Aristotle vs. Plato: The classical origins of capitalist & socialist political economies*
| Published date | 01 September 2023 |
| Author | Theocharis Grigoriadis |
| Date | 01 September 2023 |
| DOI | http://doi.org/10.1111/sjpe.12339 |
School of Business & Economics & Institute
of East European Studies, Freie Universität
Berlin, Berlin, Germany
Correspondence
Theocharis Grigoriadis, School of Business
& Economics & Institute of East European
Studies, Freie Universität Berlin, Garystr. 55,
D-14195 Berlin, Germany.
Email: theocharis.grigoriadis@fu-berlin.de
Abstract
Competing definitions of justice in Plato's Republic and
Aristotle's Politics indicate the existence of two distinct
economic systems with different priorities. The three-class
society of the Platonic economy (guardians, auxilia-
ries, producers) gives rise to guardians who by virtue are
expected to enforce output targets on producers directly or
through auxiliaries. The three-class society of the Aristote-
lian economy (rich, middle, poor) facilitates the emergence
of different ruling coalitions and compensates the efficiency
losses of central planning with political gains derived from
representative governance. In the Aristotelian economy, the
middle class is better off than in the Platonic economy (auxil-
iaries), because a just society (polity) is achieved under its
coalition with the rich. I argue that the equilibrium solutions
of the Platonic and Aristotelian economic systems provide
analytical insights on the origins of capitalist and socialist
political economies.
KEYWORDS
Aristotle, central planning, economic systems, market mechanism,
Plato, political regimes
JEL CLASSIFICATION
D63, P11, P14, P16, P21, P26, P52
ORIGINAL ARTICLE
Aristotle vs. Plato: The classical origins of capitalist
& socialist political economies*
Theocharis Grigoriadis
DOI: 10.1111/sjpe.12339
Received: 22 October 2021 Accepted: 20 October 2022
*Thanks are due to the Editor and one anonymous reviewer for useful comments and suggestions. I am also grateful to Nikolaus Wolf and Giacomo Corneo
for their insightful feedback on earlier drafts of this paper. All remaining errors are mine.
372
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and
reproduction in any medium, provided the original work is properly cited.
© 2022 The Authors. Scottish Journal of Political Economy published by John Wiley & Sons Ltd on behalf of Scottish Economic Society.
Scott J Polit Econ. 2023;70:372–390.wileyonlinelibrary.com/journal/sjpe
GRIGORIADIS 373
1 | INTRODUCTION
The comparative study of capitalism and socialism has been underpinned by the role of informational asymmetries in
the fulfillment of planned production targets and the centrality of principal-agent models in explaining the comparative
advantages of the market mechanism over central planning (Weitzman, 1974, 1976). Moreover, resource alloca tion
defined by impartiality, priority and solidarity introduces a novel concept of fairness, where egalitarian distribution
may be the compromise outcome between the equal-resource and the equal-outcome rules (Moreno-Ternero &
Roemer, 2006). As the authors argue, impartiality, priority and solidarity can be fulfilled in a society that maximizes
the welfare of either its ablest or its disablest agent (ibid.). This is why social welfare maximization is achieved when
the allocation of resources occurs through an equalisandum that corresponds to an index of both resources and
outcomes (ibid.). Lawless societies reach competitive equilibrium solutions based on the initial distribution of power
among their agents (jungle equilibrium as per Piccione & Rubinstein, 2007); the difference between an exchange and
a jungle economy lies in the existence of involuntary exchange driven by coercion in the jungle (ibid.). In his integrated
theory of justice and economic development, Roemer (2013) proposes the definition of an opportunity-equalizing
economic development measured along two dimensions: the average income level of those more disadvantaged in
society, and the effect of differential effort rather than circumstances on total income inequality. The political econ-
omy of egalitarianism underscores the difference between resource and welfare egalitarianism (Moreno-Ternero &
Roemer, 2012). While Dworkin's (1981a, 1981b) resource egalitarianism reflects randomly distributed characteristics
and, for that matter, endowments, Roemer (1985a) suggests that it is efficient to implement welfare rather than
resource egalitarianism.
The origins of the comparison between Platonic and Aristotelian regime types on the one hand and the strategic
organization of economic systems on the other are to be found both in the divergent reception of Plato and Aristotle
in the capitalist and socialist camps of the Cold War and the central role of formal contract theory in modeling hierar-
chical institutions. Both Plato and Aristotle advocate the rise of strictly stratified societies, whose primary goal is the
maximization of collective welfare. This is also a key prerogative in the design of economic systems and it has led to
differentiated approaches toward redistribution and the role of political-economic hierarchies in providing it. While
both Platonic and Aristotelian economies assume the existence of hierarchical production processes, the monitoring
monopoly of the guardians is in contrast with class competition in the formation of government. The emergence of
different possible coalitions between the rich, the middle and the poor and the tradeoff between expropriation by
the poor and rent-seeking by the rich render Aristotle's Politics the analytical core for the analysis of redistributive
politics in modern democracies. Similarly, the absence of institutional alternative to the guardians constitutes the
core of authoritarian welfare regimes of Soviet or Chinese style, whose governance reaches its optimal form in Plato's
Republic.
Hence, the regimes of politeia (Plato) and polity (Aristotle) embody two distinctive concepts of distributive justice.
Politeia constitutes the Pareto-optimal equilibrium of a vertically organized authoritarian regime; the principal-agent
relationship between the guardians and the producers leads to the equilibrium solution of politeia under conditions
of high effort by producers and overcommitment toward the common good by guardians. In the Platonic economy
equilibrium, democracy and tyranny are corner equilibrium solutions, which arise as a result of the producers' low
effort and the high share of guardians and/or auxiliaries in society. Furthermore, oligarchy and timocracy assume the
fulfillment of production plan by the producers; however, in both cases there is underprovision of the public goods,
because competent (oligarchy) or incompetent (timocracy) guardians exhibit low levels of commitment toward the
common good. Polity reflects the distributive commitment of the rich toward the common good, which may be
achieved only jointly with the middle class. In the Aristotelian economy equilibrium, tyranny, oligarchy and democ-
racy signal the abstinence of the poor from the fulfillment of the optimal production target. While democracy is the
outcome of the political disenfranchisement of the poor that rule in coalition with the middle class, tyranny and
oligarchy are regime types of an underperforming economic system that offers differential degrees of punishment on
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