The Origins of Economics


3 Key Human Characteristics

1.  Needs and wants

2.  Humans are social creatures

3.  Emotion and logic


Economist definition


Economy refers to the kinds of decisions people make when they have only limited resources or wealth, and there are unlimited goods and services they would like to acquire or use.


Anthropologist definition


An economy is a set of institutional activities which combine natural resources, human labor and technology to acquire, produce, and distribute material goods and specialist services in a structured fashion.


In general, humans tend to maximize the achievement of ends while minimizing the expenditure of means (maximize benefits while minimizing costs).



Different cultures value different goods and services and tolerate or prohibit different kinds of relationships among the people who produce, exchange, and consume.


In other words:  Different people value different things differently.


Scale of Value



Exchange refers to the practice of giving and receiving valued objects and services.


Three types of exchange:

1.  Reciprocal

2.  Redistributive

3.  Price-Market


Reciprocal:  The flow of products and services is not contingent on any definite counterflow.


The closer the relational connection the greater the time allowed for counter flow.


It isnít as if a person does not care but that there is:

1.  no need for immediate return

2.  no systematic calculation of the value of the services and products exchanged

3.  an overt denial that a balance is being calculated or that the balance must come out even


Reciprocity and the freeloader


Reciprocity and trade:

Silent trade


Trade partnership:  members of different bands or villages regard one another as metaphorical kin. 


The Kula Ring as described by Bronislaw Malinowski among the Trobriand Islanders


Redistributive:  the labor products of several different individuals are brought to a central place, sorted by type, counted, and then given away to producers and nonproducers alike.


Two types of redistributive exchange:


1.  works harder than anyone else producing the things to be given away

2.  takes the smallest portion or none at all

3.  is left with no greater material wealth than anyone else



1.  lets other do most of the work

2.  retains the largest share

3.  ends up with more material wealth than anyone else



Kwakiutl Potlatch



Price-market exchange:  The price of the goods and services exchanged is determined by buyers competing with buyers and sellers competing with sellers.


Money:  The use of certain objects to symbolize and measure the social value of other objects occur almost universally.


Money has the following characteristics:

1.  Portability:  It comes in sizes and shapes convenient for being carried about from one transaction to the next.

2.  Divisibility:  Its various forms and values are explicit multiples of each other.

3.  Convertibility:  A transaction completed by a higher valued unit can be made as well by its lower valued multiple.

4.  Generality:  Virtually all goods and services have a money value.

5.  Anonymity:  For most purchases, anyone with enough money to pay the market price can conclude a transaction.

6.  Legality:  The nature and quantity of money in circulation is controlled by a government.