Early economic thought

The first recorded monetary economies were the ancient city states of Sumer. They developed a trade based market economy, using the commodity money of the shekel, which was a certain weight measure of barley. The Babylonians and their city state neighbours before them, developed the earliest system of economic regulations using a metric of various commodities, that was fixed in a legal code.^[6]

The early law codes from Sumer could be considered the first (written) economic formula, and had many attributes still in use in the current price system today, such as codified amounts of money for business transactions (interest rates), fines in money for 'wrong doing', inheritance rules, and laws concerning how private property was to be taxed or divided.^[7] For a summary of the laws, see Babylonian law.

Urukagina, (reigned ca. 2380 BC–2360 BC, short chronology), appears as a social/economic reformer in ancient Sumer, getting rid of gross abuses of power that had taken hold in the Mesopotamian city state of Lagash. His reforms were written changes to prevailing economic thought. Here are two examples of the series of economic reforms by Urukagina... 'He cleared and cancelled obligations for those indentured families, citizens of Lagash living as debtors because of grain taxes, barley payments, theft or murder', also... 'Urukagina solemnly promised Ningirsu that he would never subjugate the waif and the widow to the powerful.'^[8]

Interest‑bearing debts were introduced to the Mediterranean lands from the Near East, most likely by Phoenician merchants in the 8th century BC along with their better known innovations such as alphabetic writing. It appears such debts, and for that matter, commercial and agrarian debts even without interest charges, are by no means a spontaneous and universal innovation. No indications of commercial or agrarian debts have been found in Early Bronze Age Egypt, the Indus valley, or even in Ebla, or in Mycenaean Greece.

These types of debts then are first documented in a particular part of the world, Sumer, in the third millennium, and can be traced diffusing from southern Mesopotamia upward along the Euphrates and westward into the Levant as part of the Sumerian commercial expansion. Originally much of the ancient concept of a debt structure is documented as being owed to temple and palace collectors.^[9] From all appearances, 'debt cancellation' as a concept, (amargi) law by Emmetena, ruler of the Sumerian city-state of Lagash, c. 2400 BC, may have been the first known (written) legal proclamation of an economic nature.

A 640 BC electrum coin from Lydia. Early standardized coins greatly facilitated commerce.

The idea of debt cancellation did not translate itself to Greek and Italian city state economies as in Sumer, as those economies adopted debt structures as regular features and interest‑bearing debts became increasingly privatized, as they became westernized.^[10] The Greek word Seisachtheia, or 'shaking off of burdens' as an economic concept occurred in Athens money system as reformed by Solon, who shook off some former aspects of the Athenian debt structure. Later a boom in trade using standardized coins^[11] may have helped to set the scene for Athens' later experiment with democracy. Athenian democracy worked to a degree to empower certain groups (Delian League), controlled by Athens, with wealth, status and prestige. Athenians became wealthy through trade and war.^[12]

Later economic discussion such as Chanakya's Arthashastra or Xenophon's Oeconomicus) all have their roots in the Middle east. In Ancient Athens, economically a slave based society, the embryonic model of democracy developed,^[13] Plato's book The Republic contained references to specialisation of labour and production. Aristotle made familiar arguments, still in economic discourse today. Chulavamsa records that Parakramabahu I of Sri Lanka had debased the currency of Ancient Sri Lanka in order to produce monies to support his large scale infrastructure projects.^[14]