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conditions and parameters in which an economy functions.HistoryA 640 BC one-third stater coin from Lydia, shown larger.As long as someone has been making and distributing goods or services, there has been some sort of economy; economies grew larger as societies grew and became more complex. The ancient economy was mainly based on subsistence farming. According to Herodotus, and most modern scholars, the Lydianswere the first people to introduce the use of gold and silver coin.It is thought that these first stamped coins were minted around 650-600 BC.For most people the exchange of goods occurred through social relationships. There were also traders who bartered in the marketplaces. The Babylonians and their city state neighbors developed economic ideas comparable to those employed today.They developed the first known codified legal and administrative systems, complete with courts, jails, and government records.Several centuries after the invention of cuneiform, the use of writing expanded beyond debt/payment certificates and inventory lists to be applied for the first time, about 2600 BC, to messages and mail delivery, history, legend, mathematics, and astronomical records. Ways to divide private property, when it is contended, amounts of interest on debt, rules as to property and monetary compensation concerning property damage or physical damage to a person, fines for 'wrong doing', and compensation in money for various infractions of formalized law were standardized for the first time in history.In Medievaltimes, what we now call economy was not far from the subsistence level. Most exchange occurred within social groups. On top of this, the great conquerors raised venture capitalto finance their land captures. The capital investment would be returned to the investor when goods from the newly discovered or captured lands were returned by the conquerors. The discoveries of Marco Polo(1254-1324), Christopher Columbus(1451-1506) and Vasco de Gama(1469-1524) set the foundations for a globaleconomy. The first enterpriseswere trading establishments. In 1513 the first stockexchangewas founded in Antwerpen.The European captures became branches of the European states, the so-called "colonies". The rising nation-states Spain, Portugal, France, Great Britain, and the Netherlands tried to control the trade
through custom dutiesand taxesin order to protect their national economy. Mercantilismwas a first approach to intermediate between private wealth and public interest.The first economistin the true meaning of the word was the Scotsman Adam Smith(1723-1790). He defined the elements of a national economy: productsare offered at a natural pricegenerated by the use of competition- supply and demand- and the division of labour. He maintained that the basic motive for free tradeis human self interest. In Europe, capitalism (see below) started to replace the system of mercantilismand led to economic growth. The period today is called the industrial revolutionbecause the system of productionand division of labour enabled the mass productionof goods.