John Locke’s Theories & His Contribution to Economics
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Over the past decades, different individuals and economists have made significant contributions in the field of economy. This they have done so based on their theories and ideological genius. One such individual is John Locke who is regarded to have contributed significantly in the field of economics, especially on the topic of demand and supply. Considering this, this paper will focus on John Locke in regards to his economic perceptions and their possible relations to the principle of supply and demand.
To begin with, born 1632 in the 17th century, John Locke is revered as a man of many talents based on his contributions to different fields including the fields of philosophy, physics and economics. Because of this, Locke is increasingly considered as among the highly influential of Enlightenment thinkers and is consequently referred to as the Father of Liberalism based on his liberalistic ideas. He was particularly champion the idea of natural rights, presenting the idea that each individual owns himself and should consequently possess certain liberties which the state or any other individual should not in any way expropriate (Moulds, 1964). In this premise, Locke argued that when an individual labors for a given product, the outcomes of that labor become the individual’s property. In relation to this, Locke developed different theories that increasingly related and contributed to economics. These include the ideas of private property, the theory of value and the concept of the State of Nature that, to an extent, all relate to the principle of demand and supply.
Basing his argument on the labor theory of property, Locke first argued that every individual has a right to property as so long as the individual employs some form of labor in acquiring the property. Under this premise, Locke first believed that each individual was the owner of his/her own life (Panesar, 2000). In essence, he believed in individual liberty derived on his idea of the State of Nature. In his state of nature, Locke reasoned that it was the state of equality under which no individual possesses power over another, and, as such, everyone is free to do as he/she pleases (Smith, 2015a). However, he highlights that this liberty is to a degree restricted as it does not equal the permission to abuse or injure other people and that even in the state of nature their exist natural laws (Smith, 2015a). Here, everyone in the state of nature has the right to execute these natural laws that Locke regards as being universal (Moulds, 1964). It is worth noting that in Locke’s state of nature the government is absent, hence, the presence and significance of the natural laws. Hence, while one is not subject to a government, he/she can still be punished when he/she commits a crime (Moulds, 1964). However, Locke posits that the given punishment should fit the said crime and ensure that the crime is not repeated. Regardless, it is the fact that no one has control of another considering that natural law renders everyone equal that remains significant to Locke’s contribution to economics.
Considering the above, in the world of Locke, having in mind that no one has power over the other, everyone is naturally endowed with particular rights that include the right to liberty, life and property. It is only when people agree to form a commonwealth that they get to leave the state of nature (Smith, 2015a). Nonetheless, the fact that one possesses individual liberty means that they possess the power to control their own labor (Panesar, 2000). Consequently, Locke noted that if an individual controlled his/her own labor, free from the interference of a government or a lord, then this would lead to the individual owning or possessing the product of their labor or work (Henry, 1999). This would subsequently lead to the ownership of private property that would also lead to individuals possessing assets that would consequently lead to the generation of wealth that is independent of a government or a related authority. In this regard, property, as given by Locke, was a natural right drawn from one’s labor and not given by the government (Henry, 1999). At the same time, it was against natural law for another individual to try to limit or control the other’s liberty or even restrict other’s ownership of property(Smith, 2015a). This was because one utilized his/her own individual liberty. In essence, something became one’s private property by virtue of him/her using his/her labor to acquire it as so long as it his/her individual liberty to do so does not interfere with other people (Panesar, 2000). Where he includes the government, Locke notes that its only purpose was to protect one’s fundamental rights including an individual’s right to enjoy his/her fruits of labor. Regardless, labor and individual liberty remained the most important factors in acquiring property.
While Locke believed that the moral foundation of property rights is labor, it is worth pointing out that his labor theory regarding property contradicts the labor theory of value from an economic angle. While according to him the moral basis of acquiring property was labor, Locke was of the opinion that the quantity of labor required to produce a commodity did not ultimately influence its market price (Smith, 2015b). Rather, he perceived that the price of labor is influenced and determined its relative scarcity, which refers to labor’s supply relative to demand as existing in a particular market (Panesar, 2000). Thus, according to Locke, the value of labor is determined by market price in that labor increases the value usefulness of natural resources (Smith, 2015b). For instance, a cultivated land using human labor tends to yield much more products that people find useful to them compared to what an uncultivated land offers. It is this premise that Locke employs to justify the private appropriation of land only when there is enough and both productive and good left for others. Using this premise, he argued that no labor could appropriate or subdue all resources (Henry, 1999). Hence, Locke was of the opinion that even the population of the world during his time could double but still leave a significant amount of land or other common resources not owned for other people to appropriate or use as private property (Smith, 2015b). However, labor itself ensures a high increase of productivity. For instance, when one cultivates a piece of land he does not only decrease its availability but also increases by many folds the goods associated with its production. In retrospect, Locke argued that without land labor, land, for instance, is of insignificant value (Henry, 1999). Whoever, when one applies labor to land, he/she does not decrease but instead increases mankind’s common stock. In this context, land similar to other economic commodities becomes valued primarily because of its utility or usefulness to man.
Following this, Locke focuses on the topic of money while also focusing on the manner in which it counteracts his concept of spoilage limitation. Spoilage limitation, in this regard, posits that an individual may not acquire ownership of an increased amount of natural resources such that some of them go bad before he/she has the opportunity to use them (Smith, 2015b). However, one can expand his/her stock of private property through engaging in batter trade using perishable goods or exchanging the same for long-lasting durable goods such as precious metals. Precious metals were, in this context, commonly accepted as money through which it became possible for an individual to accumulate possibly unlimited amounts of property without a violation of interference with the spoilage limitation (Smith, 2015b). It is worth noting that such a development was particularly vital to land ownership. Before the availability of money, the need to expand landed property was not so much because there was enough for everyone. However, the advent of money ensured that the excess land together with its products could be acquired. Thus, money enabled the availability of an extensive commerce that in turn increased both the supply and demand for commodities.
Looking at the above, one realizes that Locke’s idea of the theory of labor and private property, as well as his idea on money in relation to the same, is connected to the principle of supply and demand. Demand, in this case, can be explained as the degree to which buyers desire or want a product or service. The quantity that one demands refers to the amount of the product that an individual is willing to purchase at a given price. On the other side, supply refers to the amount of product or service that a market can offer. Considering this, Locke’s theory of labor regarding private property relates to the principle of supply and demand in that in the absence of money the demand and supply of commodities were limited as there was enough for everyone. On the other side, the advent of money ensured that people could accumulate more products without violating the spoilage limitation, consequently the advent of the concept of supply and demand. This is because there was enough demand for resources brought about by money and likewise enough supplies to feed the demand.
Considering the above, it is increasingly evident that Locke made significant contributions to the field of economics by noting the advent of supply and demand. He notes that before the advent of money, supply and demand as a concept was inconsequential considering that there were enough resources for everyone and it was illogical for one to accumulate more than they could consume before the goods perish or even to accumulate more without thinking of the others despite having the right to own property. However, the availability of money ensured that people could accumulate more property or products without violating the spillage limitation. The thought that money could enable this created the demand for more property as so long as supply was available. Hence, it is safe to conclude that Locke significantly contributed to the field of economics.