An essential discipline

Written by Sharad Raghavan | Updated: Jan 13 2013, 08:47am hrs
The Wisdom of Ants: A Short History of Economics

Shankar Jaganathan

Tranquebar Rs 295, Pp 366

The study of money, transactions and wealthnamely economicsis perhaps at its height now, with economies and markets around the world so interconnected that their study has become imperative. A case in point is the financial crisis, which had its epicentre in the west but still affected economies ranging from Brazil to China and South-East Asia. With our daily lives so dependent on how economies on the other side of the world perform, its no surprise that economics has become one of the most sought after subjects to study and to work in.

The thing with economics, however, is that it is a social construct. Its not like maths, where the discoveries of man would have held regardless of whether they were found yesterday or 2,000 years ago. Economics is born out of how people interact in society, their level of advancement and, notably, how dependent they are on the natural resources the world provides. For example, the nature of economics during the pre-monetisation era was radically different from what it is now, where even physical money is giving way to just numbers on a computer screen. Take the coincidence of wants as an illustrative example. In the pre-monetised world, barter was one of the major modes of exchange of goods and services. But a major problem with barter is that the two people in the exchange have to want what the other is offering. Say, a farmer has a bag of wheat and wants a shovel. Not only does he have to find a man willing to part with a shovel, but that man also has to want the farmers bag of wheat. The transaction falls down if the man with the shovel wants potatoes in exchange for his shovel. Money bypasses this need for a coincidence of wants; the farmer can pay cash for the shovel, and the shovel owner can use that cash to buy whatever he wants.

Although this is just a minute example of how the nature of economics has changed over the centuries, it underlines the importance of understanding the very history of economics itself. The Wisdom of Ants: A Short History of Economics by Shankar Jaganathan is a great read if you want a lucid introduction to this history. While not saying anything new, Jaganathan brings together the various trends in economics over its many years in existence, dividing them into convenient periods of time separated by watershed moments. The book underlines three principlesprivate property, social sanction for self-centred individualism as opposed to the society-first approach, and the materialistic outlookas the main drivers of what made economics the essential discipline it is today.

While it may not have any real bearing on us today, it is nevertheless fascinating to learn about how the notion of private property emerged from the system that saw all goods (even property was a notion that took a while in arriving) as equally belonging to everybody. As the book makes clear, unlike in the animal kingdom where possession is all, humanity heartily embraced the idea of titles to propertywhere even if there was no physical possession of, say, a piece of land, the owner still had rights to it and could extract value from it. This was a major moment in the history of economics. As an aside, something not mentioned in the book, it is interesting to note that one of the major reasons for the birth of the institution of marriage was to provide a systematised basis for the inheritance of property and its titles.

Many more detailed books have been written on the history of economics, but the ease with which Jaganathans work reads makes it a must-have for students of economics and lay readers alike. As the title suggests, it was the wisdom of antsto save during times of plenty so as to survive during scarce periodsthat best exemplifies humanitys economic thought. While we have undoubtedly moved well past the basic tenets of nature, their validity is still undeniable.