Economics 207 – Heilbroner Chapters 1 and 2
Vocabulary and Concepts to know
Chapter I
Economics is the study of … the process of providing for the material well-being of society
Humble
Fanaticism
Mankind does not live by bread alone
The human organism … can deliver only about 20 calories of mechanical energy for each 100
calories of food it consumes.
Brue survival
Malnutrition
Chilling calculation
Premature
Pangs of hunger
Bolivian peon
Precariousness … is our helplessness as economic individuals
Solitary
Animal prey
Envisage
Caught game
Raised meat
Ground grain
Fashioned flour into bread
Paradoxically, perhaps, the richer the nation, the more apparent is this inability of its average
inhabitant to survive unaided and alone.
Division of labor
Invaluable
Freight
Falter
Garbage collectors
Hidden vulnerability
Tacit precondition
We are rich, not as individuals, but as members of a rich society, and our easy assumption of
material sufficiency is actually only as reliable as the bonds that forge us into a social whole.
Humankind…is the source of most of our economic problems.
Stringency
Strictures
Reach of human wants
Relative social status is importantly connected with the possession of material goods.
The “wants” that nature must satisfy are by no means fixed
Stinginess
Appetite of the human being
A Society must:
1. Organize a system to assure the production of enough goods and services for its own
survival, and
2. Arrange the distribution of the fruits of its production so that more production can
take place.
Much of economic history is concerned with the manner in which various societies have sought
to cope with elementary problems.
Nature in the raw
“The basic problem of production is to devise social institutions that will mobilize human energy
for productive purposes.”
Mystifying breakdown
Depression
Thronged with people
Filthy streets
“What is lacking is a social mechanism to mobilize human energy for production purposes.”
Forge ahead
Challenge to its social organization
“Men and women… must be put to work to produce goods and services that society needs.”
Peasant cultivators
Society does not always succeed in the proper allocation of its efforts
Court disaster
Such allocative failures may affect the production problem just as seriously as a failure to
mobilize an adequate quantity of effort, because a viable society must produce not only goods,
but the right goods…. …Society must now distribute those goods…
…languished on the job while granaries bulged with grain and the well-to-do complained of the
hopeless laziness of the masses.
Equal allotements
Maldistribution
“If society is to ensure its steady material replenishment, it must parcel out its production in a
fashion that will maintain not only the capacity but also the willingness to go on working.”
Stringencies
Intransigence of human nature
Unaccustomed guise
That process is society’s basic mechanism for accomplishing the complicated tasks of production
and distribution necessary for its own continuity.
...Solving the production and distribution problems in …three ways.
1. Tradition
2. Command
3. Market
Tradition is a mode of social organization in which both production and distribution are based on
procedures devised in the distant past.
Traditional societies “…solve their economic problems very manageably… by assigning the
jobs of fathers to their sons. Thus a hereditary chain ensures that skills will be passed along and
jobs will be staffed from generation to generation. In ancient Egypt… every man was bound by a
principle of religion to follow the occupation of his father…
Horrible sacrilege
…tradition has been the stabilizing and impelling force behind a great repetitive cycle of society.
For centuries in India people were born into castes, each with their own occupation. A great
philosophic moral poem stated “Better thine own work is, though done with fault,… than doing
others’ work even excellently.”
The manner in which tradition can divide asocial product may be … very subtle and ingenious.
Chapter 2
Adam Smith wrote about …”a certain propensity in human nature…; the propensity to truck,
barter and exchange one thing for another.” He put the …”act of exchange at the very center of
his scheme of economic life. … buying and selling lie at the very heart of a market society…”.
As we proceed from the dawn of civilization to its first organized societies, the evidence of trade
and of markets increase rapidly.
Evidences of market society
Presence of market society
Adjunct
“…markets of antiquity were not the means by which those society solved their economic
problems. … they were above the critical economic machinery rather than within it.”
Monolithic temple-states
Millennium
Classical Greece or Rome
Christian era
In speaking of the societies of antiquity, Heilbroner says “…underlying their profound
dissimilarities of art or political rule or religious belief, there are equally profound similarities of
economic structure, similarities we call to mind less frequently because they are in the
‘background’ of history and rarely adorn its more exciting pages.”
…”all human communities,… live off the soil: All that differentiates an ‘industrial’ society from
an ‘agricultural’ one is the number of nonagricultural population that its food growers can
support.”
“Over all antiquity, the capacity of the agricultural population to sustain a nonfarming population
was very limited.”
“It takes two farm families to support one nonfarm family” in Egypt, the Phillipine, Indonesia,
Brazil, Columbia and Mexico. In Africa it take from 2-10 people (men, women and children).
“Antiquity was not that badly off; indeed, at times it produced impressive agricultural outputs,
but neither was it remotely comparable to American farm productivity.”
“All ancient societies were basically rural economies.” They could be “a very brilliant and
wealthy urban society or a far-flung network of international trade.”
…”the typical economic personage of antiquity was neither trader nor urban dweller but rather a
tiller of the soil…”
…”the tiller of the soil was a peasant, and a peasant is a social creature very different from a
farmer. He is not on the alert for new technologies, but, on the contrary, clings with stubborn
persistence – and often with great skill – to his well-known ways. … he does not produce for a
‘market’, but principally for his own family.”
Owner of his land
…”peasant of antiquity did not own his own land.”
Latidundium tenants of a huge commercial estate where peasants were the tenant of great lords.
The Roman historian Pliny mentions on of a million head of livestock and a population of 4,117
slaves.
…”the great majority of agricultural producers scarcely entered the market at all. For many of
these producers – especially those who were slaves – this was … an almost cashless world…”
…”the peasant’s (of antiquity) legal and social status varied widely in different areas and eras of
antiquity, in a broad view the tenor of his economic life was singularly constant. …poor, tax
ridden, and oppressed, prey to nature’s caprices and to the exploitation of war and peace, bound
to the soil by law and custom, … was dominated by the economic rule of tradition.”
Diversity
Vitality
Ebullience
Relatively static countryside
Active city
Ox-towed barges
…”we must not be beguiled into concluding “ that the economic life of cities in antiquity were
… “a market society similar to our own.”
The differences were
1. “Restricted character and scope of the market function of the city.”
2. “..the cities of antiquity tended to assume an economically parasitic role vis-à-vis the
rest of the economy.”
3. “Much of the trade that entered the great urban centers … was in the nature of luxury
goods for its upper classes, rather than raw materials to be worked and then sent out
to a goods-consuming economy.”
4. Cities … “were separated by a wide gulf from the country, making them enclaves of
economic life rather than nourishing components of integrated rural-urban
economies.”
5. They relied on slave labor
Sources of labor
1. “slavery on a massive scale was a fundamental pillar of nearly every ancient
economic society”
2. “Groups of free artisans and workmen, often banned together in collegia or fraternal
bodies…”
3. In …”latter-day Rome, a mass of unemployed (but not enslaved) laborers provided a
source of casual work.”
“The flourishing market economy of the city rested atop an economic structure run by tradition
and command.”
…” another characteristic of ancient economic society: the special relationship between its
wealth and its underlying economic organization.”
“In any society, the existence of wealth implies a surplus has been wrung from nature, that
society has not only solved its economic product problem but has achieved a margin of effort
above whatever is required for its own existence. “
…”what astonishes us … is the amount of surplus that could be got from a basically poor peasant
population.” Think of temples of Assyrian kings, treasures of the Aztecs, the pyramids, etc. …
“all testify to the ability of an essentially agricultural civilization to achieve a massive surplus.”
“…the social form taken by the accumulation of wealth reveals a great deal about any society.
‘To whom does the surplus accrue?’”
“..in ancient civilization, wealth was generally the reward for political, military, or religious
power or status, and not for economic activity.”
Why? “Societies tend to reward most highly the activities they value most highly …” …In many
of these societies, economic activity itself was disdained as essential ignoble.”
Sordid
Misrepresentations
Disdain
“In premarket societies, wealth tended to follow power; not until the arrival of the market society
would power tend to follow wealth.”
Peasant proprietor
“veil” of money
Inextricably mingled
Alleviate
…”down through the Middle Ages – a strain of primitive communism, of egalitarian sharing,
runs through the background of religious thought.”
…religion was concerned with riches and poverty,” and not “with the distributive problem of
economics, the span of antiquity saw little or no systematic inquiry into the social system that
produced riches or poverty.”
One exception was Aristotle …”with him the systematic study of economics, as such, truly
begins.” “The student of economic thought … can trace down through the present time
questions such as ‘What is value?’ “
Aristotle “differentiated” the economic process into “not production and distribution”… (we use
“use” and “gain”). “Oeconomia” (basis of economics) and “chrematistike”
Husbanding of resources
Acquisitive purposes
Precedent
Middle Ages
Retrenchment
Deprivation
Depopulation
Catastrophes of Middle Ages
1. Ghastly 2-year famine in 1315
2. Black Death 1348
3. Century long war between England and France including Germany and Italy.
Secular tides
…as Rome ‘fell’ and as successive raids and invasion from north, east, and south tore apart the
European countryside, the great administrative framework of law and order was replaced by a
patchwork quilt of small-scale political entities. “
Political dissolution
Autarky
Anarchy
Sheer
Insularity
Manorial estate: large tract of land owned by feudal lord
Spiritual
Temporal
Manor: social and political entity
Lord’s homestead
Great manor house
Necessity to preform labor for the lord
Quid pro quo
“If the serf gave the lord his labor and much of the fruits of his toil, in exchange the lord
provided some things that the serf by himself could not have obtained. The most important of
these was a degree of physical security.”
“Life expectancy when violent death was excluded was 31 years.”
…”even freemen became serfs by ‘commending’ themselves to a lord who, in exchange for their
economic, social, and political subservience, offered them the invaluable cloak of his military
protection.”
…”the lord offered a certain element of economic security. In times of famine, it was the lord
who fed his serfs from the reserves in his own manorial storehouses. Although he had to pay for
it, the serf was entitled to use the lord’s beasts and equipment in cultivating his own strips as
well as those of the lord.”
Extreme self-efficiency of manorial life
Manorial Life was “a form of economic society organized by tradition.”
Manorial Life …”was characterized by a striking absence of money transactions.”
…“the manor supplied only itself, and perhaps a local town.”
…’ the tenants (serfs) paid their obligations to their lord in kind. Every serf … owed a fixed
number of day of labour and a fixed quantity of natural product or of goods manufactured by
himself. … It is true that a few pence (pennies) had also to be paid…’
…”medieval society (consisted)… of a huge, static, largely moneyless foundation of agricultural
production atop which flourished a considerable variety of more dynamic activities.”
…”small cities obviously required a network of markets to serve them.” … “towns were clearly a
different social unit from manors, and the laws and customs of manors did not apply to their
problems.”
…”townspeople little by little won for themselves freedom from feudal obligations of labor and ,
more important, from feudal obligations of law.”
Fair .. “a kind of traveling market, established in fixed location for fixed dates.” … “a wide
variety of merchandise” was sold.
Guilds were …”the tiny but highly important centers of medieval ‘industrial’ production.
…(provided by) glaziers and masons, expert armores, and metalworkers, and fine weavers and
dyers…”
…”guilds-trade,profession, and craft organizations.” … “were the ‘business units’ of the Middle
Ages.”
Masters
Exlusive union
Guildmasters
Own guild government
Journeymen
Apprentices
…”guild organizations: the broiders and glovers, the hatters and scriveners, the shipwrights and
upholsters each with it guild hall, its distinctive livery, and its elaborate set of rules.”