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Words and ideas, like products and services, are constantly changing and being reborn.
The textbook definition of modern economics is the scientific study of the allocation of scarce resources among competing uses. Because prices and profits direct much of this allocation, modern economics focuses on market interactions. The tools of supply-demand analysis demonstrate how prices and profits coordinate consumer and producer behavior. If consumers want more strawberries, we can be pretty sure the market will accommodate those desires.
The word economics, however, traces to the Greek word oikonomia, which, in ancient Greece, meant estate management. It is derived from the Greek words oikos, meaning household, and nemein, meaning management. Its focus was directed to the proper operations of large agricultural estates or small, family-owned manufacturing units. It had little to say about market-based interactions. In fact, according to Israeli scholar Dotan Leshem, ancient texts on oikonomia were “infused” with a “degree of scorn about market trading.”
Unlike modern economics, which assumes that resources are scarce and human wants are endless, oikonomia assumed that resources were abundant enough to provide for all the basic needs of everyone in society. The economic question was, if judicious management of an estate generated a surplus beyond basic necessities, what was the proper use of that surplus?
Using the surplus to allow the estate owner to participate in politics or philosophy was considered good and proper. Using the surplus to simply generate larger surpluses was deemed mindless and pointless, and using the surplus to support a life of luxury was considered immoral and improper.
The beneficiary of the surplus was presumed to be the wealthy free male who owned the estate; his free male friends also could benefit. While everyone else—peasants, slaves and women—were considered entitled to basic necessities, they were not expected nor allowed to enjoy the “good life” of philosophizing or participating in politics. Although excluded from philosophy and politics, a good wife could serve as an “oikonomos”—a household steward or manager—and be held in high esteem if she increased the estate’s surplus.
But what if the ordinary people of Greece wanted more strawberries? Oikonomia would not consider how market prices and trade might accommodate that desire. Instead, it would most likely consider whether increased strawberry production could advance the estate owner’s prospects in philosophy or politics. Most estates probably wouldn’t consider strawberries to be necessities.
Interesting? Yes, but we will take the modern world.•
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Bohanon and Horowitz are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.
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