Evolution of Economics

The word “economics” is derived from oikonomikos, which means skilled in household management. As the western world began its transition from agrarian to industrial economy, modern economic thought came into being. Before modern economics which came into being around 1th century there existed number of economic thought particularly European Mercantilism, and French Physiocraticism. Of which, neither fall in to the classification of formal economics, and both lack the structural and systematic processes required for formal knowledge creation.

Mercantilists’
This was the economic philosophy adopted by merchants and statesman during the pre-classical era started after 1500. Mercantilists’ believed that nation wealth came primarily from accumulating gold and silver. Their philosophy can be summed up in following manner:
1. All available land should be employed for agriculture, manufacturing and mining.
2.Exports of monetary items such as gold and silver should be banned, such that mechanisms of trade stay within the country.
3. Imports should be grossly frowned up and when need arises should be traded in exchange for other goods.
Mercantilism introduced the concept of double entry accounting, which is a primary form of bookkeeping in today’s time. This system represented the pinnacle of commercial interest to level of national policy.

Physiocrats
Idea of economy as a circular flow of income and output was developed by group of French philosophers in 18th century known as physiocrats. They believed that only process that yield net result is agriculture. According to them agriculture is sole source of wealth in an economy. In an opposition against mercantilist trade theory, the physiocrats propounded a policy of laissez-faire, which meant minimal government interference in the economy.