Greek Philosophers on the Causes and Advantages of Trade
The Greek philosophers wrote about how trade, within and among city-states, affected the welfare of their citizens. Aristotle among them advocated autarky or self-sufficiency as an ideal to be pursued by city-states.
Others viewed trade as the only way a state can obtain the goods it lacks, and recognized that needed imports require exports in exchange. In Plato’s words, in order for a state to create a commodity surplus it can exchange with other states, “home production must not merely suffice for themselves, but in quality and quantity meet the needs of those of whom they have need” (Plato 1963: 371a). Other writers were wary of “unnecessary exchange” and unregulated trade undertaken for the sake of money accumulation rather than the satisfaction of real needs. Aristotle asserted that “states which make themselves marts for the world only do it for the sake of revenue; and if a state ought not to indulge in this sort of profit-making, it follows that it ought not to be an exchange centre of that kind” (Aristotle 1946: 1327a). Rephrasing this in present-day terms, globalization may not be advantageous if it is undertaken purely for the sake of profit! Moreover, while the import of necessities may be justified, the Greeks regarded that of luxury goods with suspicion as it may lead to the corruption of morals.In discussing the mutual gains from trade, the Greeks addressed the issue of whether the expertise in commodity production deployed by the parties to the trade is innate or induced by practice or training. Two millennia later Adam Smith leaned to the latter view, in line with his dictum that “the difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education” (Smith 1776 [1996], hereafter WN, I.ii.4). The Greeks instead believed people are born with different aptitudes. As Plato said in The Republic, “no two of us are born exactly alike. We have different natural aptitudes, which fit us for different jobs”, so that “we do better to exercise one skill” than “to try to practice several”. “Quantity and quality” - he concludes - “are... more easily produced when a man specializes appropriately on a single job for which he is naturally fitted, and neglects all others”. According to Lowry, specialization in different tasks as described in Xenophon’s Cyropaedia “suggests elements of the analysis of comparative advantage, or, at a minimum, reciprocal absolute advantage elaborated by nineteenth-century English economists”, if “the latter notion [is extended] to geographic regions with different characteristics” (Lowry 1987: 65-6). We return to the rationale for trade starting with Smith and Ricardo’s theories of trade discussed below.