The idea of the economy as one thing is surprisingly recent
People have made, swapped and shared goods for as long as there have been societies, but the word economy meaning a country's whole system of production only emerged around the 1650s. And the notion of the economy as something to watch and steer did not catch on widely until the Great Depression.
The English word came through Middle French and medieval Latin from the Greek oikonomia: oikos meaning house and nemein meaning to manage. An economy covers the production, distribution, trade and consumption of goods and services by individuals, businesses, organisations and governments. Transactions happen when parties agree on a price, usually in money, though monetary deals make up only a small part of economic life.
Early economies were mostly subsistence farming, with most exchange handled through social ties and some barter in markets. Sumer ran a large economy based on commodity money, and the shekel, first recorded in Mesopotamia around 3000 BC, began as a set weight of barley against which silver and bronze were valued. The Babylonians and their neighbours built the earliest known written codes of law and administration, backed by courts, prisons and official record-keeping.
Medieval life stayed close to subsistence. Conquerors raised what would now be called venture capital, from the Italian word for risk, to fund expeditions that were expected to repay backers with plunder, and those conquests became colonies. Spain, Portugal, France, Britain and the Netherlands tried to control trade through customs duties under the policy known as mercantilism. The Scottish thinker Adam Smith, often called the first modern economist, laid out how a national economy works.
The Industrial Revolution of the 18th and 19th centuries, beginning in Britain, reshaped farming, manufacturing, mining and transport and made mass production possible. After two world wars and the Depression, economists such as Friedrich Hayek and Milton Friedman championed global free trade. The collapse of the Eastern Bloc turned attention to service-based post-industrial societies, and after about 2000 the spread of the internet gave rise to talk of an information economy.
Source: Economy
