The industrial revolution

The first economist in the meaning of the word was the Scotch Adam Smith (1723-1790). He defined the elements of a national economy: products are offered at a natural price generated by the use of competition - offer and demand - and the division of labour. The basic motive for free trade is the human self interest. The so called self interest hypothesis became the anthropological base for the economics.

Thomas Malthus (1766-1834) transferred the idea of offer and demand to the problem of surpopulation. The United States of America became the place where millions of expatriates from all European countries were searching for free economic evolvement. In Europe a wild capitalism started to replace the system of mercantilism (today: protectionism) and lead to economic growth. The period is called industrial revolution because the system of production and division of labour enabled the mass production of goods. The industrial revolution lessened the role of subsistence farming, converting it to more extensive and monocultural forms of agriculture. In the last three centuries, the economic growth took place mostly in mining, construction and manufacturing industries.

Early modern times

The European captures became branches of the European states, the so-called colonies. The rising nation-states Spain, Portugal, France, Great Britain and the Netherlands tried to control the trade through custom duties and taxes in order to protect their national economy. The so-called mercantilism was a first approach to intermediate between private wealth and public interest. The secularization in Europe allowed to use the immense property of the church for the development of towns. The influence of the nobles decreased. The first secretaries of state for economy started their work. Bankers like Amschel Mayer Rothschild (1773-1855) started to finance national projects as wars and infrastructure. Economy from that on meant national economy as a topic for the economic activities of the citizens of a state.

Middle ages

In mediaeval times the great conquerors raised venture capital to finance their captures. The capital should be refunded by the goods they would bring up in the New World. Merchants as Jakob Fugger (1459-1525) and Giovanni di Bicci_de' Medici (1360-1428) founded the first banks. The discoveries of Marco Polo (1254-1324), Christopher Columbus (1451-1506) Vasco da Gama (1469-1524) lead to a first World economy, meaning international trade between the continents. The first enterprises therefore were trading establishments. In 1513 the first stock exchange was founded in Antwerpen. Economy at the time meant firstly trade.

"the cruellest of our revenue laws, I will venture to affirm, are mild and gentle in comparison of some of those which the clamour of our merchants and manufacturers has extorted from the legislature for the support of their own absurd and oppresive monopolies. Like the laws of Draco, these laws ,may be said to be all written in blood". Adam Smith, Wealth of Nations

Ancient times

The ancient economy was mainly based on subsistence farming. The exchange of goods happend within a barter economy. In the Ancient Greece, when the word economy came up, the majority of people were bondslaves of the freeholders. The economic discussion was driven by scarcity. Aristotle (384-322 B.C.) was the first to differ between a use value and an exchange value of goods. (Politics, Book I). The exchange ratio he defined was not only expression of the value of goods but of the relations between the people involved in trade. Economy became a synonym for trade, money and profit. For most of the time in history economy therefore stood in opposition to institutions with fixed exchange ratios as reign, state, religion, culture and tradition.