The Foundations of Economics, Part I: Hesiod’s Formula for Growing Wealth 

Work hard. Spend wisely. Save assiduously. Respect the law. If I were to write the Ten Commandments of Wealth Building, those might be the first four. Cultures that embrace these values grow rich and prosper. Cultures that ignore them languish at the bottom of the economies they inhabit.

As Murray Rothbard says in chapter one of History of Economic Thought, “It all began, as usual, with the Greeks. The ancient Greeks were the first civilized people to use their reason to think systematically about the world around them.”

In my August 31 essay, I listed some of their scientific, political, and cultural achievements. But I failed to mention the very good thinking they did on economics. The word itself stems from the Greek oikonomia, which refers to matters of saving, budgeting, and household management.

Aristotle (384 BC to 322 BC) contributed enormously to early economic thinking. (And I’ll be talking about his contributions in a future essay.) But Hesiod, a shepherd and poet that lived 400 years earlier, laid the foundation upon which Aristotle and those that followed him built their theories.

Hesiod identified the essential problem that all economists struggle with: the conflict between the ideal of unlimited abundance and the reality of limitations and scarcity.

From Rothbard: “Hesiod lived in the small, self-sufficient agricultural community of Ascra [and] was therefore naturally attuned to the eternal problem of scarcity, of the niggardliness of resources as contrasted to the sweep of man’s goals and desires.”

In his epic poem, Works and Days, Hesiod employs a mythology of human cultural evolution in five stages: the Golden Age, ruled by Cronos; the Silver Age, ruled by Zeus; the Bronze Age; the Heroic Age, the time of the Trojan war; and the Iron Age, Hesiod’s time, which he characterizes as corrupt.

He talks about the Golden Age, when people lived long and happy lives, free from sorrow because they had everything they could possibly want. But, he says, those days are over. Three things that were once infinitely abundant – labor, materials, and time – have become scarce. Which means, he says, that they must now be seen as valuable, limited resources, and allocated efficiently to minimize waste and maximize their benefits.

He then devotes nearly half of the poem (383 of 828 verses) to suggesting how that could and should be done.

He starts with the concept of hard work.

We humans have a natural inclination for leisure, he says, stemming somehow from our earlier existence in the Golden Age. But this desire for leisure is not useful in the real world of limited resources. To live a good and comfortable life, he says, we must reject our impulse for leisure and embrace a strong work ethic. We must, in other words, accept that we are not entitled to anything. We must accept labor as our natural duty and the natural way to have a happy and prosperous life.

Next, we must embrace the idea of saving. In order to contend with winters, droughts, and pestilence, we must work harder and longer during times of plenty to produce a surplus, which we should then save for our future needs.

This commitment to labor and saving, Hesiod contends, gives rise to an innate human ethic. Recognizing the value of work, he says, men develop a deep-seated emotional disapproval of sloth. This, combined with wanting what their neighbors have, creates a desire to emulate what their neighbors do to accumulate wealth.

“To Hesiod,” Rothbard explains, “[this] emulation leads to the healthy development of a spirit of competition, which he calls ‘good conflict,’ a vital force in relieving the basic problem of scarcity.” And “to keep competition just and harmonious, Hesiod vigorously excludes such unjust methods of acquiring wealth as robbery, and advocates a rule of law… to allow competition to develop within a matrix of harmony and justice.”

So, there you have it…

Deep within the human psyche is the memory of Edenic bliss – a world of unlimited abundance where leisure was the natural state of man. We don’t live in that world now, and yet the memory haunts us.

There is a voice in our heads that tells us we are entitled to everything it offered. That conflicts with our experience and frustrates us.

We yearn irrationally to return to that imagined state, but we cannot go back. We are stuck in the real world.

It is a world of hardship and suffering… but it is also a world of bounty.

We can have that if we like, but it won’t come to us from hoping or praying or believing. There is only one path and that is the path of work. We must work hard and spend frugally and save a portion of the fruits of our labor. We must have the stamina to work harder than we want to. We must have the courage to compete. We must have the discipline to restrain our consumption. And we must have the wisdom to save our profits for when we can no longer successfully compete.

And all this must be done in a community that values individuality, freedom, and the rule of law.

It’s as simple as that.

Hesiod figured this out more than 2500 years ago. In the millennia that have passed since then, all sorts of theories have been tested and failed.

Work hard. Spend wisely. Save assiduously. Respect the law. There is certainly more to economics than these four rules. But without them, nothing else works.

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