1. Economic Auxiliary System, Rise of the Market

The economic auxiliary system begins with the chief and ends with the Greek's development of the market. The scientific auxiliary system also begins with the chief but it ends with empiricism in the early modern era. Therefore the economic auxiliary system ends before the scientific system. The principle of physical before intellectual still holds but the principle of nonproductive before productive is reversed for the auxiliary systems.

List of Steps in Economic Auxiliary System - Theoretical Auxiliary Step Categories

  1. Chief - Specialist
  2. Theocratic State - Educational Institution
  3. Licensed Merchant - Partially Independent Specialist
  4. Market - Institution Establishing Independence

1. Chief - Specialist

Reciprocity is probably the most primitive form of economic organization. Under reciprocity individuals exchange gifts. If the individuals are very closely related reciprocity may be general reciprocity, the unmeasured and unselfish cooperation of a family, but if the traders are less closely related then the gifts should be of roughly equal value. This is known as balanced reciprocity.

Under reciprocity there is usually a period between the gifts. In many cases the recipient of the gift is expected to support the giver politically until he can repay the gift. By making many of these gifts or loans a man can become politically powerful. This is the route to power taken by the big man. As the big man establishes his power and makes his position hereditary he becomes a chief. The chief establishes a system of exchange known as redistribution. Goods flow into the chief and are then redistributed. In some respects this is like reciprocity except the chief has set himself up as the specialist who conducts the trade.

2. Theocratic State - Educational Institution

At this stage like the previous chief stage the economy is still tied into the same structure as the state and religion. The theocratic state use redistribution as the chief did but with more sophistication. Chiefs often built storehouses for the goods they redistributed. The theocratic state built its economy around the temple storehouse. Grain was stored from abundant years to provide for the lean years. Record keeping was necessary to discover who had contributed and benefited. This encouraged the invention of writing. The theocratic state also served as a center for long distance trade and sophisticated craftsmanship. Craft guilds were often associated with the temple complex suggesting education. Education was also important to the scribes who kept the records. Therefore this is the educational institution for the auxiliary economic system.

3. Licensed Merchant - Partially Independence Specialist

Under the military specialist, emperors, etc., the economy gains partial independence. Instead of running trade directly, as the theocratic state did, the kings would license merchants as agents of the state. The relative independence of the economy from the state under the military specialists and emperors reflects the larger and more varied realms that they controlled as well as their principally military orientation.

The market economy had only a limited existence under these institutional forms. Trade between kings, though highly colored by political considerations, had some of the characteristics of market exchange. But real market exchange had to wait for Athenian democracy where every citizen was king.

4. The Market - Institution Establishing Independence

The republican governments of Greece allowed the economy to progress toward the independence of the market. And in turn the economic growth encouraged by the market helped make the Greek governments powerful.

There are several factors that separate the market exchange of Greece from other economies of the ancient world. Coinage is one of the most important factors. Coinage was invented in Lydia about 640 B.C. Athens did not introduce coinage until about 625 B.C. But while Athens did not invent coinage it provided a fertile arena for its use. It is often true that widespread use of an invention is more indicative of a dynamic society than the act of invention itself.

Athens was a great trading center with many of the sophisticated economic institutions, such as banking, that are associated with the market. Possibly the most telling arguments though are that the Greeks did have market places and that both the Greeks and their enemies recognized that they had a market economy. A Greek, Aristotle, produced the first widely known writing on the economy. An enemy, a Persian King, remarked in one of the famous miscalculations of history that he had nothing to fear from a people who gather in the center of town to cheat one another. As economists know, and the economic growth of Greece suggests, the Greeks were not cheating one another but increasing their welfare through trade.

Some economists might wonder why kings did not use market organization more often given the great economic growth that it encouraged. There are several good reasons why kings did not support the market. First, while economic growth might increase tax revenue in the long run it would probably reduce the ability of the king to exploit the country in the short run. If the king's position was precarious he might prefer a poor future under his dynasty to a rich future under an opponent. Secondly, independent centers of wealth and power are a threat to the monarchy. Finally kings are generally not in the habit of giving up their power so their subjects can have more rights.

In Athens these problems did not apply. First, the citizens were the army, thus their impoverishment would mean that they could not supply their own arms. Secondly, the independent sources of wealth and power, as long as one did not become too powerful, helped prevent tyrants from seizing control. Finally, the electorate is more likely to respect its own rights than a king would, for these reasons Democracy was a good political basis for the market.

Chapter 9 Empiricism-Science gains independance

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