2. The Christian Middle Ages (continued)

0:006. Theologians at the University of Paris Theology in the Middle Ages was the queen of the sciences, that is, the intellectual disciplines offering truth and wisdom. But theology had fallen on bad times during the Dark Ages, and the Roman and canon lawyers were left to apply ethical systems to law and Human Affairs. Theology began to flourish again in the early 12th century at the University of Paris under the famous Peter Abelard. From then on, Paris was the equivalent center for theology during the High Middle Ages that Bologna was for Roman and canon law.

0:47But during the remainder of the 12th century, the theologians were content to ponder and and Workout Metaphysical and Ontological Questions and to Leave Social Ethics to the Jurists. It was typical of 12th century theologians when Peter of Poitiers, later to become the dominant regent of theology at the Cathedral School of Notre Dame in Paris, declared that such doubtful questions as usury should be left to the canon lawyers. After the turn of the thirteenth century, however, when canon and Roman law theories were already far advanced, the new university-trained philosopher-theologians turned to problems of social ethics with a will.

1:36Even before the turn of the thirteenth century, such influential theologians at the University of Paris as Rodolphus Ardent and the Englishman, later Cardinal, Stephen Langton, began to to Write on Problems of Justice. Unfortunately in dealing with the concept of just price, the theologians did not follow the Romanists and Canonists in the sensible view that the free bargaining or market price is legitimate so long as it stays within a broad zone of the just price. To the Paris theologians it was immoral, sinful and illicit for the market price to be anything nothing other than the just price. This of course meant that the just price became a weapon of compulsion instead of a broadly held standard. Ardent included a just price as a crucial criterion of a just sale. More emphatically, his colleague and author of the first constitution of the University of Paris, the Englishman and later Cardinal Robert of Courson, died 1219, writing about 1204, termed selling goods above the just price an illicit practice, and the eminent Stephen Langton sternly called any seller who accepts

3:03more than the just price guilty of a mortal sin. The theologians were well aware of their profound disagreement with the jurists, but clung to to their New and Extreme Views. Thus, William of Auzère, 1160-1229, professor of theology at Paris, in 1220 wrote that divine law which commanded that no sale be higher than the just price, must supersede human law, which followed Laecio Enormous. And his colleague, the Englishman Thomas Chabham, also writing about 1220, fanatically insisted that divine law demanded restitution from the seller, even if the seller were only mistaken and the mistake was only a penny.

3:58If the theologians insisted that the just price must be strictly obeyed, then what in the world was it? While few of the theologians address this critical matter directly, it is clear that what they had in mind was the same just price as the canonists and romanists, namely the current price at the particular place, either the common market or the government fixed price, if such a regulation existed. The late 12th century Paris theologian Peter Cantor, died 1197, in treating the function of royal assessors, asserted that the just value of goods is their current price.

4:44More succinctly, the great Franciscan theologian at Paris in the first half of the 13th century, The Englishman Alexander of Halley's, 1168-1245, declared concisely that a just estimation of the goods is, as it is sold, commonly in that city or place in which the sale occurs. Even more clearly, the renowned 13th century German-Dominican professor at Paris, St. Albert The Great, 1193-1280, put it thus, A price is just which can equal the value of the goods sold according to the estimation of the market place at that time.

5:32While the theologians in wishing to enforce the current common price were more restrictive than the canon or Roman jurists, they did constructive work in rehabilitating the image of the Merchants from the low level to which they had sunk in the writings of the Church Fathers. As late as Peter Lombard died 1160, Italian professor of theology at Paris and later Bishop of Paris, the theologians had held the older view that a merchant could not perform his duties without sinning. The beginning of the full rehabilitation of the merchant came in the form of commentaries on the sentences of Peter Lombard. Strictly, the Sententiarum Quator Libri, 1150-1151.

6:24The commentators, particularly after the turn of the 13th century, engaged in a systematic justification of the merchant and of mercantile profit-making. In the first place, the leading sentence commentators, including the Dominican professors at Paris, St. Albert the Great, Commentary 1244-1249, Peter of Tarentes, later Pope Innocent V, died 1276, Commentary 1253-1257, as well as the Italian theologian at Paris, St. Bonaventure, 1221-1274, a student of Alexander of Halley's, general of the Franciscan order and later cardinal, commentary 1250-1251, all declared that merchants were essential to society.

7:23This conception was strengthened by the rediscovery of the works of Aristotle by the early 13th century and the incorporation of Aristotelian philosophy into theology, first by Albert the Great and most especially by his great student, Thomas Aquinas. To these new Aristotelians and also to the English Franciscan Alexander of Hales, The division of labor was necessary to society, as was the concomitant mutual exchange of goods and services. This was the path of the natural law in society. More specifically, Thomas Chabham, despite his insistence on every penny of the just price, observed correctly that merchants performed the function of taking goods from areas of abundance If trading is a useful and even necessary activity, it follows that profits for maintaining such activity are justifiable.

8:38Hence, the theologians reiterated the 12th century doctrine of the merchant being allowed to gain profits for the support of himself and his family. To the needs justification, the 12th century theologians added the lawful nature of making profits in order to give to charity. The Franciscan Alexander of Hales was perhaps the first to call it a just and pious motive for trading to perform works of charity and mercy. It was unworthy, however, echoing the Hugguchian doctrine to gain profits for the sake of avarice or endless and insatiable cupidity.

9:24If the laborer in the Christian tradition was worthy of his hire, Luke 10 verse 7, then profits from the useful activities of the merchant could be justified as covering his The Theologians' labor consisted of several types, transporting goods, storage and care, and as had come in with the 13th century canonists, the assumption of risk. Its mercantile profits were a payment or reward for the merchant's labor of transportation and storage, and his assumption of risk.

10:16The risk factor was stressed particularly by Alexander of Hales and St. Thomas Aquinas. It should be noted, in contrast to many later historians, that the purpose of the jurists' Robert of Courson was the first 13th century theologian to add a natural law angle to the The traditional, though flimsily grounded, theological denunciations of usury.

11:01Courson simply appropriated the canonist Hugguccio's sophisticated moral distinction between a lease and a loan, with the former being licit and the latter illicit, because ownership of the money had temporarily been shifted to the borrower. More influential was fellow Parisian theologian William of Auxerre, who added a string of new fallacies to the mounting intensity of the Church's assault upon usury. William ranted that usury was intrinsically evil and monstrous, without really explaining why. He also did one better on the standard likening of usury to theft by actually comparing usury to Murder, to the Detriment of the Former.

11:51Killing, he said, can sometimes be licit, since only certain forms of killing are sinful. But usury is sinful everywhere, and can never be licit. Since usury, according to William of Auzère, is sinful by its very nature, this made it and a violation of the natural law, in addition to its other alleged inequities. On why usury was a sin against the natural law, William was unclear. One of his innovative arguments in the anti-usury parade was that a man who charges interest on a loan is trying to sell time, which is properly the common property of all creatures.

12:40Since time is supposed to be common and free, William of Auxerre and later theologians could therefore use this argument to condemn as usury not merely a loan, but also charging a higher price for credit than for cash sales. In adding the free time argument, William unwittingly touched on the later Austrian solution to the problem of pure interest on a riskless loan. The sale not of time, to be sure, but of time preference, where the creditor is selling the debtor money, a present good, a good useful now, in exchange for an IOU for the future, which is a future good, a good only available at some point in the future.

13:32But since everyone prefers a present good to an equivalent future good, the universal and the fact of time preference, the lender will charge and the borrower will be willing to pay interest on a loan. Interest is, then, the price of time preference. The failure of the scholastics to understand or arrive at the concept of time preference was to do more than anything else to discredit scholastic economics because of its implacable Universal Hostility to, and Condemnation of, the Universal Practice of Usury. William of Ozere also tried to grapple with the voluntarist argument.

14:19How could the usury charge be evil and unjust if paid voluntarily by the borrower? In surely one of the silliest arguments in the history of economic thought, William of Bozer conceded that the borrower's payment of interest was voluntary, but added that the borrower would have preferred a free loan still more, so that, in an absolute rather than a conditional sense, the interest charge was not voluntary. William somehow failed to see that the same could be said of the buyer of any product, Since any buyer would prefer a free good to the charge of any price, we could then conclude that all free exchanges are involuntary and sinful in an absolute sense.

15:11Despite the manifest absurdity of this argument, the conditional voluntary as well as the other new arguments of William of Auzère were highly influential and immediately incorporated into The German Dominican St. Albert the Great performed the enormous service to philosophy of bringing Aristotle and Aristotelianism back to Western thought. Born in Bavaria to an aristocratic family, Albert was, for a time, German Provincial of the Dominican Order and Bishop of Regensburg. But for most of his long life he taught at the universities of Paris and Cologne.

15:59Unfortunately Albert was not nearly as good an economist as he was a philosopher, and in many ways he took scholastic economics down the wrong road. It is true that he performed the service of teaching his great pupil, St. Thomas Aquinas, that the just price is the common market price, and that the merchant is performing a legitimate and its legitimate social role. On the other hand, Albert unfortunately added the Aristotelian attack on usury as an unnatural breeding of a barren metal to the accumulated hodge-podge of all the other arguments against interest. St. Albert did not realize that Aristotle's attack on usury was only part and parcel of the latter's denunciation of all retail trade, since the Latin translation of Aristotle available to Albert rendered the Greek term for retail trade as a Latin word meaning money changing.

17:01Hence Albert adopted this argument by mistake, since he would certainly not have gone along with the Aristotelian idea that all retail trade was unnatural and sinful. Albert also did great damage to future thought in another of his misinterpretations of Aristotle's Nicomachean Ethics. Somehow he interpreted the Aristotelian determinant of value not as consumer needs or utility, but as labor and expenses, thus at least partially prefiguring the later labor theory of value. 7. The Philosopher Theologian, St. Thomas Aquinas St. Thomas Aquinas, 1225-1274, was the towering intellect of the High Middle Ages, the man who built on the philosophical system of Aristotle, on the concept of natural law, and on Christian Theology to Forge Thomism, a mighty synthesis of philosophy, theology, and the sciences of man.

18:15This young Italian was born an aristocrat, son of Landolf, Count of Aquino at Rocoseca in the Kingdom of Naples. Thomas studied at an early age with the Benedictines and later at the University of Naples. At the age of 15 he tried to enter the New Dominican Order, a place for church intellectuals and scholars, but was physically prevented from doing so by his parents, who kept him confined for two years. Finally St. Thomas escaped, joined the Dominicans, and then studied at Cologne and finally at Paris under his revered teacher, Albert the Great. Aquinas took his doctorate at the University of Paris and taught there as well as at other university centers in Europe.

19:07Aquinas was so immensely corpulent that it was said that a large section had to be carved out of the round dinner table so that he could sit at it. Aquinas wrote numerous works, beginning with his commentary on Peter Lombard's sentences in the 1250s, and ending with his masterful and enormously influential three-part Summa Theologica, written between 1265 and 1273. It was the Summa, more than any other work, that was to establish Thomism as the mainstream of Catholic scholastic theology in centuries to come. Until recently, historical studies of the just price typically began with St. Thomas, as if the entire discussion had suddenly leapt into being in the ample person of Aquinas in the thirteenth century.

20:05We have seen, however, that Aquinas worked in a long and rich canonist, romanist and theological tradition. It is not surprising that Aquinas followed his revered teacher, St. Albert, and the other theologians of the previous century in insisting on the just price for all exchanges, and not being content with the more liberal legist creed of free bargaining up to the alleged point of l'ecio enormous, in asserting that divine law, which must take precedence over for Human Law, Demands Complete Virtue or the Precise Just Price. Unfortunately, in discussing the just price, St. Thomas stored up great trouble for the future by being vague about what precisely the just price is supposed to be.

21:02As a founder of a system built on the great Aristotle, Aquinas, following St. Albert before

21:38The Austrian aspect of value based on demand and utility was reinstated in economic thought. On the other hand, Aristotle's erroneous view of exchange as equating values was rediscovered, along with the indecipherable shoemaker-builder ratio. Unfortunately, in the course of the commentary to the Nicomachean Ethics, Thomas followed St. Albert in seeming to add to utility as a determinant of exchange value, labor plus expenses. This gave hostage to the later idea that St. Thomas had either added to Aristotle's utility theory of value a cost of production theory, labor plus expenses, or even replaced utility by a cost theory.

22:34Some commentators have even declared that Aquinas had adopted a labor theory of value, capped by the notorious and triumphant sentence by the 20th century Anglican socialist historian Richard Henry Taney. The true descendant of the doctrines of Aquinas is the labor theory of value. The last of the school men is Karl Marx. It has taken historians several decades to recover from 20's disastrous misinterpretation. Indeed, the scholastics were sophisticated thinkers and social economists who favored trade and capitalism, and advocated the common market price as the just price, with the exception of the problem of usury.

23:25Even in value theory, the labor plus expenses discussion in Aquinas is an anomaly. For labor plus expenses, never just labor, appears only in Aquinas' commentary and not in the Summa, his magnum opus. Moreover, we have seen that labor plus expenses was a formula generally used in Aquinas' times to justify the profits of merchants rather than as a means of determining economic value. It is therefore likely that Aquinas was using the concept in this sense, making the sensible point that a merchant who failed in the long run to cover his costs and not to make profits would go out of business.

24:15In addition, there are many indications that Aquinas adhered to the common view of the Churchman of his and previous times that the just price was the common market price. If so, then he could scarcely also hold that the just price equaled cost of production, since the two can and do differ. Thus his conclusion in the Summa was that the value of economic goods is that which comes into human use and is measured by a monetary price, for which purpose money was invented. Particularly revealing was a reply Aquinas made as early as 1262 in a letter to Jacopo da Viterbo, died 1308, a lector of the Dominican monastery in Florence and later Archbishop of Naples.

25:12In his letter, Aquinas referred to the common market price as the normative and just price with which to compare other contracts. Moreover, in the Summa, Aquinas notes the influence of supply and demand on prices. A more abundant supply in one place will tend to lower price in that place, and vice versa. Furthermore, St. Thomas described without at all condemning the activities of merchants in making profits by buying goods where they were abundant and cheap, and then transporting and selling them in places where they are dear. None of this looks like a cost of production view of the just price.

26:02Finally, and most charmingly and crucially, Aquinas, in his great Summa, raised a question that had been discussed by Cicero. A merchant is carrying grain to a famine-stricken area. He knows that soon other merchants are following him with many more supplies of grain. Is the merchant obliged to tell the starving citizenry of the supplies coming soon, and and thereby suffer a lower price. Or is it all right for him to keep silent and reap the rewards of a high price? To Cicero, the merchant was duty-bound to disclose his information and sell at a lower price.

26:48But St. Thomas argued differently. Since the arrival of the later merchants was a future event and therefore uncertain, Aquinas declared Justice did not require him to tell his customers about the impending arrival of his competitors. He could sell his own grain at the prevailing market price for that area, even though it was extremely high. Of course, Aquinas went on amiably, if the merchant wished to tell his customers anyway, that would be especially virtuous. Justice did not require him to do so. There is no starker example of Aquinas's opting for the just price as the current price determined by demand and supply rather than the cost of production, which of course did not change much from the area of abundance to the famine area.

27:49A piece of indirect evidence is that Giles of Lysines died circa 1304, a student of Albert and Aquinas and a Dominican professor of theology at Paris, analyzed the just price similarly and flatly declared that it was the common market price. Giles stressed, furthermore, that a good is properly worth as much as it can be sold for without Coercion or Fraud. It should come as no surprise that Aquinas, in contrast to Aristotle, was highly favorable towards the activities of the merchant. Mercantile profit, he declared, was a stipend for the merchant's labor and a reward for shouldering the risks of transportation.

28:41In a commentary to Aristotle's Politics, 1272, Aquinas noted shrewdly that greater risks in sea transportation resulted in greater profits for merchants. In his commentary to the sentences of Peter Lombard, written in the 1250s, Thomas followed preceding theologians in arguing that merchants could ply their trade without committing sin. But in his later work, he was far more positive, pointing out that merchants perform the important function of bringing goods from where they are abundant to where they are scarce. Particularly important was Aquinas's brief outline of the mutual benefit each person derives from exchange.

29:31As he put it in the Summa, buying and selling seems to have been instituted for the mutual Building on Aristotle's theory of money, Aquinas pointed out its indispensability as a medium of exchange, a measure of expression of values, and a unit of account. In contrast to Aristotle, Aquinas was not frightened at the idea of the value of money It was the peculiar fate of the usury prohibition in the Middle Ages that every time it seemed to be weakening in the face of reality, theorists would strengthen the ban.

30:36At a time when the highly sophisticated and knowledgeable Cardinal Hostiensis was seeking to soften the prohibition, St. Thomas Aquinas unfortunately tightened it once more. Like his teacher, St. Albert, Aquinas added the Aristotelian objection to the medieval will ban on usury, except that Aquinas also inserted something new. In the medieval tradition of starting with the conclusion, the crushing of usury and seizing any odd argument to hand which might lead to it, Aquinas added a new twist to Aristotelian doctrine. Instead of stressing the barrenness of money as a major argument against usury, Aquinas has seized on the term measure and stress that since money, in terms of money, of course, has a fixed legal face value, this means that the formal nature of money must be to remain fixed.

31:41The purchasing power of money can fluctuate due to changes in the supply of goods. That is legitimate and natural. But when the holder of money sets out to produce variations in its value by charging interest, he violates the nature of money and is therefore sinful and mindless of the natural law. That such errant nonsense should swiftly assume a central place in all later scholastic prohibitions is testimony to the way that irrationality can seize the thought of even so great a champion of reason as Aquinas and his followers. Why the fixed legal face value of a coin should mean that its value in exchange, at least from the side of money, should not change, or why the charging of interest should be The theory, which can be confused with a change in the purchasing power of money, simply testifies to the human propensity for fallacy, especially when prohibiting usury had already become the overriding goal.

32:55But Aquinas' argument against usury involved another invention of his own. Money, to him, is totally consumed. It disappears in exchange. Therefore, money's use is equivalent to its ownership. Hence, when one charges interest on a loan, one is charging twice, for the money itself and for its use, although they are one and the same. Highlighting this odd thesis was Aquinas's discussion of why it was legitimate for an of Money to charge rent for someone to display a coin. In that case, there is a bailment, a charge for keeping one's money in trust.

33:44But the reason why this charge is licit for Aquinas is that the display of money is only a secondary use, a use separate from its ownership, since money is not consumed or does not disappear in the process. The primary use of money is to disappear in the purchase of goods. There are several grave problems with this new weapon invented by Aquinas with which to beat usury. First, what is wrong with charging twice for ownership and use? Second, even if somehow wrong, this act scarcely bears the weight of sin and excommunication that that the Catholic Church had loaded for centuries upon the hapless usurer.

34:35And third, if Aquinas had looked beyond the legal formalism of money and at the goods which the borrower purchased with his loan, he might have seen that these purchased goods were, in an important sense, fruitful, so that while the money disappeared in purchases, In an economic sense, the goods equivalent of money was retained by the borrower. St. Thomas's stress on consumption of money led to a curious shift on the usury question. In contrast to all theorists since Gratian, the sin now became not charging interest on on a loan per se, but only on a good, money, that disappears. Therefore, for Aquinas, charging interest on a loan of goods in kind would not be condemned as usury.

35:34But if the usury prohibition on money was tightened with new arguments, Aquinas continued and strengthened the previous tradition of justifying investments in a partnership, Societas. A Societas was licit because each partner retained ownership of his money and ran the risk of loss, hence profit on such risky investments was legitimate. In the late 11th century, Ivo of Chartres had already briefly distinguished a Societas from a usurious loan, and the distinction was elaborated in the early thirteenth century by the theologian Robert of Courson circa 1204 and in John Teutonicus's Gloss on Gracian 1215. Courson had made it clear that even an inactive partner risked his capital in and an enterprise.

36:36This of course meant that types of inactive partnerships such as sea loans for specific voyages slid over into actual loans and the lines were often fuzzy. Besides, and this was a problem that no one at the time would face, wasn't any lender necessarily risking his capital since a borrower could always turn out to be unable to repay Even the Principle of a Loan? Aquinas now lent his enormous authority to the view that the societas was perfectly licit and not usurious. He succinctly declared that the investor of money does not transfer ownership to a working partner.

37:23That ownership is retained by the investor, so that he risks his money and can legitimately The Trouble with this, however, is that Aquinas here abandons his own thesis that the ownership of money is the same thing as its use. For the use of the money was transferred to the working partner, and therefore, on St. Thomas's own grounds, he should have condemned all partnerships, as well as the societas, is illicit and usurious. Confronting a 13th century world in which the societas flourished and was crucial to commercial and economic life, it was unthinkable to Aquinas that he should throw the economy into chaos by condemning this well-established instrument of trade and finance.

38:22Instead of ownership going with the use of a consumable item then, Aquinas now advanced That's the idea of ownership going with incidents of risk. The investor risks his capital, therefore he retains ownership of his investment. A seemingly sensible way out, but flimsy. Not only did Aquinas thereby contradict his own bizarre ownership theory, he also failed to realize that, after all, not all ownership need be particularly risky. Another problem is that the risk-taker is making a profit on the investment of money, which is supposed to be sterile.

39:08Instead of stating that all profit should go to the working partner, St. Thomas explicitly says that the capitalist rightly receives the gain coming thence, that is, from the the use of his money as from his own property. It looks very much as if St. Thomas is here treating money as fertile and productive, providing an independent reward to the capitalist. Yet despite the inner contradictions rife in St. Thomas's treatment of usury and the societas, his entire doctrine continued to be dominant for 200 years. Finally, Aquinas was a firm believer in the superiority of private to communal property and resource ownership.

39:58Private ownership becomes a necessary feature of man's earthly state. It is the best guarantee of a peaceful and orderly society, and it provides maximum incentive for the care and efficient use of property. Thus in the Summa, St. Thomas Keanley writes,

40:40Furthermore, developing the Roman law theory of acquisition, Aquinas, anticipating the famous theory of John Locke, grounded the right of original acquisition of property on two basic factors, labor and occupation. The initial right of each person is to ownership over his own self, in Aquinas' view, in a proprietary right over himself. Each individual's self-ownership is based on the capacity of man as a rational being. Next, cultivation and use of previously unused land establishes a just property title in the land in one man, rather than in others.

41:30St. Thomas's theory of acquisition was further clarified and developed by his close student and Disciple, John of Paris, Jean Quidor, circa 1250-1306, a member of the same Dominican community of Saint Jacques in Paris as Aquinas. Championing the absolute right of private property, Quidor declared that lay property is acquired by individual people through their own skill, labor and diligence, and individuals Individuals as individuals have right and power over it and valid lordship. Each person may order his own and dispose, administer, hold or alienate it as he wishes, so long as he causes no injury to anyone else, since he is Lord.

42:28This homesteading theory of property has been held by many historians to be the ancestor of the Marxian Labor Theory of Value. But this charge confuses two very different things, determination of the economic value or price of a good, and a decision on how unused resources are to go over into private hands. The Aquinas John of Paris Locke view is the labor theory, defining labor as the expenditure of Human Energy, rather than working for a wage, of the origin of property, not a labor theory of value.

43:13In contrast to his forerunner, Aristotle, labor for Aquinas was scarcely to be despised. On the contrary, labor is a dictate of positive, natural and divine law. Aquinas is very much aware that God in the Bible gave the dominion over all the earth to man for his use. Man's function is to take the materials provided by nature and, by discerning natural law, to mold that reality to achieve his purposes. While Aquinas scarcely has any conception of economic growth or capital accumulation, He clearly posits man as active molder of his life.

44:00Gone is the passive Greek ideal of conforming to given conditions or to the requirements of the polis. Perhaps St. Thomas's most important contribution concerned the underpinning or framework of economics rather than strictly economic matters. For in reviving and building on Aristotle, St. Thomas introduced and established in the Christian world a philosophy of natural law, a philosophy in which human reason is able to master the basic truths of the universe. In the hands of Aquinas, as in Aristotle, philosophy, with reason as its instrument of knowledge, became once again the queen of the sciences.

44:48Human reason demonstrated the reality of the universe and of the natural law of discoverable classes of entities. Human reason could know about the nature of the world and it could therefore know the proper ethics for mankind. Ethics then became decipherable by reason. This rationalist tradition cut against the Fideism of the earlier Christian Church, the Debilitating idea that only faith and supernatural revelation can provide an ethics for mankind. Debilitating because if the faith is lost, then ethics is lost as well. Thomism, in contrast, demonstrated that the laws of nature, including the nature of mankind, provided the means for man's reason to discover a rational ethics.

45:45To be sure, God created the natural laws of the universe, but the apprehension of these natural laws was possible whether or not one believed in God as Creator. In this way, a rational ethic for man was provided on a truly scientific rather than on a supernatural foundation. In the subset of natural law theory that deals with rights, St. Thomas led a swing back from the 12th century concept of a right as a claim on others, rather than as an inviolable area of property right, of the dominion of an individual to be defended from all others.

46:32In a brilliant work, Professor Richard Tuck points out that early Roman law was marked by an active property-right dominion view of rights, while the later 12th century Romanists at Bologna converted the concept of right to the passive listing of claims on other men. This passive as opposed to active concept of rights reflected the network of interwoven customary and status claims that marked the Middle Ages. Curse is, in an important sense, the ancestor of the modern assertion of such claim rights as the right to a job, the right to three square meals a day, etc., all of which can only be fulfilled by coercing others to obtain them.

47:25At 13th century Bologna, however, a curseus began a swing back to an active property rights and the natural rights theory, with the property of each individual a dominion which must be defended against all others. Aquinas adopted the idea of a natural dominion without, however, going all the way to a genuine natural rights theory, which asserts that private property is natural and not a convention created by society or government. Aquinas was moved to adopt the dominion theory because of the mighty late thirteenth century ideological battles between the dominican and franciscan orders.

48:11The franciscans, committed to total poverty, claimed that their subsistence use of resources was not really private property. This pleasant fiction enabled the franciscans to claim that in their state of voluntary In contemporary poverty, they had risen above the ownership or possession of property. They maintained, oddly, that purely consumption use of resources, such as they engaged in, did not imply the possession of property. Supposedly the sale or giving away of a resource was necessary to qualify it as property. Self-sufficiency or isolation did not, according to the Franciscan view, allow property to exist.

49:00The rival Dominicans, including Aquinas, understandably upset by this claim, began to insist that all use necessarily implied dominion, the possession and control of resources, and therefore property. 8. Late 13th Century Scholastics, Franciscans and Utility Theory The first victory in the struggle over property right concepts was won by the Franciscans, whose theory was upheld by their protector, Pope Nicholas III, in his bull, Exeot, issued in 1279.

49:47This dominant theory was elaborated by the first great critic of Thomism, the British Franciscan scholastic John Duns Scotus, 1265-1308, professor of theology at Oxford and later at Paris. Aquinas had maintained that neither private nor communal property was a necessary Scotus, on the contrary, boldly maintained that in a state of natural innocence, both natural and divine law decree that all resources be held in common, so that no private property or dominion may exist.

50:34In this supposedly idyllic primitive communism, each person may take what he needs from the common store. Wright's theory was scarcely the only Franciscan deviation from mainline Thomism. As Fideasts, the Franciscans harked back to earlier Christian tradition before it had been superseded by the rationalism of St. Thomas. They began, therefore, to deprecate the idea of irrational ethics, and hence, of natural law. In the matter of rights theory, at least, the Franciscans were soon smashed. Reacting against the Franciscans, Pope John XXII issued his famous bull, Quia Vir Reprobus, 1329.

51:25Quea asserted trenchantly that God's dominion over the earth was reflected in man's dominion or property over his material possessions. Property rights, therefore, were not, as even Aquinas had believed, a product of positive law or social convention. They were rooted in man's nature as created by divine law. Property rights were therefore natural and coextensive with man's actions in the material world. The Franciscans were effectively routed on this point. It was now established, as Richard Tuck puts it, that property was a basic fact about human beings, on which their social and political concepts had to be posited.

52:15In more strictly economic matters, Franciscans could either adhere to or deviate from the mainline Thomist concept of the just price. Scotus himself set forth a deviationist view. In his commentary on Peter Lombard's sentences, Scotus elaborated a minority view that many historians have wrongly attributed to scholasticism as a whole, that the just price was the merchant's The Merchant's cost of production plus compensation for the industry, labor and risk involved in bringing his product to market. The compensation, furthermore, was supposed to provide adequate support for the family of the merchant.

53:02In this way, labor plus expenses plus risk, previously employed to justify whatever profits the merchant might obtain, in 2009, was now transformed into the determinant of the just price. SCOTUS made this cost of production a theory of just price, in contrast to the long-standing mainstream scholastic view that the just price was the common price on the market. Although a Franciscan, the British scholastic at the University of Paris, Richard of Middleton, circa 1249 to 1306, followed the economic doctrine of Aquinas and stressed need and utility as the determinants of economic value. The just price following the main scholastic line was equivalent to the common market price determined by these needs. Middleton also also underlined Aquinas' vitally important concept that both parties to an exchange benefit.

54:11Becoming more precise than Aquinas, Middleton pointed out that, say, when a horse is sold for money, both the buyer and the seller gain from the transaction, since the buyer demonstrates that he needs the horse more than the money, while the seller prefers the money to the In addition to developing this crucial concept of mutual benefit, Richard of Middleton was the first to apply that concept to international trade. International trade, as well as individual exchange, brings mutual benefits. Middleton illustrated this idea by postulating two countries, country A, which has a super for Abundance of Grain but a Dirth of Wine, and Country B which has an abundance of wine but little grain. Both countries will then benefit by exchanging their respective surpluses.

55:11The merchants will also profit by transporting grain from Country A where it is abundant and its price is therefore cheap, to Country B where it is scarce and commands a high price. Merchants will also profit by the reverse traffic, shipping wine from country B, where its price is low, to A, where its price is high. By buying and selling at current market prices, the merchants are trading at the just price, and make a profit, yet exploit no one. The merchants are justly compensated for performing a useful service and for taking trouble and risks. The only point missed by Middleton in this sophisticated analysis is that the actions of the various merchants will move toward equalizing prices in the two countries.

56:06An even more dazzling contribution to economic thought was made by a Provencal Franciscan friar prior, for many years lector at Florence. Pierre de Jean-Olivier, 1248-1298, in Two Treatises on Contracts, one on usury and the other on purchases and sales, pointed out that economic value was determined by three factors, scarcity, raritas, usefulness, virtuositas, Desirability or Desiredness, Complacibilitas. The effect of scarcity, or what we would now call supply, is clear. The scarcer a product, the more valuable it is, and therefore the higher the price. The more abundant the product, the greater the supply, on the other hand, and the lower the value and the price.

57:08Olévy's remarkable contribution was to investigate the previously vague concept of need or utility. Aquinas's student and disciple, the Dominican Giles of Lecine, teaching at the University of Paris, had taken the utility concept a step further by stating that goods are more or less valuable on the market according to the degree of their utility. But now, Olivier separated utility into two parts. One was virtuositas, or the objective utility of a good, the objective power it has to satisfy human wants. But, as Olivier explains, the important factor in determining price is complacibilitas, or subjective utility, the subjective desirability of a product to the individual consumers.

58:08Furthermore, Olavi squarely confronted the paradox of value which would later confound Adam Smith and the classical economists, and did far better than they at solving it. The value paradox is that a good such as water or bread essential to life, and therefore, according to the classical economists, having a high use value, should be very cheap and have a low value on the market. At the same time, in contrast, gold or diamonds, non-essential luxuries and therefore of far The classical economists of the 18th and 19th centuries simply threw up their hands at this paradox and unsatisfactorily posed a sharp dichotomy between use and exchange value.

59:08Olivier, on the other hand, pointed to the solution. Water, though necessary to human life, is so highly abundant and easily available that it commands a very low price on the market, while gold is far more scarce and therefore more valuable. Utility in the determination of price is relative to supply and not absolute. The complete solution to the value paradox had to wait for the Austrian school of the late 19th century. The marginal utility, the value of each unit of a good, diminishes as its supply increases. Thus, a superabundant good, such as bread or water, will have a low marginal utility, while a rare good, such as gold, will have a high one.

1:00:04The value of a good on the market, and therefore its price, is determined by its marginal utility, not the philosophical utility of the good as a whole or in the abstract. But of course, before the Austrians, the marginal concept was lacking. The marketplace for Olivier, then, was an arena in which prices for goods are formed and out of the interaction of individuals with differing subjective utilities and valuations of the good. Just market prices, then, are not determined by referring to the objective qualities of the good, but by the interaction of subjective preferences on the market.

1:00:54In addition to his monumental achievement in being the first to discover subjective of Utility Theory, Olivier was the first to bring into economic thought the concept of capital, capitali, as a fund of money invested in a business venture. The term capital had appeared in numerous business records since the mid-12th century, but this is the first time it was conceptualized. The concept of capital was used by Olivier to show that it was possible to use money in a fruitful way, to gain a profit. Olivier retained the usury ban where capital was invested without being altered in some way by the labor and industry of the investor.

1:01:44However, Olivier was one of the minority of scholastics to adopt the hostiensis allowance of Lucrum Cessans, permitting an interest charge on a loan wherever the profit on an investment was foregone in the process. Unfortunately, Olivier continued Hostianz's careful limitation of confining Lucrum Cessans to loans granted out of charity so that the activities of a professional moneylender could still in no way be justified. It is a notable irony in the history of economic thought that the discoverer of the subjective utility theory, a highly sophisticated analyst of how the market economy worked, a believer in the just price as the common market price, the initiator of the concept of capital and a defender of at least the partial use of lucrum cessans as a way of justifying interest, that this great market thinker should have been the leader of the rigorous wing of the Franciscan order that believed in living in extreme poverty.

1:02:59Perhaps one explanation is that Olivier was born in the highly important market town of Narbonne. He was the main intellectual leader of the spiritual Franciscans, who believed devoutly in Following Faithfully the Rule of Total Poverty Laid Down by the Founder of the Order, St. Francis of Assisi, 1182-1226. It is a further irony that Olivier's opponents, the conventional Franciscans, who believed in a far laxer interpretation of the rule, hurled anathemas at Olivier and other spirituals and managed to destroy many physical as well as intellectual traces of Olivier's work. In 1304, six years after his death, a chapter general of the Franciscan order commanded the destruction of all Olivier's works, and 14 years later the unfortunate Olivier's body was disinterred and his bones scattered.

1:04:02Not only were many physical copies of Olivier's writings destroyed, but it became unhealthy for Franciscans at least to refer to his works. As a result, when, nearly a century and a half later, Olivier's forgotten work was rediscovered by the great Franciscan saint, San Bernardino, Saint Bernardine of Siena, Bernardino thought it prudent not even to refer to the heretic Olivier, even though he used the latter's theory of utility virtually word-for-word in his own work. This reticence was necessary because Bernardino belonged to the strict observant wing of the Franciscans, in a way, descendants of Olivier's spirituals.

1:04:52Indeed, it has only been since the 1950s that the illuminating economic writings of Olivier and their appropriation by San Bernardino have come to light. Perhaps another reason for the hysteria with which the mainstream Franciscans greeted the religious views of Pierre Olivier was his continuing dalliance with the Joachimite heresy. One of the founders of mystical Christian messianism was the Calabrian hermit and abbot Joachim of Fior, 1145-1202. In the early 1190s, Joachim adopted the thesis that there had been in history not just two ages, pre-Christian and post-Christian, but a third age, of which he himself was the prophet.

1:05:46The pre-Christian epoch was the age of the Father of the Old Testament, the Christian era the age of the Son of the New Testament, and now was coming the fulfillment, the new third age, the apocalyptic age of the Holy Spirit, in which history was soon to come to an end. The third age, which for Joachim was to be ushered in during the next half century in of the Early or Mid-13th Century was to be an age of pure love and freedom. The knowledge of God would be revealed directly to all men and there would be no work or property because human beings would possess only spiritual bodies, their material bodies having disappeared.

1:06:35There would be no church or Bible or state, but only a free community of perfect spiritual Seemingly tiny divergences in premises often have grave social and political consequences, and such was true of disagreements among Christians on the apparently recondite question of eschatology, The Science or Discipline of the Last Days Since St. Augustine, the orthodox Christian view has been a millennialist.

1:07:20That is, that there is no special millennium or kingdom of God in human history except the life of Jesus and the establishment of the Christian Church. This is the view of Catholics, of Lutherans, and probably of Calvin himself. The ideological or social conclusion is that Jesus will return to usher in the last judgment and the end of history in his own time, so that there is nothing that human beings can do to speed the last days. One variant of this doctrine is that after Jesus' return, he will launch a thousand years of the kingdom of God on earth before the last judgment.

1:08:05In practical terms, however, there is little of a significant difference here, since Christianity remains in place and there is still nothing man can do to usher in the millennium. The crucial difference comes with teleastic ideas such as those of Joachim of Fior, where not only was the world coming to the end soon, but man must do certain things to usher in in the last days, to prepare the way for the last judgment. These are all post-millennial doctrines, that is, that man must first set up a kingdom of God on earth as a necessary condition either for Jesus' return or for the last judgment.

1:08:54Generally, as we shall see further in the Protestant Reformation, post-millennial views will lead to some form of theocratic coercion of society to pave the way for the culmination of history. For Joachim of Fior, the path to the last days would be blazed by a new order of highly spiritual monks, from whom would come twelve patriarchs, headed by a supreme teacher, who would convert the Jews to Christianity, as foretold in Revelation, and would lead all mankind away from the material and towards the love of things of the Spirit. Then, for a brief, blazing three-and-a-half years, a secular king, the Antichrist, would chastise and destroy the corrupt Christian Church.

1:09:48In view of the radical and potentially explosive nature of Joachim's heresy, it is remarkable that no less than three contemporary popes expressed great interest in his doctrine. By the middle of the 13th century, however, Joachimism was neglected and little known. It is small wonder that the Joachimite heresy was revived by the spiritual Franciscans who were tempted to see in their own flourishing new order and in their devotion to poverty the very monastic order that had been foretold by Joachim to bring about the last days.