The earliest discussions of economics date back to ancient times (e.g. Chanakya's Arthashastra orXenophon's Oeconomicus).

Back then, and until the industrial revolution, economics was not a separate discipline but part of philosophy. In Ancient Athens, a slave based society but also one developing an embryonic model of democracy,[4] Plato's book The Republic contained references to specialization of labour and production. But it was his pupil Aristotle that made some of the most familiar arguments, still in economic discourse today. Ancient near east Economic organization in the earliest civilizations of the fertile crescent was driven by the need to efficiently grow crops in river basins. Ancient greco-roman world The influence of Babylonian and Persian thought on Greek administrative economics is present in the work of Greek historian Xenophon. Discussion of economic principles are especially present in his Oeconomicus, his biography of Cyrus the Great, Cyropaedia, Hiero, and Ways and Means. The Oeconomicus discusses the administration of agricultural land. In the work, subjective personal value of goods is analyzed and compared with exchange value. Xenophon uses the example of a horse, which may be of no use to a person who does not know how to handle it, but still has exchange value. [8] Although this broadens the idea of value based in individual use to a more general social concept of value that comes through exchange, scholars note that this is not a market theory of valueIn Cyropaedia Xenophon presents what in hindsight can be seen as the foundation for a theory of fair exchange in the market. Allocation of scarce resources was a moral issue to Aristotle, he expresses that consumption was the objective of production, and the surplus should be allocated to the rearing of children, and personal satiation ought to be the natural limit of consumption. In transactions, Aristotle used the labels of "natural" and "unnatural". Natural transactions were related to the satisfaction of needs and yielded wealth that was limited in quantity by the purpose it served. Un-natural transactions aimed at monetary gain and the wealth they yielded was potentially without limits. He explained the un-natural wealth had no limits because it became an end in itself rather than a means to another endsatisfaction of needs. Middle Ages Thomas Aquinas was an Italian theologian and writer on economic issues. In the treatise Summa Theologica Aquinas dealt with the concept of a just price, which he considered necessary for the reproduction of the social order. He argued it was immoral for sellers to raise their prices simply because buyers were in pressing need for a product. Whilst human laws might not impose sanctions for unfair dealing, divine law did, in his opinion. One of Aquinas' main critics was Duns Scotus (12651308) in his work Sententiae (1295). Scotus thought it possible to be more precise than Aquinas in calculating a just price, emphasising the costs of labour and expenses though he recognised that the latter might be inflated by exaggeration, because buyer and seller usually have different ideas of what a just price comprises. If people did not benefit from a transaction, in Scotus' view, they would not trade. Scotus defended merchants as performing a necessary and useful social role, transporting goods and making them available to the public.

Mercantilist and natinalism From the localism of the Middle Ages, the waning feudal lords, new national economic frameworks began to be strengthened. From 1492 and explorations like Christopher Columbus' voyages, new opportunities for trade with the New World and Asia were opening. New powerful monarchies wanted a powerful state to boost their status. Mercantilism was a political movement and an economic theory that advocated the use of the state's military power to ensure local markets and supply sources were protected. Mercantile theorists thought international trade could not benefit all countries at the same time. Because money and gold were the only source of riches, there was a limited quantity of resources to be shared between countries. Therefore, tariffs could be used to encourage exports (meaning more money comes into the country) and discourage imports (sending wealth abroad). In other words a positive balance of trade ought to be maintained, with a surplus of exports. The term mercantilism was not in fact coined until the late 1763 by Victor de Riqueti, marquis de Mirabeau and popularised by Adam Smith, who vigorously opposed its ideas. British enlightenment argued rational self interest in a system of freely adjusting markets would lead to order and mutually compatible prices. Unlike the mercantilist thinkers however, wealth was found not in trade but in human labour. The first person to tie these ideas into a political framework was John Locke. Physiocrats, a group of 18th century French thinkers and writers, developed the idea of the economy as a circular flow of income and output. Physiocrats believed that only agricultural production generated a clear surplus over cost, so that agriculture was the basis of all wealth. Thus, they opposed the mercantilist policy of promoting manufacturing and trade at the expense of agriculture, including import tariffs. Physiocrats advocated replacing administratively costly tax collections with a single tax on income of land owners. In reaction against copious mercantilist trade regulations, the physiocrats advocated a policy of laissez-faire, which called for minimal government intervention in the economy. Classical political economy Classical economics refers to work done by a group of economists in the eighteenth and nineteenth centuries. They developed theories about the way markets and market economies work. The study was primarily concerned with the dynamics of economic growth. It stressed economic freedom and promoted ideas such as laissez-faire and free competition. Publication of Adam Smith's The Wealth of Nations in 1776, has been described as "the effective birth of economics as a separate discipline."[86] The book identified land, labor, and capital as the three factors of production and the major contributors to a nation's wealth. Marxism Marxist (later, Marxian) economics descends from classical economics. It derives from the work ofKarl Marx. The first volume of Marx's major work, Das Kapital, was published in German in 1867. In it, Marx focused on the labour theory of value and what he considered to be the exploitation of labour by capital. [92] The labour theory of value held that the value of an exchanged commodity was determined by the labor that went into its production. Neoclassical economics A body of theory later termed 'neoclassical economics' or 'marginalism' formed from about 1870 to 1910. The term 'economics' was popularized by such neoclassical economists as Alfred Marshallas a

concise synonym for 'economic science' and a substitute for the earlier, broader term 'political economy'. [93] This corresponded to the influence on the subject of mathematical methods used in the natural sciences.[3] Neoclassical economics systematized supply and demand as joint determinants of price and quantity in market equilibrium, affecting both the allocation of output and the distribution of income. It dispensed with the labour theory of value inherited from classical economics in favor of a marginal utility theory of value on the demand side and a more general theory of costs on the supply side.[94] In the 20th century, neoclassical theorists moved away from an earlier notion suggesting that total utility for a society could be measured in favor of ordinal utility, which hypothesizes merely behavior-based relations across persons.

Positive economics is the branch of economics that concerns the description and explanation of economic phenomena.[1] It focuses on facts and cause-and-effect behavioral relationships and includes the development and testing of economics theories.[2] Earlier terms were value-free economics. Positive economics usually answers the question "why". To illustrate, an example of a positive economic statement is as follows: The price of milk has risen from $3 a gallon to $5 a gallon in the past five years. This is a positive statement because it can be proven true or false by comparison against real-world data. In this case, the statement focuses on facts. Normative economics is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. An example of a normative economic statement is as follows: The price of milk should be $6 a gallon to give dairy farmers a higher living standard and to save the family farm. This is a normative statement, because it reflects value judgments and cannot be proven true or false by comparison against real world data. This specific statement makes the judgment that farmers need a higher living standard and that family farms need to be saved.