PRECLASSIC PERIOD
Economic thought in the pre-classical period is the development of economic thought
that developed before the classical period, or the economic enlightenment period of the era of
Adam Smith's thought. Smith's thinking became a benchmark, because of his influential thinking
and became the foundation in the debate about political economy thought. The term "pre-
classical" was also used by Blanc and Desmedt in their article "In search of a 'crude fancy of
childhood': deconstructing mercantilism". This article does not explain in detail what is meant by
pre-classical, but explains the author's model in the "pre-classical" period which was greatly
influenced by the socio-political situation of the time, including economic thinkers in the
mercantalism period or around the 16th century.
Ancient Greece Period The Ancient Greece period was actually the beginning of the
development of science in general, where philosophy as a source of science developed very
rapidly. Then the philosophical thought in the Ancient Greek period, some of his thoughts were
used as a reference and basis in understanding economic concepts explicitly or implicitly. During
this period, figures such as Plato (427 BC–347 BC), Xenophon (440 BC–355 BC), and Aristotle
(384 BC–322 BC) were born. The specifics of economic thought in Ancient Greece were still thick
with very common ideas at that time, namely; 1) mythopoeic, i.e. thinking involving gods, or
anthropomorphic, i.e. economic thinking that still involves spirits; and 2) religious in nature that
prioritizes moral rules in economic activities.5 Andre Gregory (University College London) gives
an illustration that the ancient Greeks did indeed use myths as the basis for scientific
development. However, there was a fundamental belief system of the Ancient Greek people as
the basis of theory and science, namely about "cosmos" or "cosmeo". That the Greeks believed
they lived in the cosmos, a well-organized place. The universe for them has an order, where the
order is good and pleasant at that time. The order of the cosmos is something that can be
discovered and understood by humans.
What's more, the Greeks were the first to recognize the difference between the natural
and the supernatural. They considered the cosmos to be a completely natural place, not random,
or by the sudden change of the gods (a mere spiritual process).6 Thus in the thought of the
Ancient Yunanites there was a "rational" or scientific thought of the existence of something (the
cosmos) as a natural process rather than always a supernatural myth. In his book "The State",
Aristotle distinguished between the oikonomie (who studied the ways of organizing the
household) and the Chrematistie (who studied the rules of exchange). It could be that Aristotle
can actually be considered the pioneer of Theoretical Economics. 7 He also explained
economics as a science that teaches about the relations between economies on the one hand,
and on the other hand, economics also teaches about epistemology, ethics, and politics.8 From
the above two directions of thought, it can be said that the ancient Greek model of economic
thought still had a non-empirical element and began to move towards empirical aspects and
rationality in the field of economics, especially in the rules of exchange and management of
scarce resources that were initiated since Aristotle. Also, there has been thinking about the
relationship between economics and other studies, including with politics.
Cameron is very good at describing the development of economic thought in Ancient
Greece as well as criticizing the thought of Joseph Schumpeter who explained that for the Ancient
Greeks the term "economics or oeconomicus" (from oikos, houses, and nomos, laws or rules)
meant only practical wisdom from household management. Schumpeter's reason for referring
to the Greek philosopher was basically a political philosopher, not an economic thinker.
Cameron then explained further by referring to Finley, since the middle of the 18th century, the
understanding of economics has undergone a major shift from just about household
management to about the management of the wealth nations
The "Scholastic" period is a philosophical development after the era of "Aristotle" which
developed between 500 and 1500 AD. Some of the important figures of the Scholastics were
Albertus Magnus (1206–1280) and Thomas Aquinas (1225–1274). The main characteristic of the
Scholastics is the strong connection between the economy and the "ethical" problem and the
great attention to the problem of "justice". During this period, most of the production was
produced by small farmers who rented / cultivated the land. Farmers and traders gather in a
container called a guild, which trains skilled workers and sets market prices and wage levels. At
this time, the position and role of the church are very influential in determining moral rules.
Scholastic teachings are greatly influenced by religious teachings, so economic behavior and
thinking are also greatly influenced by church teachings.
Period of Mercantilism Influential figures of mercantilism include Jean Bodin (1530–
1596), Sir William Petty (1623–1687), and David Hume (1711–1776). The mercantilist
understanding comes from merchant which means merchant. Mercantilism is an economic
theory that states that the welfare of a country is only determined by the amount of assets or
capital stored by the country concerned, and that the volume of global trade is very important.
Economic assets or state capital can be described in real terms by the amount of capital
(precious minerals, especially gold and other commodities) owned by the state and this capital
can be enlarged by increasing exports and preventing (as much as possible) imports so that the
trade balance with other countries will always be positive.
Jahrhundert (History of German Small Businesses in the 19th Century, 1870), and William
Cunningham (1849-1919) author of The Progress of Capitalism in England (1917). According to
Schmoller and Cunningham, the political interpretation of mercantilism is a medieval condition
in which European nations are in the process of recognizing the state as an identity with its
material foundation. As a result, there are conflicts between national borders between countries,
including the foreign trade system between countries. There was a bloc or mercantilism in
England and Germany, and there was a rise in nationalist sentiment in Europe in the 16th century,
about the increasing awareness of the British people about the existence and resources of the
sea as a natural defense, as well as about the increasingly aggressive nationalist push to ensure
British supremacy through the expansion of sea power. On the other hand, there is a theory
described by 'eine egoistische nationale und statliche Handelspolitik harter und schroffer Art' as
an inevitable consequence of historical progress represented by the rise of the modern state and
national economy; the so-called German bloc, in which mercantilism stood for the
establishment of a strong state and a healthy national economy, and that meant the overthrow
of local and provincial economic institutions, the belief in the future, the release of its
commercial dependence that was increasingly burdensome on foreign countries, and the
pursuit of economic autarchy (a system of self-sufficiency and limited trade)
It can be said that the era of mercantilism is a period in which the role of the state
(political) has gained space and a greater role in economic problems, especially in the export and
import exchange sectors. It also plays a great role in the management and protection of natural
resources that have great potential and become public commodities. Meanwhile, in the context
of political economy, mercantalism is a development of the understanding of the power of
natural resources, especially the sea, as a fundamental aspect driven by the British Bloc, versus
the German Bloc which emphasizes mercantilism on self-reliance and national strength by
optimizing national economic power without dependence on foreigners. d. School of Physiocrats
Physiocrats (Yun=physiocrats) are rooted in the words physia (nature), and cratain/cratos
(power). The school of physiocrats grew as a criticism of mercantilist economic thought that
emphasized state revenue on export optimization and import minimization as initiated by the
school of mercantilism
Gerald Arthur Royce in his dissertation entitled Physiocratic Economic Analysis (1962) at
the University of Glasgow, Scotland explained that physiocrats made several very significant
contributions to economic theory, especially the Capital Theory developed by Quesnay. One of
the most important and better known is Quesnay's theory of capital. Generalizing from the
experience of the agricultural revolutions in England and France, Quesnay theorized about this
situation in which wealth could be greatly increased by intensive investment in "Real Capital",
i.e., in the means of material production; Subsistence goods for the maintenance of labor, raw
materials to be machined, and machinery, soil improvement, and better and more farm animals,
are all necessary to facilitate the more efficient production of new agricultural technologies.
Meanwhile, "Real Capital" is considered as the advance payment of material goods necessary to
bridge the temporal gap between productive enterprises and the final sale of consumer goods.
Some of Quesnay's students later generalized the theory of capital to include capital-intensive
industries. The accumulation of Real Capital (as opposed to monetary capital) is considered the
main variable that determines the productivity of the economic machine. Physiocrats argue that
mercantilist policies have forced the growth of the commercial and manufacturing sectors to
such an extent that they outpace the growth of the agricultural sector. Discriminatory
government policies (tax policies being the most disturbing) have impoverished agriculture
Meanwhile, Deliarnov explained that Quesnay divides the community into 4 groups. (1)
productive communities, active in cultivating the land. (2) landlords. (3) unproductive (sterile)
society, merchants and craftsmen. (4) the working community. Land is the only source of
community prosperity.16 In relation to political economy, the school of physiocrats has
introduced the principle of liberalism of the laissez faire model, which is an economic condition
and activity whose sustainability is left to market forces. During this period, there has also
emerged a more obvious socio-economic class based on the potential of capital between
landlords, traders, and laborers, as well as the emergence of a part of the production factor in
the form of land which is considered a priority as a source of prosperity. In the school of
physiocrats, it is explained: a) Theories that are objective scientific and have succeeded in
compiling a view of a comprehensive and complete economic system b) The concept of laissez
faire has begun to emerge c) Macro theories have been developed in analyzing national income
and its distribution to society
Obstacles that hinder the accumulation of capital in feudal society. The peasants are
only subject to the arbitrary will of the landlords, and have no opportunity and stimulus to
increase wealth. Instead, the landowners lived a life of laziness and were constantly at war with
each other. Conditions are increasingly chaotic, because traders are unable to secure their
industrial products from coercion and violence from other parties.18 A thought that describes
the situation of abnormality in activities, motivations, and social phenomena in the economy. In
its development, classical economic thought received strong criticism from socialist schools
from various streams, especially from social sciences such as Karl Marx (1818–1883), Friedrich
Engels (1820–1895) who emphasized the larger function and role of the state in economic
development. 3. Modern Period In the modern era, economics is no longer just about meeting
household needs, but the economy as an entity that influences and influences other entities,
such as politics, social, mathematics and others. Thus, many experts describe the economy in a
variety of materials and purposes, and the background in which the economy becomes
important in human life. Lionel Robbins (1898–1984), an early 20th-century British economist
and author of A History of Economic Thought, explains economics is the science which studies
Human behavior as a relationship between ends and scarce means which have
alternative uses.19 This formulation is similar to that developed by the P3EI Team of the Islamic
University of Indonesia which formulates economics as the study of human behavior in using
scarce resources to produce goods and services. Meanwhile, the scope of economics includes
one human behavior in consumption, production, and distribution.20 Robbins further explained
that there are differences of opinion among economic experts in terms of economic studies
focusing more on the creation of material welfare, social behavior in economic exchange, or the
occurrence of complications in economic exchange activities.
George Riesman (born 1937), professor emeritus of economics at Pepperdine University,
USA whose work has received much praise, in his 1046-page book entitled Capitalism: A Treatise
on Economics, explained that in the 19th century the definition of economics was only typical of
the science of wealth or wealth that can be exchanged (the wealth be exchangable). Then since
the 20th century or in the modern era, the definition of economics has developed as a study that
discusses competition in obtaining increasingly limited resources (the allocation of scarce
means among competing ends). However, Riesman emphasized that the important point of
economic studies in the current era is about the production of wealth resources under a system
of division of labor. 23 Some of the early 20th-century thinkers here provide an overview of
economics as a development of economics that does not only discuss household management
but also includes social behavior, the complexity of exchange activities, the identification and
exploration of scarce resources, and the consumption, production, and distribution of goods and
services. Ronald M. Ayers and Robert A.
Collinge define economics giving rise to interpretations. In economics, it is studied about
the allocation of limited resources in response to unlimited desires. Because economics is a
study that leads to a good and appropriate choice. But making good choices can be questioned
because of the nature of society, what makes a good choice, does rationality go into it, what are
rational decisions, are rational human beings?24 Milan Zafirovski of the University of North Texas
would not fully agree with the concept of absolute rationality in economics. That the economy
cannot really say what a good or bad choice is, it can only show the outcome of the choice.
Because rationality is something agreeable to reason; reasonable; sensible; a rational plan for
economic development.25 Thus, something can be said to be rational if it has been planned in
economic development so that it is successful, reasonable and reasonable. From some of the
economic definitions above, the definition of economics in the modern era can be taken as a
study of the allocation and empowerment of wealth sources as production under the division of
labor system so that full employment occurs. However, due to the increasingly limited natural
resources, there will be competition and there may be uneven distribution and the achievement
of broad welfare goals. For this reason, economic studies also direct good values and rationality
in human behavior in the consumption, production, and distribution sectors through a country's
strict and fair political policies.
The main criticism of Islamic economics against the history of mainstream economic
thought is that it refers to the history of Islamic glory, which according to various analyses has
been largely ignored by Western thinkers. They deny the evidence of Islamic history which has
produced many experts who have made great contributions to economic and political
civilization. The heyday of Islam is approximately from the 8th century in the period of the first
Umayah to the end of the 18th century in the late Ottoman Turkish empire. If you look at the time,
the heyday of Islam runs from the time of the Scholastic (13th century), the Mercantilist Period
(16th century), the School of Physiocrats (18th century), and even close to the era of the
development of Adam Smith's thought (late 18th century). However, by Schumpeterian (a
follower of Schumpeter's teachings) at that time as "the great gap" of civilization or a period of
gap in Western civilization that was cut off or experienced a void so that it did not connect with
the European enlightenment period. Abdul Qoyum, et al., sponsored by KNEKS (National
Committee for Sharia Financial Ecosystem) and Bank Indonesia, comprehensively traced the
history of Islamic economic civilization which is codified in the book History of Islamic
Civilization. The important criticism in the book is aimed at the phenomenal book of modern
economics, The History of Economic Analysis (1954) by the AustroAmerican economist, Joseph
A. Schumpeter (1883-1950) which describes in sequence related to contemporary social science
