History & Evolution of Economics
The history and stages of economics consist of the evolution and development of this social science over time, of how the economic and social organization has evolved from primitive times to what is known today as economics.
In primitive times, humans lived in small groups and their economy was based on subsistence and the gathering of natural resources. However, as human groups settled in specific geographic areas and discovered agriculture, a significant change occurred in the economy that led to the development of more complex economic systems in the early civilizations.
The early civilizations, such as Sumeria, Egypt, China, and India, developed more sophisticated economic systems that included large-scale agriculture, trade, division of labor, and the emergence of cities.
For the systematic study of the stages of economics, the stages that begin from the early civilizations are covered, such as the Roman Empire, then followed by other stages like feudalism, the craft stage, capitalism, and collectivism. Each stage has distinctive characteristics in terms of economic activity, systems of property, and work. Studying these stages helps to better understand the current economic reality and to locate in time and space the doctrines formulated by thinkers and writers in the economic field.
As a formal field of study, Economics was developed in ancient Greece, by philosophers such as Aristotle and Plato. However, it was in the 18th and 19th centuries when the systematic study of economics as an academic discipline was consolidated with the appearance of Political Economy.
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Origin of economics
Before the emergence of the first civilizations, humans lived in small groups, and their economy was based on subsistence and the collection of natural resources. Primitive economy was characterized by hunting, fishing, gathering fruits, roots, and other foods available in their environment, as well as bartering goods with each other.
As human groups settled in specific geographic areas and discovered agriculture, a significant change occurred in the economy. The cultivation of plants and the domestication of animals allowed primitive communities to settle in one place and develop subsistence agriculture. This led to the emergence of agricultural villages and the establishment of an economy based on surplus production.
Over time, agricultural villages evolved into the first civilizations, such as Sumerian, Egyptian, Chinese, and Indian civilizations. These civilizations developed more complex economic systems, including large-scale agriculture, trade, division of labor, and the emergence of cities. Incipient forms of governance emerged, and legal systems were established to regulate trade and economic transactions.
Origin of the study of economics
The study of economics as an academic discipline roots back to ancient Greece, although its formal development occurred more recently.
In ancient Greece, philosophers like Aristotle and Plato reflected on economic issues, although their focus was more philosophical and moral than scientific. For example, Aristotle discussed the nature of property, trade, and resource distribution.
However, it was in the 18th and 19th centuries when the systematic study of economics as an academic discipline was established. During this period, the Industrial Revolution took place, and new forms of production, such as machinery and factories, transformed the economy and society.
Adam Smith, considered the father of modern economics, published his work “The Wealth of Nations” in 1776. In this book, Smith developed key ideas about division of labor, free trade, and the importance of markets in efficiently allocating resources. His ideas laid the foundation for the study of economics as a scientific discipline separate from other fields of knowledge.
Throughout the 19th century, other prominent economists, such as David Ricardo and John Stuart Mill, contributed to the development of economic theory. These thinkers explored concepts such as the theory of value, wealth distribution, and the role of government in the economy.
In the 20th century, economics diversified into different schools of thought, such as Keynesianism, monetarism, and neoliberalism. Each of these schools offers different approaches and theories on how the economy works and how economic problems should be addressed.
Currently, the study of economics encompasses a wide range of topics, from microeconomics and macroeconomics to international economics, development economics, environmental economics, and many other specialized fields. Mathematical tools, statistics, and theoretical models are used to analyze and understand economic phenomena and make informed decisions in the economic and political spheres.
Stages of economics
The history of economics dates back to the beginning of humanity and thousands of years ago, to the first civilizations that emerged in different parts of the world, and from there it changed over time, as explained below.
The Roman Empire
During the Roman Empire, the economy was based on agriculture and slavery. Trade and territorial expansion played a significant role in the economic development of this period. It consolidated in the early Christian era and began its decline and fragmentation in the 4th and 5th centuries.
Geographical and social aspects
The Roman Empire spanned a vast geographical area that extended from England, France, Spain, Portugal, Belgium, Switzerland, Germany, and Austria to Asia Minor, Palestine, and North Africa. This extensive territorial expanse allowed the Roman Empire to establish a broad political, cultural, and economic influence in these regions.
Roman society was structured in a social hierarchy with an aristocratic class, a middle class, and a base consisting of slaves. Additionally, there were social and cultural differences in different regions of the Empire.
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Economic activity
The economic activity in the Roman Empire was largely sustained by maritime trade. Maritime routes connected various regions of the empire, facilitating the exchange of goods and allowing trade with distant regions such as India and China. Trade was a fundamental part of the Roman economy and contributed to the prosperity and growth of the empire.
The Roman economy was characterized by being centralized and highly regulated. The Roman state intervened extensively in the economy, establishing regulations and setting prices and wages. This intervention aimed to maintain order and guarantee the economic stability of the empire.
In terms of production, consumption prevailed over production. The empire relied mainly on trade and the importation of goods to sustain itself, rather than relying heavily on internal production. This was partly due to the availability of resources and products from the various regions under Roman control.
Property and labor
Regarding property and labor, private property was predominant in the Roman Empire and was considered a fundamental right. However, it is important to note that although slavery existed to a large extent, it gradually began to decline as the empire advanced.
Unemployment and misery were frequent problems in the Roman Empire, especially among the lower classes of society. The lack of employment opportunities and the concentration of wealth in the hands of a few contributed to inequality and economic difficulties for many Roman citizens.
Feudal/Feudalism economy
Feudalism primarily developed in Europe during the Middle Ages. During this period, the economy was mainly based on agriculture, and land was the key resource. Feudal lords, whether they were nobles or clergy, owned the land and had control over it. On the other hand, serfs worked on the lands of feudal lords and provided them with services and rents in exchange for protection and the right to work the land.
Geographical and Social Aspects
In geographical terms, feudalism was established in a variety of regions in Europe, including France, England, Germany, Spain, and other countries. These areas had a combination of fertile lands and natural resources that allowed for productive agriculture.
In terms of social aspects, feudalism was a hierarchical and stratified society. At the top were the feudal lords, who had control over the land and political power. Below them were the nobility, who were usually vassals of the feudal lords. The serfs, who made up the majority of the population, were at the base of the social pyramid and worked the land under conditions of servitude.
Economic activity of feudalism
During the feudalism era, economic activity was mainly based on agricultural production. Agriculture was the primary source of sustenance and generated most of the food and resources needed for feudal society. Serfs worked on the lands of feudal lords and cultivated various crops such as cereals, legumes, and vegetables. Livestock farming, particularly cattle breeding, was also practiced.
In terms of industrial production, it was very limited compared to agriculture. Most artisanal and production activities were carried out on a small scale within the feudal estates. Artisans such as blacksmiths, carpenters, and weavers produced necessary goods for the community, including tools, utensils, and clothing. However, industrial production was minimal and not as developed as in later stages, such as capitalism.
During feudalism, there was no modern market system. The economy was closed, and people primarily relied on the product of the land or engaged in barter. Barter was a common form of exchange, where goods were traded directly without widespread use of currency. The use of currency was scarce and limited compared to bartering.
Property and labor during feudalism
In terms of property and labor in feudalism, there were significant changes to the concept of private ownership. Most people were vassals or serfs who did not have absolute ownership rights over the land. Instead, they had the right of usufruct, meaning they could use and enjoy the fruits and benefits derived from the land, but the feudal lord was considered the legitimate owner of the land.
In this system, vassals or serfs worked on the land of the feudal lord and were obligated to provide certain services and contributions. This was known as serfdom, and the serfs were subject to the authority of the feudal lord. In exchange for their work and services, serfs had the right to use a plot of land for their sustenance and that of their families.
However, it is important to note that as feudalism progressed, serfdom evolved and eventually disappeared. Over time, new forms of labor relations emerged, and changes in the social and economic structure led to the transition to other systems, such as capitalism.
The artisan economy
Geographical and social aspects
Craftsmanship Economy Geographical and Social Aspects From the 11th century onwards, a significant change occurred in the feudal economy with the emergence of the craftsmanship economy in the cities. This change was characterized by the growth of cities and the development of an economic activity based on industrial and artisanal production.
Geographically, cities became key economic centers during this period. As cities grew, they became places where economic activity was concentrated. However, cities remained connected to the agricultural countryside as many of their raw materials and suppliers came from the surrounding rural areas.
This economic change also led to increased division of labor and specialization. As cities developed and grew, there was a more pronounced differentiation between different professions and trades. Artisans and merchants specialized in different activities such as shoemaking, ceramics, textiles, among others. This allowed for greater efficiency and quality in the production of goods and an increase in the variety of available products.
In terms of social aspects, this economic change also had implications. Society became more stratified, with the emergence of a merchant and artisan class that had increasing status and economic power. Furthermore, cities provided opportunities for social mobility as people could seek employment and opportunities in urban centers instead of relying solely on land and feudalism.
Economic activity
During the period of economic and artisanal development, while agriculture was very important, different economic sectors such as industrial, artisanal, commercial, and credit emerged and grew. These sectors experienced significant growth due to the expansion of local trade and the search for new geographic locations for commercial exchange.
The industrial sector developed as the production of manufactured goods increased. Artisans and producers specialized in different crafts and used more advanced techniques and tools to manufacture a variety of products. The use of rudimentary machinery and division of labor contributed to the growth of industrial production.
The artisanal sector also experienced a boom as specialization became more common. Artisans focused on producing high-quality and elaborate goods such as ceramics, textiles, furniture, jewelry, and other handmade products. These products were highly valued and demanded both locally and in external markets.
Trade played a crucial role during this time. Local trade expanded on a large scale, encompassing new geographic locations. Cities became commercial centers where manufactured goods, raw materials, and food were exchanged. Trade routes extended, establishing commercial contacts with other regions and countries, fostering the exchange of goods and diversification of the economy.
Additionally, the credit and finance sector experienced significant growth. As trade increased, lending and credit practices emerged to facilitate commercial transactions. Bankers and lenders played a significant role in providing financing and credit lines to traders and entrepreneurs, driving economic activity and business growth.
Property and labor
Regarding labor, there was a shift in forms of labor organization. During this period, labor was no longer based on slavery or serfdom but rather on collaboration and organization among members of a particular profession. Workers grouped together in guilds or similar organizations to collaborate and achieve common goals. Regulations were established to protect the interests of producers, consumers, and workers.
The artisanal economy is considered a transitional period between the not very advanced or feudal economy and the exchange economy that would develop later. During this stage, there was greater regularization of economic and labor relations, laying the foundation for the future evolution towards more complex economic systems.
Capitalist economy or Capitalism
The capitalist economy has been known since the 18th century and has different phases: commercial capitalism, industrial capitalism, and regulatory capitalism. It was an initial phase in the development of the capitalist economic system.
Commercial Capitalism
It existed from the 16th century until the mid-18th century.
Geographical and Social Aspects
During this stage, significant geographical and social aspects were observed.
Geographically, commercial capitalism developed in various European countries such as France, Spain, Portugal, Germany, and the Netherlands. These countries engaged in colonial expansion, establishing colonies in different parts of the world. This colonial expansion allowed access to new sources of raw materials, markets, and trade routes, which fueled trade and capital accumulation.
From a social perspective, commercial capitalism brought about changes in the division of labor and the diversity of professions and trades. Both in urban and rural areas, there was an increase in specialization and differentiation of occupations. Producers and artisans specialized in different activities, enabling greater efficiency and diversification of production.
Moreover, the growth of trade and the development of colonies created new economic and social opportunities. An emerging merchant class composed of traders and entrepreneurs benefited from trade and colonial expansion. These merchants accumulated capital and played a significant role in the economic system.
Economic Activity
During commercial capitalism, economic activity was marked by the emergence of financial institutions, new forms of exchange, and credit operations. Additionally, there was progress in agriculture and transportation, and the market expanded both nationally and internationally.
Property and Labor
During the era of colonial expansion in commercial capitalism, private ownership of the means of production and wage labor remained fundamental elements.
Regarding private ownership of the means of production, colonizers and colonial powers acquired and controlled land, natural resources, and other forms of capital in the colonies. These means of production were privately owned and used to generate wealth and economic benefit for the owners.
About wage labor, colonizers and colonial powers employed the local population in the colonies in various economic activities such as agriculture, mining, and production of goods. Local workers were hired and paid a salary for their work, but they did not have ownership or control over the means of production used in their labor.
Industrial capitalism
The industrial capitalism was a historical period that took place from the mid-18th century to the late 19th century. During this period, significant changes occurred in the economy, production, and labor relations, driven by industrialization and the application of machinery and technology on a large scale.
The Industrial Revolution, which began in England in the mid-18th century, was a key factor in the development of industrial capitalism. There was a fundamental shift in production methods, moving from artisanal production to factory production using machinery and mass production systems.
Geographical and social aspects
During the period of industrial capitalism, there were significant geographical and social aspects observed in different countries such as England, the United States, France, Germany, among others.
A regards social aspects, the following were observed:
Increase in occupations and specialization: Industrialization led to a greater diversification of occupations and the emergence of new professions. Additionally, there was a greater specialization within existing occupations as tasks became more specific and fragmented.
Increase in individual productivity: The introduction of machinery and technology in production improved the efficiency and individual productivity of workers. Machines allowed tasks to be performed more quickly and in larger quantities, which increased production and generated greater economic benefits.
Improved standard of living: For certain sectors of the population, industrial capitalism led to an improved standard of living. Technological advancements, mass production, and increased availability of goods and services contributed to improving the living conditions of certain social groups.
Unemployment crisis: However, industrial capitalism also brought about an unemployment crisis at certain times. As machinery and technology advanced, less labor was required, resulting in job losses for many workers. This situation generated social and economic tensions, as well as the need to establish social protection policies and labor reforms.
Economic activity
During the industrial capitalist period, economic activity was influenced by several key aspects:
- Machinery: The invention and use of machines in production were fundamental. Machinery replaced manual labor and enabled greater efficiency and productivity in the production of goods and services. Machines such as the steam engine, mechanical spinner, and steam locomotive revolutionized industrial sectors and transformed production methods.
- Free competition: Industrial capitalism was based on the idea of free competition. Entrepreneurs and companies competed with each other to gain higher profits and a dominant position in the market. This competition drove innovation, efficiency, and cost reduction, benefiting consumers by offering a greater variety of products at lower prices.
- Profit priority: In industrial capitalism, the pursuit of profits was a priority for entrepreneurs and business owners. Maximizing economic gains was the main objective, and business decisions were made based on this goal.
- Market mechanism: The functioning of the market was a central element in industrial capitalism. Supply and demand determined the prices of goods and services, and market mechanisms guided production and consumption decisions.
- Periodic overproduction crises: Due to the nature of competition and profit-seeking, overproduction would sometimes occur in certain sectors, leading to an excess supply compared to demand. This could result in price falls, declining profits, and a contraction of economic activity, which in turn posed challenges and difficulties for entrepreneurs and workers.
Property and Labor
During industrial capitalism, the following aspects related to property and labor stood out:
- Private ownership: The means of production were privately owned and controlled by entrepreneurs and capitalists.
- Wage labor: The employment of workers who sold their labor in exchange for a salary prevailed.
- Class differentiation: Two distinct social classes emerged: employers (owners of the means of production) and wage workers.
- Freedom of labor: There was the possibility to choose employment, but this freedom was limited by a lack of options and difficult working conditions.
- Deplorable working conditions: Workers faced labor exploitation, long hours, low wages, the employment of children and women, and unhealthy work environments.
Regulatory capitalism
Regulatory capitalism, also known as regulated capitalism or regulated market economy, is a historical period that emerged in the late 19th century and throughout the 20th century. It was a response to the poor labor and social conditions prevailing in industrial capitalism. During this period, various labor laws and regulations were implemented to protect workers’ rights and improve their working conditions.
In many countries, laws were established to limit the duration of the workday, set minimum wages, guarantee the right to unionize and engage in collective bargaining, and promote safety and health standards at work. These measures aimed to balance labor relations and mitigate abuses and inequalities that arose in the capitalist system.
Regulatory capitalism represented a shift in the conception of the role of the state in the economy. It recognized the need for intervention to correct market failures and ensure a fairer and more equitable treatment for workers.
Geographical and social aspects
During industrial capitalism in countries such as England, the United States, France, Japan, and Germany:
- There was a greater division of labor and increased productivity.
- This led to a better standard of living for certain groups.
- However, there were also unemployment crises due to economic fluctuations and overproduction.
Economic activity
During industrial capitalism, technological advancements were made, and economic instruments such as currency and banking were developed. However, there was also a restriction on economic freedom, the emergence of monopolies and state-owned enterprises, the implementation of protectionist policies, and occasionally economic planning by the state.
Property and labor
- Restrictions on private property: Regulations and restrictions on private property emerged, especially in areas such as industry and land ownership, with the aim of balancing economic and social interests.
- Regulation and control of working conditions: Norms and regulations were implemented to regulate working conditions, such as wages, holidays, rest days, and working hours. These measures aimed to protect workers’ rights and improve their living and working conditions.
- Protective labor legislation: Labor laws were established to protect workers’ rights, ensuring job security, equal opportunities, and protection against labor discrimination.
- Birth and development of social security: During this period, social security systems emerged, providing protection and assistance to workers in areas such as health, retirement, unemployment, and occupational accidents. These systems aimed to provide a safety net for workers and their families.
Collectivist or socialist economy
The collectivist or socialist economy is an economic system in which the means of production, such as factories, land, and natural resources, are collectively or state-owned rather than privately owned. In this system, the equitable distribution of resources and the elimination of economic and social inequalities are sought.
In a collectivist or socialist economy, central planning or state ownership plays a significant role in economic decision-making. The state or a centralized entity is responsible for planning and regulating the production, distribution, and consumption of goods and services.
Historical period
Socialism and collectivist economy emerged as alternatives to industrial capitalism in the 19th century. Karl Marx and Friedrich Engels laid the theoretical foundations of socialism and communism. Throughout the 20th century, socialist states were established in different countries, such as the USSR, China, and Cuba. However, the practical implementation of socialism has varied and faced economic and political challenges. Since the end of the 20th century, many countries have adopted reforms towards more market-oriented systems.
Geographical and social aspects
In the socialist economy, such as in the USSR, geographical diversity was recognized and the division of labor, specialization, and diversity of professions were promoted. This allowed for efficient task allocation and the development of specific skills. Furthermore, efforts were made to eliminate social classes and promote economic and social equality, ensuring that benefits and resources were shared equitably throughout society.
Economic activity
In the socialist economy, economic activity is oriented towards meeting collective needs rather than pursuing individual profits. The main goal is to ensure the well-being of the entire society and promote economic and social equality.
In this system, centralized economic planning is used to coordinate the production, distribution, and consumption of goods and services. Planning is based on assessing society’s needs, and goals and priorities are established based on those needs. The aim is to avoid overproduction and scarcity, and resources are allocated equitably to meet the population’s demands.
Centralized economic planning involves the participation of the state or central bodies in economic decision-making. These bodies assess demand, plan production, allocate resources, set prices, and regulate the distribution of goods and services. In theory, the goal is to avoid competition and exploitation and ensure that resources are used efficiently and for the benefit of the entire society.
Property and labor
There is no private ownership of the means of production. Resources, means of production, and enterprises are collectively or state-owned and used for the benefit of the entire society rather than benefiting individuals or private companies. This means that workers are not owners of the means of production but rather work in them as part of a collective system.
Regarding labor, in the socialist economy, workers receive a salary or compensation for their labor, but the accumulation of individual wealth or the pursuit of private profits is generally not sought. In some cases, workers may receive bonuses or additional incentives based on performance or productivity, but these benefits are provided to meet basic needs and promote motivation and work commitment.
Related: Marxism
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- Godoy Castro, R. (1981). Teoría económica I. Universidad Nacional Abierta. https://drive.google.com/file/d/1BCBTKsdg7MHOjTPuVkYeWL2pvYTJQz2L/view?usp=sharing
- Robinson, J. (1978). Introducción a la economía marxista. Siglo Veintiuno: Madrid. https://books.google.com/books/about/Introducci%C3%B3n_a_la_econom%C3%ADa_marxista.html?id=h1_nAQAACAAJ
See also