship of male relatives.

The Roman Empire was a centralized political bureaucracy that relied on slave labor both in the major cities and towns and on the huge agricultural estates (villas). (There were also large groups of free artisans and laborers.) During the Dark Ages, from the end of the Greco-Roman civilizations through about the 900s, those villas that had not been destroyed by barbarian raiders from the north and east became landed estates.¹ The Roman cities —some in ruins —shrank to towns and villages. The slaves tended to remain slaves until a decline in population made labor scarce and expensive. Although slavery did not end with the Roman Empire, it continued in Western Europe on a greatly diminished scale.²

Because of the major social and political disruptions at the end of the fifth century, law and order began to crumble. Citizens of the empire could no longer rely on Roman centralized control and legal authority for protection. Furthermore, much of Greco-Roman knowledge was lost with the collapse of the political order.

A BRIEF HISTORY OF THE DEVELOPMENT OF FEUDALISM

By the end of the sixth century, Europe was profoundly uncivilized. To be “free,” one had to be a warrior and have weapons. War was a common form of economic activity. Pillaging (then a form of economics and politics) included the acquisition of cattle, ornaments, and slaves, as well as weapons for the next assault.

But successful aggressors were themselves obvious targets for plunder, and pillage was therefore a poor “solution” to the question of how goods and services could be produced and distributed. People had to be able to hold on to what they had; as a result, mutual self-protection societies began to evolve within the framework of the existing agricultural economy.

Feudalism was based upon mutual duties and obligations. One human being was no longer supposed to own another outright (though exceptions were made), but the chains were not completely broken, the bondage being of a different kind. The serf, the lowest person on the feudal economic scale, was bound to the land, retained for himself subsistence, and exchanged service for protection by his master, who, in turn, was given control of both the serf and the all-important land in exchange for service to his master, the king or duke. The nobility provided mutual protection services through those who became knights or warriors. The king atop the social pyramid—be he King Phillip Augustus or King John—was in control of both the land and the serf. The king then could transfer control from one master to another.

Among the nobility, marriage, land, and politics were hopelessly intertwined, a condition best explained by noble thirteenth century example. As part of a peace treaty to seal the victory in Normandy of French King Philip Augustus over King John of England in January 1200, a marriage was arranged. John's sister Eleanor had two eligible daughters, 13-year-old Urraca and 12-year-old Blanche (girls were legally mature at age 12 and available for sealing political alliances or gaining property). As royal luck would have it, Louis, the 13-year-old heir to the French crown, was desperately in need of a bride. John's mother and the princesses’ grandmother, Eleanor of Aquitaine, selected Blanche.

John promised estates from his French lands plus 20,000 silver marks as Blanche's dowry. The dower was comprised of royal French lands in Artois, in northeastern France. These transfers of property were also part of the peace treaty. Thus, the story of this Blanche, in contrast to the Blanche of Tennessee Williams's A Streetcar Named Desire, is of both custom and command, not of passion. Louis's Blanche would never have had to say, “I have always depended on the kindness of strangers.”³

As with Blanche and Louis, family had little effect on the obligations of a man to his lord or king, whereas the king and other lords had control over the families of their vassals so that women and children had even fewer social rights than did men. In England no woman could marry without the assent of her lord, and the lord could even transfer his ward's marriage, for a fee. For example, in 1214, the aforementioned King John of England conceded his first wife, Isabella of Gloucester, whose marriage had been annulled in 1200, to Geoffrey de Mandeville, Earl of Essex, for 20,000 marks.

King John, like other noble owners of large plots of land, being unable to personally control all he owned, decentralized his land, assigning parts of it to less powerful men, whom his own decree made lesser nobles. King John further extended the delegation of responsibility, in turn, by these tenants-in-chief to subtenants, who actually did most of the work on the land. The right to farm the land obligated these subtenants (called serfs, or “free” peasants) to render military and other services to the noble in the name of the king.

In the work they did, the serfs were like the slaves in the Roman economy, but the property rights system had changed: A “contractual” set of obligations had been substituted for slavery. The sparseness of the population and the joint defense needs of the serfs and the nobles were forces making serfdom mutually irresistible in the early Middle Ages. We cannot be sure about population trends preceding and during the Dark Ages; but the general impression is that the population of the Roman Empire tended to decline, and the decline was speeded by a bubonic plague epidemic in the sixth century. The epidemic continued for over 50 years, and this contributed to making labor a scarce resource.

Thus, we can see that the feudal ties that bound the serf to the land had obvious advantages over slavery. The tenant-in-chief did not have to worry that his slaves would be stolen or taken from him as long as he remained loyal to his lord. And the serf enjoyed at least some of the benefits of his own labor as well as a degree of protection from the pillaging barbarians.

Even if the land changed lordships, the serf was tied to the land by his unwritten contract and fulfilled his obligations to the next lord. The manor often was passed to the next lord by inheritance. Thus, an individual's relationship to his fellows was decided mostly by custom, which evolved into common law, rather than by economic efficiency.

The right to use land was generally inherited by the eldest son, and unmarried daughters and the younger males were then sometimes left to beg at the gates of the manors. Women could acquire a property share only by marriage. The intent of the feudal system was the survival of the fief, not necessarily the survival of the family or its members.

Land occasionally was “sold,” its sales financed by a king. An abbey chronicler in England (monks in abbeys have supplied much of the data on feudalism) recorded the sale of the village of Elton for 50 golden marks to a king in 1017, but such transactions were rare.⁴ No one seems to know whether Elton was worth it because no market for land, as we know it today, existed. As with the arranged pubescent marriage between Louis and Blanche, more often they could transfer land to others. Though not an invention of feudalism, the close tie of marriage to landed property failed to unravel with feudalism, as fans of Jane Austen know.

Sometimes literature came with the land. The aforementioned Eleanor of Aquitaine, once married to Louis VII, King of France, ensured that the art of the troubadours (the knight-poets of southern France) flourished in the courts of her husband, his nobles, and her children. When she left Louis to marry Henry of Anjou, soon to be Henry II and King of England, she thoughtfully brought both Aquitaine and her southern poets, including Marie, a court woman poet, as a dowry. In the Lais of Marie de France, a king takes the wife of one of his loyal knights as a lover. Faithful to feudal values, however, the lovers are punished; they come to a scalding end (and vice versa) in a bath of boiling water.

The Manorial System

Economic activity in feudal society was generally organized around the life of a manor, a largely self-sufficient agricultural plantation controlled by a lord and tilled by the peasants and serfs. The manor was little different from that of Scarlet O'Hara's Tara; it provided most of life's material essentials in one place. By the High Middle Ages small villages had grown around the manor, or vice versa, and sometimes the villages encompassed more than one manor. These small, often isolated settlements were havens of civilization in an otherwise anarchic world.

Manorial organization had two basic aims: To produce enough to keep the manor going, and to provide authority and agricultural surplus for its lord. What was produced? Food, shelter, and clothing to keep the peasants and serfs in working order, the lord contented, and some surplus. How was it produced? In the custom of the manor. For Whom was it produced? Beyond the workers’ subsistence, products were distributed mostly to the lord and king by custom. Although the manor strove for self-sufficiency, the uncertainties of agricultural production made necessary some exchange of products between manors, often on a “loan” basis.

On an English manor, the agricultural peasant or serf would have about 30 acres to farm, with the cultivated areas fenced. Each year, one field out of two or three was left fallow and unenclosed for animal grazing. Mixed in among the peasants’ land were the strips of land kept by the lord for his own use (his demesne). Each serf household owed week-work (one laborer) of about three days a week on the demesne farm. The serf had to supply his share of the needed oxen, heavy plows, and other implements. Thus, in addition to providing for their own subsistence, the serfs provided surpluses for the lord and king while supporting the knights. In return, the knights, the lords, and the Church provided what little safety, peace, and justice there was.

Keeping law and order was not cheap. The outfitting of one knight required an outlay equivalent to about 20 oxen or the farm equipment for about ten peasant landholders.⁵ To take care of his military needs, the king exacted military duty and other services from his lords, who in turn reminded their knights of their military obligations. Involuntary military service was a part of the feudal contract.

Today, feudalism seems an undesirable, even grotesque, economic system, especially for the serfs. There were some peasant uprisings such as the Peasants’ Revolt of 1381 that threatened the English ruling class, but by and large the serfs and peasants were merely living in the “manor” to which they were accustomed and did not imagine anything better. There was little they could have done to bring about change even when they desired it. Besides, they generally saw serfdom as an improvement over slavery. And they were right.

The Social Theory of Feudalism

In feudal society the serfs worked, the warriors fought, the clergy prayed, the lords managed, and the king ruled. Kings generally managed quite well. In 1170 to 1171 Henry II received an estimated 23,500 pounds in revenue, of which he and his entourage spent about 5,000 pounds on themselves. At the time, an average parish income was about ten pounds yearly.

We might have expected class conflict, but more conflicts erupted between families and states than among these classes because social organization was rigidly hierarchical. A person born into serfdom gave little thought to the ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Brief Contents
• Detailed Contents
• Preface
• Introduction
• 1: Feudalism and the Evolution of Economic Society
• 2: Adam Smith's Great Vision
• 3: Bentham and Malthus: The Hedonist and the “Pastor”
• 4: The Distribution of Income: Ricardo versus Malthus
• 5: The Cold Water of Poverty and the Heat of John Stuart Mill's Passions
• 6: Karl Marx
• 7: Alfred Marshall: The Great Victorian
• 8: Thorstein Veblen Takes on the American Captains of Industry
• 9: The Jazz Age: Aftermath of War and Prelude to Depression
• 10: John Maynard Keynes and the Great Depression
• 11: The Many Modern Keynesians
• 12: The Monetarists and the New Classicals Deepen the Counterrevolution
• 13: Economic Growth and Technology: Schumpeter and Capitalism's Motion
• 14: The Many Faces of Capitalism: Galbraith, Heilbroner, and the Institutionalists
• 15: The Rise of the Casino Economy
• 16: The Global Economy
• 17: Climbing the Economist's Mountain to High Theory
• 18: The Housing and Credit Crises of 2008
• 19: The Great Recession of 2007-10
• 20: The Future of Economics
• Glossary of Endurable Terms
• Annotated Suggestions for Further Readings
• Index
• Back Cover