Chapter 1b

The 4 Main Schools of Post-Smith Economics Icon

January 30, 2022

The science of resource allocation began with Xenophon’s The Economist which narrates how Socrates was taught about proper estate management.

Socrates cites Cyrus the Great of Persia as the first person during that period to get Economics right by having policies that encouraged the productivity of the empire.

In the West, this knowledge was carried over from the Persians to the Greeks and then to the Romans.

Asia, on the other hand, had its Economics founded in Hinduism which predates the Persian empire. The Hindus also had policies for maximizing productivity through its caste system or division of labor. Ancient Egypt had this too. China followed the Hindu system which was formalized when it became unified under the Chin emperor.

Therefore, there are two systems of ancient Economics:

  1. The Political Economy of Europe
  2. The Traditional Economy of Asia

These two are similar in nature as their policies were dictated by the natural leaders of society and based on morals.

The Fall or Rome Caused Western Economics to Get Corrupted by the Venetians

The fall of the Roman empire caused Western Economics to collapse. It had to be rebuilt from scratch through the decentralized feudal system and then through centralized parliament.

The problem was that the post-Roman reconstruction was begun by the Venetians, a merchant people. This caused the new Western systems to be mercantilist or money-based.

From Venice, the merchants moved to Spain where they funded overseas colonization. After the defeat of the Spanish by the British, the merchants moved to Britain and the Netherlands where they invented paper instruments.

  1. Classical (Ricardo)
  2. Marxist
  3. Neoclassical (Keynes-Marco, Samuelson-Micro)
  4. Traditional Hindu, Confucian, Arab (Khaldun)
  • Marx invented Marxist economics (labor theory of value) as an alternative to Ricardo’s Mercantilist Economics
  • China under Mao had Marxism
  • China under Xi Jinping has a mix of Marxism and Confucianism
  • The Marginal Revolution of the 1870’s corrupted Classical into Neoclassical