s the research and development needed to produce products from natural resources. (A logging company might research ways to use partially burnt wood to be processed so that the undamaged portions of it can be made into pulp for paper. .) Note that education is sometimes included in this sector.
More details about the various phases of economic development follow. As this process was far from being homogeneous geographically, the balance between these sectors differs widely among the various regions of the world.
Ancient timesThe ancient economy was mainly based on subsistence farming. For most people the exchange of goods occurred through social relationships. There were also traders who bartered in the marketplaces. In Ancient Greece, when the word 'economy' arose, many people were bond slaves of the freeholders. Economic discussion was driven by scarcity. Aristotle (384-322 B.C.) was the first to differentiate between a use value and an exchange value of goods. (Politics, Book I.) The exchange ratio he defined was not only the expression of the value of goods but of the relations between the people involved in trade. For most of the time in history economy therefore stood in opposition to institutions with fixed exchange ratios as reign, state, religion, culture and tradition.
Middle agesIn Medieval times, 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 capital (from ventura, ital.; risk) to finance their captures. The capital should be refunded by the goods they would bring up in the New World. Merchants such as Jakob Fugger (1459-1525) and Giovanni di Bicci de' Medici (1360-1428) founded the first banks. The discoveries of Marco Polo (1254-1324), Christopher Columbus (1451-1506) and Vasco de Gama (1469-1524) led to a first global economy. The first enterprises were trading establishments. In 1513 the first stock exchange was founded in Antwerpen. Economy at the time meant firstly trade.
Early modern timesThe 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 duties and taxes in order to protect their national economy. The so-called mercantilism (from mercator, lat.: merchant) was a first approach to intermediate between private wealth and public interest. The secularization in Europe allowed states to use the immense property of the church for the development of towns. The influence of the nobles decreased. The first Secretaries of State for economy started their work. Bankers like Amschel Mayer Rothschild (1773-1855) started to finance national projects such as wars and infrastructure. Economy from then on meant national economy as a topic for the economic activities of the citizens of a state.
The industrial revolutionThe first economist in the true meaning of the word was the Scotsman Adam Smith (1723-1790). He defined the elements of a national economy: products are offered at a natural price generated by the use of competition - supply and demand - and the division of labour. He maintained that the basic motive for free trade is human self interest. The so-called self interest hypothesis became the anthropological basis for economics. Thomas Malthus (1766-1834) transferred the idea of supply and demand to the problem of overpopulation. The United States of America became the place where millions of expatriates from all European countries were searching for free economic evolvement. In Europe wild capitalism started to replace the system of mercantilism (today: protectionism) and led to economic growth. The period today is called industrial revolution because the system of production and division of labour enabled the mass production of goods.
Capitalism and communismStarting in England, simultaneous related processes of mechanization, and the enclosures of the commons, led to increases in wealth for the controllers of capital, and mass poverty, s