Bab 1.

Assumptions About Human Behavior: A Historical Perspective

Feudalism and capitalism

All economic systems are characterized by basic social relations between those who exercise authority
and those who obey it and between those who own the means of production and those who do not. An
examination of the historical development of these social relations will give us an idea of the underlying
assumptions about human behavior that have characterized business, economics, and accounting.

We will begin by contrasting capitalism with the feudal order that it replaced. This is extremely relevant
because the change from feudalism to capitalism has been the major change in modern times. All other
revolutions pale by comparison. Then, we will contrast the assumptions about human behavior that
characterized the early stages of capitalism with those of the advanced stages that characterized the
United States and over Western countries in the 1980s.

The Feudal system

By the end of the fifteenth century, a political, social, and economic order was coming to a close in
Europe. Known as feudalism, this socioeconomic order was defined by a series of social relations based
on status derived from lineage and age. In medieval Europe, a man was a serf or a lord, a merchant into
which he was born, rather than on merit.

Land and labor were not objects of commerce, both were communized in medieval Europe. Ownership
of land passed from a lord to his heir, and trading in real estate was rare. Serts were part of the estate;
they had the right to live on the land and to work it.

Guilds were unions of artisans. The guild system – the center of “industrial” production – was also
steeped in tradition. A man became a carpenter or a glassblower because that is the work his father did.

Masters elected their own guild government and set their own work rules. They set wage rates, output
standards, and working conditions. They regulated social conduct and expected guild members to dress
in an appropriate manner and to be involved in civic affairs. In short, guilds were concerned with both
the economic and noneconomic dimensions of life.

The guilds of the Middle Ages wanted to preserve an orderly way of life, so they regulated behavior at
work and in the community. To maintain the status quo, guilds shunned innovation and technological
change. They worked to prevent the formation of monopolies by sharing techniques and technology.
The avoided competition by limiting entry into the guild and regulating advancement from apprentice to
journeyman t master. The guilds set the terms of sale and expected their members to adhere to those
term. Advertising was prohibited. Guild members, who owned the means of production, were expected
to take pride in their work.
The idea was to maintain one’s position in life., rather than to enhance it. There was not a clear-cut
distinction between one’s social and economic life. People did not “make a living” – the work was an
end in itself.

The rise of industrial society

The steam engine, invented by James Watt in 1776, could mark the beginning of the Industrial
Revolution and the decline of the guilds. It allowed for the beginning of the factory system, as opposed
to cottage industries where people worked at home. The steam engine freed people as a source of
energy. That is, it enable an energy source to be established anywhere because it used inanimate energy
and could be moved. Before the steam engine, water, wind, and animals were used as power sources.

The factory used large numbers of workers who operated machines driven by inanimate power. Each
worker had his or her specific role to play in the manufacturing process. This was much different than
work done by guild members, who completed an entire job with their own tolls in their own workshop.

The factory relied on the availability of wage laborers – free labor class unknown in medieval Europe.
The availability of this labor pool developed over time as the result of other economic events. One of the
more important events was the enclosure movement in England.

The demand for wool led to the development of sheep farming, which resulted in the land being
enclosed – or fenced off – for the grazing needs of the animals. These enclosures drove large numbers of
serfs, who previously worked the land, off the estates into the cities. This movement created an
impoverished working class with nothing to sell but their labor. The great migration to the cities also
caused the standards in guilds – indeed, the entire guild system – to break down because there was too
much labor competing with guilds.

Thus, the enclosure movement transformed the serfs who remained on the land into peasants and the
serfs who left the land into a free, mobile, property less labor class that robbed the guilds of their
former power. Moreover, the enclosure movement change the perception of land use – with the advent
of an industrial society, land became acceptable as an object of commerce. Up until the time of the
French Revolution in1789, landed estate (land, buildings, equipment, and serfs) was a source of social
privilege. The process by which landed estate change from common land to private land took a long
time. It represented a new idea: that land, as property, could be owned. In medieval Europe, land was
held but never owned.

Another major change was the development of a new middle class. Merchants now stood between
procedures and consumers. The rise of this entrepreneurial class was also necessary for the
development of capitalism. (hal 45)