MERCHANTS AS FACILITATORS OF EXCHANGE, AND MARKET DYNAMICS IN INTERCITY TRADE
Yet just as individuals are not self-sufficient, neither is one city. Even though the city was formed because individuals could help one another satisfy each other’s needs and could do so better when they lived in close proximity, the location-specific resources available to them will still to some extent be insufficient for their needs (370e). Therefore, they will need to trade with people in other cities. It is therefore impossible that for Plato the aim of a city is self-sufficiency, as Weinstein (2009, 441, 443-44, 449) and Gordon (1975, 28) claim, and as it is for Aristotle (1999, 1:2.1252b27-1253a1); an aim of the early city is interdependence with other cities. Socrates breaks down intercity trade into its component needs and roles. There will need to be “merchants” (371d7), whom Socrates classifies as “agents” (or “servants,” diakonoi, 370e12, 371a10), to bring what is needed from another city. For the first time, Socrates introduces a specialized productive role that does not produce a material object but rather renders a service that others need.
Yet if the merchants have nothing to give foreign producers in return for what the first city’s inhabitants need, they will be given nothing; therefore certain inhabitants (for example, farmers and craftsmen) will have to produce more of the products that those foreigners need than is needed at home—that is, more than domestic consumption demands, a surplus (370e-371a). In addition, to the extent that the inhabitants continue to need what the foreigners produce, they must produce whatever kind and quantity of surplus product will be sufficient for the foreign exchange partners’ needs (371a). Merchants must therefore specialize in both importing and exporting as needed. Their work will in turn make use of sea travel, which will require “multitudes of others who have knowledge of the work related to the sea” (371b1-3). The general insight that seems to lie behind this new role is that distances and physical barriers can themselves be hindrances to exchange and can increase the effort required to obtain what is needed. Certain inhabitants must therefore reduce those costs by specializing in transportation roles (previously, farmers did their own hauling). In sum, the service that merchants, aided by experts in sea travel, have to offer is to facilitate exchanges between distant exchange partners (371a).
In Plato’s time the “art of household management” (oikonomia) was much discussed, taught, and written about, but as Lowry (1987, 12) notes, “[i]t was an administrative, not a market approach, to economic phenomena.” By contrast, Lowry claims, “there is no general discussion of supply and demand in response to impersonal market forces in ancient Greek writings.” Socrates’s analysis of intercity trade, I propose, must be the one exception. Those who consider buying and transporting foreign products for domestic resale must make calculations about aggregate, and therefore impersonal, domestic demand for those products. Similarly, domestic producers and merchants who consider which goods to produce and sell to foreigners must assess aggregate, impersonal demand for a variety of products in another city. Moreover, by breaking intercity trade into its component needs and corresponding productive roles, Socrates explains that and why both the kind and quantity of domestic production vary in response to foreign demand. He even notes the limit on increasing domestic production; once foreigners are satisfied with the “sufficient” amount of a specific import, producers in the early city will produce no more than that and an equilibrium between supply and demand will have been reached, to use the modern terms. This constitutes the first formulation of the part of the law of supply-and-demand concerned with the effect of demand on supply.35 And in all of this, Socrates continues to speak not of their own city or of foreign cities as actors, but only of local and foreign individuals engaging in exchanges where that would be beneficial to both parties.