Aristotle’s Economic Thought: A critical analysis

THE ORIENTATION OF ARISTOTLE’S POLITICAL THEORY.

Aristotle is said to be one of the greatest thinkers and philosophers of his time. Works of Aristotle has been studied and evaluated all over the world for its philosophy and logic. His works are said to be the base on which many subjects such as science, psychology, reasoning, politics were created.

Aristotle was born in Stagira of Macedonia, in northern Greece. He was the son of the physician of Amyntas III, the king of Macedonia. He received much of his know how from his teacher Plato and his works were constantly overshadowed by him. In this paper we will see the contributions made by Aristotle in political economy and economics and its relevance in the present day.

Most of his works on economics and politics come from his works ‘Nicomachean Ethics’, ‘Eudemian Ethics’ (ethics and politics/ life and economy) ‘Topics’ and his work ‘Politics’ which will be evaluated here. All his thinking comes in line with the ancient and medieval though which suggested a higher purpose of life and its fulfilment. Aristotle’s writings clearly provide a eudemonic way of life. His ideology, while extremely advanced suggests a society that works on benevolence and goodness of people.

HIS IDEAS AND ITS UNDERLYING PHILOSOPHY

Ideas in ‘topics’

In his works he lays, what I believe to be the foundation of all economics known to the mankind. He differentiates the needs, wants and necessity as well as the value created by the goods and commodities. He says that men take part into production and make the end products which are in turn much more valuable than the initial product. The higher the importance and usage of the product, the higher its value. This can be related directly to the demand theory which was later refined by Alfred Marshall. (Aristotle also hints the allocation of resources and scarcity to be of value in order to create wealth. This can be understood with reference to supply and inequalities in income.)

Aristotle, much like all the early classical economists and economic though believed that the main reason people engage in action is to attain “the good life” (basic necessities). His ideas behind economic exchange included high levels of moral and virtuous living.

He says that human actions are deliberate and planned and that these actions lead to attainment of material and devotional wellbeing. We can loosely interpret this as the earliest idea of human rationality as he says that a man does actions in order to fulfil his own personal agendas. Be it attainment of happiness (what he called as “spiritual wellbeing”) or material gains these require man to make an effort and take part in the active market. This virtuous living leads people towards retaining the liberty and freedoms of the society.

However, economics was perceived by him as a very moralistic way of living. That economics concerns itself with aspects of dealing with everyday choices and alternatives which lead us to virtuous living.

His works are said to be the beginning of political economics. Since his suggested way of living and actions suggest a relationship between economics and political economics which was much later realized widely. It is said that his understanding of political economics had great impacts on his student Alexander the great. He imparted knowledge which taught him to understand human actions that came from the freedoms and unique nature of experiences and skills enjoyed by different individuals.

Ideas in ‘politics’

In his work Politics, Aristotle gave the idea of human capital by saying that labour is not just a factor of production but it has value in itself. The said that the value of the goods and commodities are not just determined by the inherent properties of it but is affected by the labour skills which are spent into making of the good. This idea allows us to envision the wages or the value of labour skills pertaining to that particular product as well as explains how the market price involves the cost of labour and other factors involved in the production.

Aristotle’s ideas also gave me a sense of his understanding on utility and satisfaction which comes from consumption. He said that the consumption is solely motivated by the need and requirement of the good, which in turn provides value to a good. Hence his idea of market price and value of exchange was similar to the modern understanding of the same. This “value” is said to be signalled through the market demand and use.

Aristotle differentiated between the idea of exchange value and use value in this work. He differentiated between the ideas of personal consumption and the value when used as a medium of exchange. he also explains demand and diminishing marginal utility and how when more of a good is consumed, the “use value” of the good decreases and this will also be affected by the availability of good and its scarcity.

He also explained how the goods used in production also have different values. Value that one derives to make a good and the “use value” is then derived by the consumption of that good. He mentions this idea in more than two of his major works .in his book he mentions that the value of a good is lost when we have a mixed bundle of commodities, and from such bundles the loss of the good with the higher value would be greater. Aristotle makes a distinction between use and exchange. He believes people need to exchange goods to acquire the things they need; he believes that people who exchange goods simply to acquire a surplus of money is non virtuous.

He wanted to identify how the value of goods can be determined when they are in a bundle. He aimed at explaining how the exchange are done between goods of equivalent values and also tried to form a common medium of exchange. he believed in setting a common ground such that utilities of both parties participating in the exchange equalizes. However, Aristotle considered this to be the real problem with economics as he could never really understand how ratios of exchange can be equalized for all and his ideas of metallic money were not effectively materialized.

His ideas of exchange have heavy virtues in them so the idea of exchange and justice were interlinked. He believed in a natural order of justice that would be a proper distribution of resources in an equitable and just fashion and this should be restored when off balance. Proper sharing and mutual benefits from the transactions were enveloped in nicety and overall social gain.

In the Politics, Aristotle explains the ideas of exchange, barter and trade. He explains how trade and exchange take place solely due to natural needs of people and how these needs vary and are of subjective nature. This needs help with the redistribution of the goods in the economy. He also describes invention of money as an abstract thought. The journey from barter to money to facilitate trade was merely a tool of convenience for him. Money is not the same as wealth and only has value because of its command on the goods.

Aristotle believed that goods have value in store . so, stocks of commodities which can be used are necessary for the ease of living and maintaining households. He said that the same is necessary for the community and the community should always have a margin of surplus necessary goods for times of emergencies.

Other ideas:

His ideas on private property, I felt contradicted the opinions he had for wealth and its acquisition. He said private property is important because of the following reasons

· Private property is more productive than public property because everyone wants to mind their own business and this would lead to better outcomes

· He thought of private property as something individual not only uses for his own benefit but to bring about betterment for everyone. That is, the individual would use it “virtuously” and share it with his community. This also means he was not against large and conspicuous gains. I.e., there should be no ceiling or upper limits to the ownership of wealth.

His ideas on usury were that he condemned it. However he doesn’t consider the risk for the lender of not being paid back. Therefore, interest is charged to cover this risk. In other words, the lender does not have use of this money for a certain period of time as he gives it up, there is opportunity cost linked to the wealth which he doesn’t consider. the interest received by the lender can be re-invested into the economy and, thereby, promote the welfare of the people, however the idea that capital can be multiplied was not existent. Aristotle also does not distinguish between charging ordinary interest which covers risk and the inconvenience of not having the use of the money and excessive interest which is generally considered usury.

The idea of monopoly was recognized by Aristotle using a story. The story of Thales, Thales was a poor man but he had a good knowledge of astronomy, using his knowledge he figured out that the crop of olives in the upcoming winters would be large.. so, he raised a small amount of money and bought all the olive presses in Miletus and Chios. He then hired labour for and paid them very low as he had no other competition. When winter came, there was a sudden demand for olive presses and he gained profits by letting them in the market by his own terms and became rich. This is a case of classic monopoly, Aristotle recognized the evils that come with free choice and laissez faire kind of a society.

The idea of inequality of men was given in terms of slavery. He believed that men from the birth are unequal. Some possessed better abilities than others and the others were destined to be ruled by them. He gave the idea that slaves are of two types- natural slaves who are inferior in their abilities and legal slaves who were bought and sold in the market.

His ideas on justice and role of the state were very modern. His distribution of the forms of economy into four, namely the king, the governor, the city and the individual can be said to be similar to our modern idea of the gross domestic product. (consumption. Investment. government expenditure and exports). He believed the system is naturally just and that human beings are not equal from birth so the inequalities in the society are justified. The role of the state in the Aristotelian thought wasn’t much except for overlook and maintain the balance of the society with the help of different powers of governance and to provide stability to the state and markets to operate.

Even tough Aristotle’s contributions to these were immense he has made several errors regarding his understanding of markets and its functioning, exchange ratios, interest, slavery work of the market etc. Aristotle looked at economics from an analytical yet philosophical viewpoint. It is in this sense, that Aristotle is often considered one of the first scientific minds because he put forward logical arguments to back his observations of markets and society. His works on economic thought are greatly admired and accepted as one of the greatest in the history and have heavily influences great economist such as Adam Smith and David Hume.

REFRENCES:

· Fighting Nature: An Analysis and Critique of Breed-Specific Flourishing Arguments for Dog Fights.Ian Werkheiser — 2015 — Society and Animals 23 (5):502–520.

· Aristotle’s Golden Mean: Its Implications for the Doping Debate.Jung Hyun Hwang & R. Scott Kretchmar — 2010 — Journal of the Philosophy of Sport 37 (1):102–121.

· Aristotle. (2017, November 16). Retrieved from https://www.biography.com/people/aristotle-9188415

· *Kraut, R. (2012). Aristotle on Becoming Good: Habituation, Reflection, and Perception. In C. Shields (Ed.), The Oxford Handbook on Aristotle

· Wikipedia — Wikipedia — Wikimedia — April 15 2007 — http://en.wikipedia.org/wiki/Aristotle

· Blaug M. (1985) Economic theory in retrospect (4th ed). Cambridge University Press, New York

· Langholm O. (1984) The Aristotelian analysis of usury. Universitetsforlaget AS, Bergen

· aristotle. Aristotle in 23 Volumes, Vol. 21, translated by H. Rackham. Cambridge, MA, Harvard University Press; London, William Heinemann Ltd. 1944.

Meany, P. (2018, July 11). 4 Reasons Private Property Is Superior to Communal Property, According to Aristotle | Paul Meany. Retrieved from https://fee.org/articles/aristotle-s-defense-of-private-property-4-reasons-communal-property-is-inferior