Plato's Economic Genius
Originally published in Interdisciplinary Studies of the Market Order
Plato's economic genius has largely been overlooked. A careful assessment of Socrates' economic analysis in the health "early city" of Plato's Republic reveals that historians of economic thought, including schumpeter, Finley, and Robbins, have missed many or most of Plato's contributions to economic theory, that Socrates' analytical approach and resulting economic theory in the early city contrast sharply with the approach and conclusions of his interlocutors Glaucon and Adeimantus later in the Republic, and that these differences call into question the comon view that Plato is a sort of communist, fascist, or totalitarian.
Among other things, Plato has Socrates: adopt an approach to social and political analysis, similar to those of Weber and Mises, that seeks to account for the experiences of acting individuals; systematically build a theory of why such individuals exchange with one another, a theory that includes three reasons for the division of labor more comprehensive than those of Adam Smith; incorporate a normative claim --that individuals should only do what is needed/necessary--into a descriptive analysis of exchange; identify the effect of aggregate demand on supply; propose a fiat understanding of money; and articulate much of the theory of comparative advantage. Whereas Socrates introduces and endorses these principles structuring the early city, the later versions of the city featuring extreme unity and political control reflect changes introduced by Glaucon and Adeimantus. Careful interpretations of the politics of Plato's Republic must fully account for these differences.