A disciple and contemporary of Plato was the Athenian landed aristocrat and army general, Xenophon (430–354 BC). Xenophon's economic writings were scattered throughout such works as an account of the education of a Persian price, a treatise on how to increase government revenue, and a book on ‘economics’ in the sense of thoughts on the technology of household and farm management. Most of Xenophon's adumbrations were the usual Hellenic scorn for labour and trade, and admiration for agriculture and the military arts, coupled with a call for a massive increase in government operations and interventions in the economy. These included improving the port of Athens, building markets and inns, establishing a governmental merchant fleet and greatly expanding the number of government-owned slaves.
Interspersed in this roll of commonplace bromides, however, were some interesting insights into economic matters. In the course of his treatise on household management, Xenophon pointed out that ‘wealth’ should be defined as a resource that a person can use and knows how to use. In this way, something that an owner has neither the ability nor the knowledge to use cannot really constitute part of his wealth.
Another insight was Xenophon's anticipation of Adam Smith's famous dictum that the extent of the division of labour in society is necessarily limited by the extent of the market for the products. Thus, in an important addition to Plato's insights on the division of labour, written 20 years after The Republic, Xenophon says that ‘In small towns the same workman makes chairs and doors and plows and tables, and often the same artisan builds houses...’ whereas in the large cities ‘many people have demands to make upon each branch of industry’, and therefore ‘one trade alone, and very often even less than a whole trade, is enough to support a man’. In large cities’, we find one man making men's boots only; and another, women's only’... one man lives by cutting out garments, another by fitting together the pieces’.
Elsewhere, Xenophon outlines the important concept of general equilibrium as a dynamic tendency of the market economy. Thus, he states that when there are too many coppersmiths, copper becomes cheap and the smiths go bankrupt and turn to other activities, as would happen in agriculture or any other industry. He also sees clearly that an increase in the supply of a commodity causes a fall in its price.
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