Aristotle is classified among the most vital thinker ever to exist in the economic sector. He advanced and analyzed economic processes within his surroundings to determine the position of the economy (buying and selling) in the society. Aristotle’s writings on economics continue to attract the attention of many contemporary thinkers. He developed many insightful economic thoughts especially the value theory. The most important topics related to economics covered by Aristotle’s include human action and political economy. In these topics, he provides his philosophical analysis of human ends and means. He expounds how valuable means of production (in terms of their end products) are to the society. High value of the means of production defines how usefulness of the end products. Aristotle’s continues with derivation of numerous economic ideas from axiomatic concepts such as human action on necessity, end pursuits through ordering and allocation of scarce means, and the reality of human inequality and diversity (Scott, 1997). With regard to human action, Aristotle emphasizes that actions are necessary and fundamental. According to Aristotle, the personal human action of utilizing wealth is what constitutes the economic dimension of the society. The importance of economic action is exploitation of things that are a necessity in life (survival) and a flourishing life. A flourishing life has morals and virtues through which human beings achieve happiness. Since human actions are voluntary and intentional, these actions require the prior brain acts of deliberation and choice. Actions are what give human beings the fulfillment of their perfection. Observations show that human nature has capacities relating to the dual material and spiritual character. Expression of this dual character is what defines economics. The economic sphere rotates between the mental and corporeal aspects of an individual (Aristotle, 1977). Economics in Aristotle’s view is a practical science. Practical science concentrates on knowledge in order to control reality. It studies relationships that are not regular, constant or invariable as economics. Aristotle argued that economics concentrates both with the household and the politics thus generally economics deals with things and issues that make life better. Therefore, economics as a practical science targets the goodness and is morally fundamental. Due to Aristotle perspective of economics relationship with politics, the study of political economy is accredited to him (Scott, 1997). According to Aristotle, economics primarily implies to the action of involving things for the purpose of making life good. Besides, he views economics as a practical science, and it bears the potential that foster behavior that triggers the action. With practical knowledge, economics helps a person to obtain and utilize those things which improve the living standards. Economics as a practical science aims at achieving effective action. This is possible because practical science recognize the nature of its final decision resultant from individual human action dictated by their freedom and uniqueness (Scott, 1997). Relative to theory of value, Aristotle sees labor as a valuable commodity, but it does not give out the value. He strongly rejects labor as a source of wealth. Aristotle clarifies that his theory is the value of labor but not labor of value. The labors skills do not determine the value of exchange; instead, the value of labor skills is determined by the goods they possess in the market. He strongly disagrees that the labor expenditure in the production process is solely created. Labor is a necessity, but in the determination of value, it is insufficient. A combination of both the labor skills and utilities are what determines the exchange values and ratios respectively. His concludes that the utility governed by human desires is the core requirement of value. The ability to satisfy human wants is what he defines as value. Demand, on the other hand, is controlled by value associated in using goods (Aristotle, 1977). Aristotle suggested a distinction between the exchange value and use value. The measure of use value is dependent on productivity in an individual personal good. There exist variations in the use value of a good or service between individuals. The demand of an item is functional to the use value. An increase in the possession of goods implies a decrease in the use value of that good at a certain threshold points. To maintain an increase in use value of goods or services, consumption must be conspicuous. There will be fluctuations in demand if the usage of the item is limited or wide-ranging. In circumstances of scarcity, both the demand and exchange value are affected. Aristotle further shows a distinction between one’s possession (final goods) and factors of productivity. Factors of production obtain their value from the final product (Scott, 1997). From the derivation of goods value from individual utility, Aristotle defined the role of diminishing returns in price formation. He found that to establish the value of something is traced from the contribution of a commodity (addition or subtraction) to a group towards the overall value of the group. A higher value is attributed to more gains through the addition of goods. Subtraction or absence of goods means greater loss in value and this elicits more desire to assess the commodity. When the quantity of goods attains saturation point the use value is plunged and immaterial (Scott, 1997). Aristotle also formulated different types of exchange in economics. These are barter, retail and usury. In barter trade, there is direct exchange of commodities which is non-monetary. This form is regarded as natural because it satisfies the natural requirement of sufficiency. Natural barter trade is based on the right to own property, which are dependent on the capacity for its proper usage. Although he views barter trade as natural, it is inadequate due to the difficulty involved in matching the property with the surpluses and deficiencies. Relative to usury, transfer of goods between households is mediated by money. In this form, every participant starts and finishes with use value, which Aristotle strongly approves, but the item involved in exchange is not used in its natural form. For this reason, Aristotle viewed this form of exchange as irresolute and ambivalent. The problem of double coincidence in wants is eliminated by the introduction of money. For Aristotle, money is just a medium of exchange, but not wealth or a store of value. Finally in retailing, the purpose of buying and selling is to make a profit. Retail trade concentrates on gaining money rather than acquisition of materials in need. Like usury, Aristotle views retail trade also as unnatural and insufficient way of attaining wealth because all attention is directed towards attaining large quantities of money (Aristotle, 1977). In conclusion, Aristotle contributed much in the field of economics. To many, Aristotle’s thoughts on economics are insightful, but so contradictory and inconsistent. The contradiction arises on his views on marketing and money- making deals. This two do not provide the mechanism through which order could be maintained in the society via individuals pursuing their own ends. Nevertheless, Aristotle still remains an icon in the development economics history.
Aristotle. (1977). Aristotle politics. Cambridge, Mass: Harvard Univ. Press. Scott M. (1997). Aristotle's economic thought. Oxford: Clarendon Press.