The Doctrines of One Obscure and Heterodox Scholastic
[This article is excerpted from An Austrian Perspective on the History of Economic Thought, vol. 1, Economic Thought Before Adam Smith.]
One nominalist and student of Buridan, Heinrich von Langenstein the Elder (also known as Henry of Hesse) (1325–1397), while an uninfluential and minor scholastic philosopher in his own and later centuries, made great mischief for modern interpretations of the history of economic thought. Langenstein, who taught first at the University of Paris and then at Vienna, began in his Treatise on Contracts by analyzing the just price in the mainstream scholastic manner: just price is the market price, which is a rough measure of the human needs of consumers. This price will be the outcome of individuals" calculations about their wants and values, and these in turn will be affected by the relative lack or abundance of supply, as well as by the scarcity or abundance of buyers.
Having said this, Langenstein proceeded to contradict himself completely. In a highly unfortunate contribution to the history of economic thought, Langenstein urged local government authorities to step in and fix prices. Price fixing would somehow be a better path to the just price than the interplay of the market. Other scholastics had not exactly opposed price fixing; for them, the market price was just whether it was set by the common estimate of the market or by the government. But it was at least implicit in their writings that the free market was a better (or at the very least an equally good) path to discovering the just price. Langenstein was unique in positively advocating government price fixing.
Moreover, Langenstein added another economic heresy. He counseled the authorities to fix the price so that each seller, whether merchant or craftsman, could maintain his status or station in life in the society. The just price was the price which maintained everyone's position in the style to which he had become accustomed — no more and no less. If a seller tried to charge a price to advance beyond his station, he was guilty of the sin of avarice.
Langenstein was the odd man out among the scholastics and late medieval thinkers. No one has been found to second the "station in life" concept of the just price. Indeed St Thomas Aquinas himself effectively demolished this view when he trenchantly declared
In a just exchange the medium does not vary with the social position of the persons involved, but only with regard to the quantity of the goods. For instance, whoever buys a thing must pay what the thing is worth whether he buys from a pauper or a rich man.
In short, on the market prices are the same to all, rich or poor, and furthermore this is a just method of establishing prices. In the bizarre Langenstein view, of course, a wealthy seller of the same product would be obliged to sell it for a far higher price than a poor seller, in which case it is unlikely that the wealthy man would last long in the business.
As far as can be determined, no medieval or renaissance thinker adopted the station-in-life theory, and only two followers adopted the price-fixing position. One was Matthew of Cracow (c. 1335–1410), professor of theology at Prague and later rector at the University of Heidelberg and archbishop of Worms, and particularly Jean de Gerson (1363–1429), nominalist and French mystic who was chancellor of the University of Paris. Gerson, however, ignored the station-in-life notion and reverted to the 13th-century view of John Duns Scotus that the just price is the cost of production plus compensation for labor and risk incurred by the supplier. Gerson therefore urged that the government fix prices to force them to conform to the allegedly just price. Indeed, Gerson was a fanatic on price fixing, advocating that it be extended from its customary sphere in wheat, bread, meat, wine and beer, to embrace all commodities whatsoever. Fortunately, Gerson's view also had little influence.
Von Langenstein was scarcely important in his own or at a later day; his great importance is solely that he was plucked out of well-deserved obscurity by late-19th-century socialist and state-corporatist historians, who used his station-in-life fatuity to conjure up a totally distorted vision of the Catholic Middle Ages. That era, so the myth ran, was solely governed by the view that each man can only charge the just price to maintain him in his presumably divinely appointed station in life. In that way, these historians glorified a nonexistent society of status in which each person and group found himself in a harmonious hierarchical structure, undisturbed by market relations or capitalist greed. This nonsensical view of the Middle Ages and of scholastic doctrine was first propounded by German socialist and state corporatist historians Wilhelm Roscher and Werner Sombart in the late 19th century, and it was then seized upon by such influential writers as the Anglican Socialist Richard Henry Tawney and the Catholic corporatist scholar and politician Amintore Fanfani. Finally, this view, based only on the doctrines of one obscure and heterodox scholastic, was enshrined in conventional histories of economic thought, where it was seconded by the free market but fanatically anti-Catholic economist Frank Knight and his followers in the now highly influential Chicago School.
The much-needed corrective to the older view has at last become dominant since World War II, led by the enormous prestige of Joseph Schumpeter and by the definitive research of Raymond de Roover.