In his Prolegomena (The Muqaddimah), 'Abd al-Rahman Ibn Muhammad Ibn Khaldun al-Hadrami of Tunis (A.D. 1332-1406), commonly known as Ibn Khaldun, laid down the foundations of different fields of knowledge, in particular the science of civilization (al-'umran). His significant contributions to economics, however, should place him in the history of economic thought as a major forerunner, if not the "father," of economics, a title which has been given to Adam Smith, whose great works were published some three hundred and seventy years after Ibn Khaldun's death. Not only did Ibn Khaldun plant the germinating seeds of classical economics, whether in production, supply, or cost, but he also pioneered in consumption, demand, and utility, the cornerstones of modern economic theory.
Before Ibn Khaldun, Plato and his contemporary Xenophon presented, probably for the first time in writing, a crude account of the specialization and division of labor. On a non-theoretical level, the ancient Egyptians used the techniques of specialization, particularly in the era of the Eighteenth Dynasty, in order to save time and to produce more work per hour. Following Plato, Aristotle proposed a definition of economics and considered the use of money in his analysis of exchange. His example of the use of a shoe for wear and for its use in exchange was later presented by Adam Smith as the value in use and the value in exchange. Another aspect of economic thought before Ibn Khaldun was that of the Scholastics and of the Canonites, who proposed placing economics within the framework of laws based on religious and moral perceptions for the good of all human beings. Therefore all economic activities were to be undertaken in accordance with such laws.
Ibn Khaldun was cognizant of these ideas, including the one relating to religious and moral perceptions. The relationship between moral and religious principles on one hand and good government on the other is effectively expounded in his citation and discussion of Tahir Ibn al-Husayn's (A.D. 775-822) famous letter to his son 'Abdallah, who ruled Khurasan with his descendants until A.D. 872. From the rudimentary thoughts of Tahir he developed a theory of taxation which has affected modern economic thought and even economic policies in the United States and elsewhere.
Labor Theory of Value, Economics of Labor, Labor as the Source of Growth and Capital Accumulation
With the exception of Joseph A. Schumpeter, who discovered Ibn Khaldun's writings only a few months before his death, Joseph J. Spengler, and Charles Issawi, major Western economists trace the theory of value to Adam Smith and David Ricardo because they attempted to find a reasonable explanation for the paradox of value. According to Adam Smith and as further developed by David Ricardo, the exchange value of objects is to be equal to the labor time used in its production. On the basis of this concept, Karl Marx concluded that "wages of labour must equal the production of labour" and introduced his revolutionary term surplus value signifying the unjustifiable reward given to capitalists, who exploit the efforts of the labor class, or the proletariat. Yet it was Ibn Khaldun, a believer in the free market economy, who first introduced the labor theory of value without the extensions of Karl Marx.