Man is prone to error and even folly, and therefore a history of economic thought cannot confine itself to the growth and development of economic truths. It must also treat influential error, that is, error that unfortunately influenced later developments in the discipline. One such thinker is the Greek philosopher Pythagoras of Samos (c.582–c.507 BC) who, two centuries after Hesiod, developed a school of thought which held that the only significant reality is number. The world not only is number, but each number even embodies moral qualities and other abstractions. Thus justice, to Pythagoras and his followers, is the number four, and other numbers consisted of various moral qualities. While Pythagoras undoubtedly contributed to the development of Greek mathematics, his number-mysticism could well have been characterized by the twentieth century Harvard sociologist Pitirim A. Sorokin as a seminal example of ‘quantophrenia’ and ‘metromania’. It is scarcely an exaggeration to see in Pythagoras the embryo of the burgeoning and overweeningly arrogant mathematical economics and econometrics of the present day.
Pythagoras thus contributed a sterile dead-end to philosophy and economic thought, one that later influenced Aristotle's pawky and fallacious attempts to develop a mathematics of justice and of economic exchange. The next important positive development was contributed by the pre-Socratic (actually contemporary of Socrates) Democritus (c.460–c.370 BC).
This influential scholar from Abdera was the founder of ‘atomism’ in cosmology, that is, the view that the underlying structure of reality consists of interacting atoms. Democritus contributed two important strands of thought to the development of economics. First, he was the founder of subjective value theory. Moral values, ethics, were absolute, Democritus taught, but economic values were necessarily subjective. ‘The same thing’, Democritus writes, may be ‘good and true for all men, but the pleasant differs from one and another’. Not only was valuation subjective, but Democritus also saw that the usefulness of a good will fall to nothing and become negative if its supply becomes superabundant.
Democritus also pointed out that if people restrained their demands and curbed their desires, what they now possess would make them seem relatively wealthy rather than impoverished. Here again, the relative nature of the subjective utility of wealth is recognized. In addition, Democritus was the first to arrive at a rudimentary notion of time preference: the Austrian insight that people prefer a good at present to the prospect of the good arriving in the future. As Democritus explains, ‘it is not sure whether the young man will ever attain old age; hence, the good on hand is superior to the one still to come’.
In addition to the adumbration of subjective utility theory, Democritus's other major contribution to economics was his pioneering defence of a system of private property. In contrast to Oriental despotisms, in which all property was owned or controlled by the emperor and his subordinate bureaucracy, Greece rested on a society and economy of private property. Democritus, having seen the contrast between the private property economy of Athens and the oligarchic collectivism of Sparta, concluded that private property is a superior form of economic organization. In contrast to communally owned property, private property provides an incentive for toil and diligence, since ‘income from communally held property gives less pleasure, and the expenditure less pain’. ‘Toil’, the philosopher concluded, ‘is sweeter than idleness when men gain what they toil for or know that they will use it’.