An Austrian Perspective on the History of Economic Thought
2. The Christian Middle Ages
2.1 The Roman law: property rights and laissez-faire
2.2 Early Christian attitudes towards merchants
2.3 The Carolingians and canon law
2.4 Canonists and Romanists at the University of Bologna
2.5 The canonist prohibition of usury
2.6 Theologians at the University of Paris
2.7 The philosopher-theologian: St Thomas Aquinas
2.8 Late thirteenth century scholastics: Franciscans and utility theory
2.9 Notes
2.1 The Roman law: property rights and laissez-faire
One of the most powerful influences in the legal and political thought and institutions of the Christian West during the Middle Ages was the Roman law, derived from the Republic and Empire of ancient Rome. Roman law classically developed in the first to the third centuries AD. Private law developed the theory of the absolute right of private property and of freedom of trade and contract. While Roman public law theoretically allowed state interference in the life of the citizen, there was little such interference in the late Republic and early Empire. Private property rights and laissez-faire were therefore the fundamental heritage of the Roman law to later centuries, and much of it was adopted by countries of the Christian West. Though the Roman Empire collapsed in the fourth and fifth centuries, its legal heritage continued, as embodied in two great collections of the Roman law: influential in the West, the Theodosian Code, promulgated by the Emperor Theodosius in 438 AD and in the East the great four-volume Corpus Juris Civilis, promulgated by the Byzantine Christian Emperor Justinian in the 530s.
Both collections emphasized strongly that the ‘just’ price (justum pretium) was simply any price arrived at by free and voluntary bargaining between buyer and seller. Each man has the right to do what he wants with his property, and therefore has the right to make contracts to give away, buy, or sell such property; hence, whatever price is freely arrived at is ‘just’. Thus in the Corpus, several leading Roman jurists of the third century quoted the early second century jurist Pomponius in a classic expression of the morality of laissez-faire: ‘In buying and selling natural law permits the one party to buy for less and the other to sell for more than the thing is worth; thus each party is allowed to outwit the other’; and ‘it is naturally permitted to parties to circumvent each other in the price of buying and selling’. The only problem here is the odd phrase, ‘the thing is worth’, which assumes that there is some value other than free bargaining that expresses some ‘true worth’, a phrase that would prove to be an unfortunate harbinger of the future.
More specifically, the Theodosian Code was crystal-clear: any price set by free and voluntary bargaining is just and legitimate, the only exception being a contract made by children. Force or fraud, as infringements on property rights, were of course considered illegal. The code held explicitly that ignorance of the value of a good by either buyer or seller was insufficient ground for authorities to step in and rescind the voluntarily agreed contract. The Theodosian Code was carried forward in western Europe, e.g. the Visigothic law set forth in the sixth and seventh centuries, and the Bavarian law of the early eighth century. Bavarian law added the explicit provision that a buyer may not rescind a sale because he later decides that the agreed price was too high. This laissez-faire aspect of the Theodosian Code later became incorporated into Christian canon law by being included in the collection of ‘capitularies’ (decrees) by St Benedictus Diaconus in the ninth century AD.
While the Justinian Corpus, promulgated in the East, was equally devoted to laissez-faire, it included a minor element that was later to grow and justify attacks upon free bargaining. As part of the Justinian discussion of how courts can appraise property for payment of damages, the code mentioned that if a seller has sold his property for less than half ‘the just price’, then he suffers ‘great loss’ (laesio enormis), and the seller is then entitled either to get back the difference between the original price and the just price from the buyer, or else get his property back at that original price. This clause was apparently meant only to apply to real estate and to compensations for damages, where authorities must somehow assess the ‘true’ price, and it had no influence on the laws of the next centuries. But it was to yield unfortunate effects in the future.
2.2 Early Christian attitudes towards merchants
Roman law was not the only influence on economic ideas in the Middle Ages. Ambivalent attitudes in the early Christian tradition also proved highly important.
Economic matters were of course scarcely central to either the Old or New Testament, and scattered economic pronouncements are contradictory or subject to ambivalent interpretation. Fulminations against excessive love of money do not necessarily imply hostility to commerce or wealth. One remarkable aspect of the Old Testament, however, is its repeated, almost pre-Calvinist, extolling of work for its own sake. In contrast to the contemptuous attitude toward labour of the Greek philosophers, the Old Testament is filled with exhortations in favour of work: from the ‘be fruitful and multiply’ of Genesis to ‘Enjoy life in your toil at which you toil under the sun’ of Ecclesiastes. Oddly, these calls to labour are often accompanied by admonitions against the accumulation of wealth. Later, in the second century BC, the Hebrew scribe who wrote the Apocryphal book Ecclesiasticus goes so far as to extol labour as a sacred calling. Manual workers, he writes, ‘keep stable the fabric of the world, and their prayer is in the practice of their trade’. Yet the pursuit of money is condemned, and merchants are habitually treated with deep suspicion: ‘A merchant can hardly keep from wrong doing, and a tradesman will not be declared innocent of sin’. And yet, in the same book of Ecclesiasticus, the reader is instructed not to be ashamed of profit or success in business.
The attitude of the early Christians, including Jesus and the Apostles, toward work and trade was coloured by their intense expectation of the imminent end of the world and of the coming of the Kingdom of God. Obviously, if one expects the impending end of the world, one is inclined to have little patience for such activities as investing or accumulating wealth; rather the tendency is to act as the lilies of the field, to follow Jesus, and forget about mundane matters. It was in this context that we must understand St Paul’s famous ‘the love of money is the root of all evil.’
By approximately 100 AD, however, the books of the New Testament written by St John make it clear that the Christian Church had abandoned the idea of the imminent end of the world. But the Hellenistic and the Gospel heritage fused to lead the early Church Fathers into a retreatist view of the world and its economic activities, combined with fulminations against wealth and merchants who tend to amass such wealth. The Church Fathers railed against mercantile activities as necessarily stamped with the sin of greed, and as almost always accompanied by deceit and fraud. Leading the parade was the mystical and apocalyptic Tertullian (160–240), a prominent Carthaginian lawyer who converted late in life to Christianity and eventually formed his own heretical sect. To Tertullian, attack on merchants and money-making was part and parcel of a general philippic against the secular world, which he expected at any moment to founder on the shoals of excess population, so that the earth would soon suffer from ‘epidemics, famines, wars, and the earth’s opening to swallow whole cities’ as a grisly solution to the overpopulation problem.
Two centuries later, the fiery St Jerome (c.340–120), educated in Rome but also influenced by the eastern Fathers, took up the theme, proclaiming the fallacy that in trade, one man’s gain must be achieved by means of the other man’s loss: ‘All riches come from iniquity, and unless one has lost, another cannot gain. Hence that common opinion seems to me to be very true, ‘the rich man is unjust, or the heir of an unjust one”. And yet there was another, contradictory strain even in Jerome, who also declared that ‘A wise man with riches has greater glory than one who is wise only’, for he can accomplish more good things; ‘wealth is not an obstacle to the rich man who uses it well’.
Probably the most intelligent attitude toward wealth and money-making among the early Church Fathers was that of the Athenian-born eastern Father Clement of Alexandria (c. 150–215). While Clement counselled that property be used for the good of the community, he endorsed private property and the accumulation of wealth. He attacked as foolish the ascetic ideal of divesting oneself of one’s possessions. As Clement wisely put it, employing a natural law theme:
We must not cast away riches which can benefit our neighbor. Possessions were made to be possessed; goods are called goods because they do good, and they have been provided by God for the good of men: they are at hand and serve as the material, the instruments for a good use in the hand of him who knows how to use them.
Clement also took a hard-nosed attitude toward the rootless poor. If living without possessions was so desirable, he pointed out,
then that whole swarm of proletarians, derelicts and beggars who live from hand to mouth, all those wretched cast out upon the streets, though they live in ignorance of God and of his justice, would be the most blessed and the most religious and the only candidates for eternal life simply because they are penniless...
The early Church Fathers culminated in the great Saint Augustine (354– 430) who, living at the time of the sack of Rome in 410 and of the collapse of the Roman Empire, had to look ahead to a post-ancient world which he was greatly to influence. Born in Numidia in Africa, Aurelius Augustinus was educated in Carthage, and became a professor of rhetoric in Milan. Baptized a Christian at the age of 32, St Augustine became bishop of Hippo in his native North Africa. The Roman Empire under Constantine had embraced Christianity a century earlier, and Augustine wrote his great work, The City of God, as a rebuttal to the charge that the embrace of Christianity had resulted in the fall of Rome.
Augustine’s economic views were scattered throughout The City of God and his other highly influential writings. But he definitely, and presumably independently of Aristotle, arrived at the view that people’s payments for goods, the valuation they placed on them, was determined by their own needs rather than by any more objective criterion or by their rank in the order of nature. This was at least the basis of the later Austrian theory of subjective value. He also pointed out that it was the common desire of all men to buy cheap and to sell dear.
Furthermore, Augustine was the first Church Father to have a positive attitude towards the role of the merchant. Rebutting the common patristic charges against the merchants, Augustine pointed out that they perform a beneficial service by transporting goods over great distances and selling them to the consumer. Since, according to Christian principle, ‘the labourer is worthy of his hire’, then the merchant too deserved compensation for his activities and labour.
To the common charge of endemic deceit and fraud in the mercantile trades, Augustine cogently replied that any such lies and perjuries were the fault not of the trade but of the trader himself. Such sins originated in the iniquity of the person, not in his occupation. After all, Augustine pointed out, shoemakers and farmers are also capable of lies and perjuries, and yet the Church Fathers had not condemned their occupations as being per se evil.
Clearing the merchants of the stain of inherent evil proved enormously influential in the following centuries, and was quoted time and again in the flowering of Christian thought in the twelfth and thirteenth centuries.
A less tangible but still important contribution to social thought was St Augustine’s recasting of the ancient world’s view of the human personality. To the Greek philosophers, the individual personality was to be moulded to conform to the needs and desires of the polis. Dictation by the polis necessarily meant a static society, with discouragement directed towards any innovating entrepreneurs trying to break out of the contemporary mould. But St Augustine’s stress was on the individual’s personality unfolding itself and therefore progressing over time. Hence Augustine’s profound emphasis on the individual at least set the stage indirectly for an attitude favourable to innovation, economic growth and development. That aspect of Augustine’s thought, however, was not really stressed by the thirteenth century Christian theologians and philosophers who built on Augustine’s thought. It is ironic that the man who set the stage for optimism and a theory of human progress should, on his death-bed, find the barbarian hordes besieging his beloved city of Hippo.
If St Augustine looked benignly on the role of the merchant, he was also favourable, though not as warmly, towards the social role of rulers of state. On the one hand, Augustine took up and expanded Cicero’s parable demonstrating that Alexander the Great was simply a pirate writ large, and that the state is nothing but a large-scale and settled robber band. In his famous City of God, Augustine asks:
And so if justice is left out, what are kingdoms except great robber bands? For what are robber bands except little kingdoms? The band also is a group of men governed by the orders of a leader, bound by a social compact, and its booty is divided according to a law agreed upon. If by repeatedly adding desperate men this plague grows to the point where it holds territory and establishes a fixed seat, seizes cities and subdues people, then it more conspicuously assumes the name of kingdom, and this name is now openly granted to it, not for any subtraction of cupidity, but by addition of impunity. For it was an elegant and true reply that was made to Alexander the Great by a certain pirate whom he had captured. When the king asked him what he was thinking of, that he should molest the sea, he said with defiant independence: ‘The same as you when you molest the world! Since I do this with a little ship I am called a pirate. You do it with a great fleet and are called emperor’.1
Yet Augustine ends by approving the role of the state, even though it is a robber band on a large scale. For while he stressed the individual rather than the polis, in pre-Calvinist fashion Augustine emphasized the wickedness and depravity of man. In this fallen, wicked and sinful world, state rule, though unpleasant and coercive, becomes necessary. Hence, Augustine supported the forcible crushing by the Christian Church in North Africa of the Donatist heresy, which indeed believed, in contrast to Augustine, that all kings were necessarily evil.
The likening of the head of state to a large-scale brigand, however, was resurrected in its original anti-state context by the great Pope Gregory VII, in the course of his struggle with the kings of Europe over his Gregorian reforms in the late eleventh century. This strain of bitter anti-statism, then, emerges from time to time in the early Christian era and in the Middle Ages.
2.3 The Carolingians and canon law
‘Canon law’ was the law governing the Church, and during the early Christian era and the Middle Ages the intertwining of Church and state often meant that canon law and state law were one and the same. Early canon law consisted of papal decretals, decrees of church councils, and the writings of the Church Fathers. We have seen that later canon law also incorporated much of the Roman law. But canon law also included something else basically pernicious: the decrees and regulations (‘capitularies’) of the Carolingian Empire in the latter eighth and ninth centuries.
From the fifth to the tenth centuries, the economic and political chaos of the Dark Ages prevailed throughout Europe, and there was consequently little or no room for the development of political, legal or economic thought. The only exception was the activities of the Carolingian Empire, which burgeoned in western Europe. The most important Carolingian Emperor was Charlemagne (742–814) and his rule devolved on to his successors during the remainder of the ninth century. In capitulary after capitulary, Charlemagne and his successors laid down detailed regulations for every aspect of economic, political and religious life throughout the empire. Many of these regulations became incorporated into the canon law of later centuries, thereby remaining influential well after the crumbling of the Carolingian Empire itself.
Charlemagne built his despotic network of regulations on a shaky foundation. Thus the important Church council of Nicaea (325) had forbidden any clergymen from engaging in any economic activities leading to ‘shameful gain’ (turpe lucrum). In his council at Nijmegen (806) Charlemagne revived, greatly broadened and imposed the old doctrine of turpe lucrum. But now the prohibition was extended from the clergy to everyone, and the definition broadened from fraud to all greed and avarice, and included any disobedience of Charlemagne’s extensive price regulations. Any market deviations from these fixed prices were accused of being profiteering by either buyers or sellers and hence turpe lucrum. As a corollary, all speculative buying and selling in foodstuffs was prohibited. Moreover, in foreshadowing the English common law prohibition of ‘forestalling’, any sale of goods outside and at higher prices than the regular markets was prohibited. Since the English common law was motivated, not by a misguided attempt to aid the poor but in order to confer monopoly privileges on local owners of market sites, it is highly probable that Charlemagne, too, was trying to cartelize markets and confer privileges on market owners.
Every arbitrary price decree of the Carolingian officialdom was of course revered by the Carolingians as the ‘just price.’ Probably this coerced price was often near what had been a customary or current price in the neighbourhood; otherwise it would be difficult to conceive how the Carolingian officials would discover what price was supposed to be just. But this meant a futile and uneconomic attempt to freeze all prices on the basis of some past market status quo.
The problem, then, is that later canon law incorporated the idea of the just price as being the state-decreed price. The banning of any price higher than the current market price was reimposed by the late Carolingian Emperor Carloman in 884, and incorporated into the canon law collection of Regino of Prum in 900, and over a century later into that of Burchard of Worms.
Remarkably, the two contradictory legal strains: the laissez-faire theme of the Theodosian Code, and the statist Carolingian motif, both found their way into the great collection at the basis of the medieval discipline of the canon law: that of Bishop Ivo of Chartres, at the turn of the twelfth century. There, in the same collection, we find the view that the just price is any price voluntarily arrived at by buyer and seller, and also the contradictory view that the just price is one decreed by the state, especially if it be the common price in general markets.
2.4 Canonists and Romanists at the University of Bologna
The High Middle Ages were established by the commercial revolution of the eleventh to thirteenth centuries, in which trade, production and finance flourished, living standards rose markedly, and the institutions of commercial capitalism developed in western Europe. With the advent of economic growth and prosperity, canon and Roman law, learning and social thought, also began to flourish once again.
The fountainhead and great centre of both canon and Roman law studies during the High Middle Ages was the University of Bologna, in Italy, flourishing from the early twelfth century to the latter part of the thirteenth. During those two centuries, both canon and Roman law, including the Justinian Code, were revived at Bologna, influenced each other, and penetrated to the rest of western Europe.
The great and definitive collection of canon law, the Decretum, was published around the year 1140 by the Italian monk, Johannes Gratian, who founded canon law studies at the University of Bologna. The Decretum was the definitive canon law work from that point on, and for the remainder of the twelfth century Bolognese scholars, known as the decretists, elaborated, discussed, and wrote glosses on Gratian’s work.
Gratian himself and his early glossators took a traditional zealous anti-merchant position. Speculation, buying cheap to sell dear – purely mercantile activities – were turpe lucrum and inevitably involved fraud.
The first decretist to begin to take an intelligent position on the activities of the merchant was Rufinus, a professor at Bologna who later became bishop of Assisi and then archbishop of Sorrento. In his Summa (1157–59) to the Decretum, Rufinus pointed out that artisans and craftsmen could buy materials cheaply, work on them and transform them, and then sell the product at a higher price. This form of buying cheap and selling dear was justified by the craftsmen’s expenses and labour, and is permissible even to the clergy as well as to the laity. However, another activity, practised by the pure merchant or speculator, who buys cheap and sells dear without transforming the product is, according to Rufinus, absolutely forbidden to the clergy. The lay merchant, however, could honourably engage in these transactions provided that he had either made heavy expenditures or was fatigued by hard labour. But a pure entrepreneurial cheap purchase to be followed by a sale when market prices were higher was condemned unconditionally by Rufinus.
This partial rehabilitation of the merchant by the decretists was included in the important Summa of 1188 of Huguccio, professor at Bologna, later chosen bishop of Ferrara. Huguccio repeated the views of Rufinus, but shifted the justification of the merchant from labour or expenses to actions that provide for the needs of the merchant’s family. Huguccio’s stress, then, was not on objective costs but on the subjective intentions of the merchant, supposing that they could be discovered: was it mere greed or was it a desire to fulfil his family’s needs? Clearly, Huguccio allowed considerable room for mercantile activities.
Moreover, Huguccio began a radical reconstruction of Patristic teachings about private property. From the time of Huguccio, private property was to be considered a sacrosanct right derived from the natural law. The property of individuals and communities was, at least in principle, supposed to be free from arbitrary invasion on the part of the state. As ‘moderator and arbiter’ of his own goods, an individual owner could use and dispose of them as he saw fit, provided that he did not violate general legal rules. A ruler could only expropriate the property of an innocent subject if ‘public necessity’ required it. This, of course, was a hole in the system of rights, since ‘public necessity’ could be and was an elastic concept. But this concept of private property was an enormous advance over patristic teachings.
After the late twelfth century, the decretist movement in canon law gave way to the decretalists, who based themselves on a stream of papal edicts or decretals, from the late twelfth to the thirteenth century. Since the pope is supreme in the Catholic Church, the decretals pronounced by him and his Vatican curia automatically became incorporated into the body of canon law. In this way, canon law came to differ from that of Gratian and the Decretists, who built the law chiefly on ancient sources. But the new decretals were scarcely arbitrary; they built on and elaborated previous canon law. The continuity of the building process was greatly aided by the fact that several of these popes were former Bolognese. Thus, Pope Alexander III (Roland Bandinelli), who initiated the new decretal process and who enjoyed a long papal reign from 1159 to 1181, had studied both law and theology at Bologna, was probably a professor there, and had direct contact with the great Gratian. A distinguished legal scholar, who himself had written an early Summa to Gratian’s Decretum, Alexander became cardinal and chancellor before being elected to the papacy. Another significant papal decretalist, Pope Innocent II (Lothaire de Segni), who reigned from 1198 to 1216, had studied canon law under Huguccio at Bologna. Finally, Pope Gregory IX (Ugolino de Segni), a pontiff from 1227 to 1241, commissioned and published the momentous Decretals in 1234, incorporating Gratian’s Decretum of a century before in addition to the various papal decretals. Gregory IX’s Decretals became the standard work of canon law from that point on.
The decretalists had a far more favourable attitude towards merchants and the free market than had the early decretists. In the first place, instead of the negative patristic attitude toward merchants and trade, the decretalists, beginning with Pope Alexander III and continuing through Gregory IX, incorporated the free market attitude of the Roman law. Unfortunately, it was not the pure laissez-faire attitude of the Theodosian or even Justinian law. For when the Justinian Code came to Bologna and western Europe at the beginning of the twelfth century, the French author of the Brachylogus took up the laesio enormis principle of the Justinian Code and greatly changed its meaning. Instead of applying the concept of ‘just price’ differing from the actual price to the assessment of damages as in the Justinian Code, the Brachylogus expanded the concept from real estate to all goods, and from assessing damages to actual sales. In the hands of the Brachylogus, if any sale, even a voluntary one, had been made at less than half the ‘just price’, the seller could present the buyer with the choice: either pay me the difference between the sale price and the just price, or else rescind the contract, with the buyer returning the goods and the seller returning the payment. It has been pointed out that this was not a cartelizing device, since neither third parties nor the state could step in to enforce laesio enormis; the enforcement had to be done on a charge made by the seller himself.
The Roman law developing during the twelfth and thirteenth centuries was largely the product of the University of Bologna, where Roman law studies had been founded by Irnerius in the late eleventh century. In the mid-twelfth century, the Bolognese Roman jurists began to incorporate the broader concept of laesio enormis of the Brachylogus. About 1150, the Provençal Lo Codi, a popular adaptation of a recent Bolognese Summa, added another fateful expansion of laesio enormis. For the first time, this Provençal work included buyers as well as sellers as suffering from laesio enormis, when the sale price was significantly higher than the just price. In the Lo Codi, if a buyer had paid more than twice the true value, or just price, of a product, then the seller had the option either to pay the buyer the difference between the just and the sale price, or else rescind the contract. Remarkably, when the Lo Codi was translated back into Latin, this new extended restriction on laissez-faire was added to the Roman law, particularly by Albericus, professor of Roman law at Bologna, in his canon law collection at the end of the twelfth century.
The burgeoning principle of laesio enormis reached its final extension in the late twelfth century work of the Bolognese-trained Petrus Placentinus. Placentinus lowered the maximum permissible price to 1.5 times the just price, beyond which the principle of laesio enormis went into effect. This final expansion was incorporated into the works of the three great Bolognese Roman law professors of the thirteenth century: Azo (c.1210); Azo’s highly influential student and follower Accursius (c.1228–60), a native of Florence; and the culmination of the Bolognese school in Odofredus, in the mid-thirteenth century.
While it is true that the twelfth and thirteenth century Romanists took the trivial concept of laesio enormis and made it a significant restriction on freedom of bargaining and laissez-faire, at least by the late twelfth century they also made clear that there was to be full freedom of bargaining and freedom to outwit the other, within the matrix of laesio enormis. The decretalists, beginning with Pope Alexander III, incorporated much of this developing Roman law. This meant that Church law now included not only the patristic fulminations against merchants per se, but also the contrasting Romanist tradition of full freedom of bargaining within the laesio enormis matrix. The decretalists reached their culmination, after building on and glossing the Decretals of Gregory IX, in the works of Cardinal Henricus Hostiensis de Segusio, first in the late 1250s and finally in 1271, the year of his death. Hostiensis had studied canon and Roman law at Bologna, had taught in England and France and was cardinal-archbishop of Ostia.
The decretalists justified speculative buying and selling, freeing it from the sin of turpe lucrum, by adopting and expanding the Huguccian line that speculation was permissible if the speculator was acting to fulfil the needs of his family. In the Gloss of the French Dominican canonist William of Rennes (c. 1250), this area of freedom was broadened still further. A merchant’s or speculator’s actions were not considered sinful unless he was driven by ‘a wanton desire for having temporal riches, not for necessary use or utility, but for curiosity, so that the fancy is charmed by such, just as a magpie or a crow is enticed by coins, which they discover and hide away’. Surely this kind of stricture, which can only apply to a few persons in the real world, had come very far from the patristic denunciations of merchants and traders per se.
Another loosening of restrictions came with Alanus Anglicus, an English-born professor of canon law at Bologna, writing in the first two decades of the thirteenth century. Alanus declared that no turpe lucrum (or usury, for that matter) could exist if the future price of a good was uncertain in the mind of the merchant. Not only is uncertainty always present in the market, but also it is impossible for outside courts or authorities to prove that a merchant did not feel uncertain when he bought or sold. In effect, all turpe lucrum restrictions on trade or speculation had now been removed.
In analysing business profits, the later thirteenth century canonists added to the older justification of profit as covering labour plus expenses. This was the element of risk, present in every business situation. Increase of price as a consequence of risk was first justified in the prominent canon law commentaries of Pope Innocent IV (Sinibaldo Fieschi), published between 1246 and 1253. Before becoming pope, Innocent had been a native of Genoa and a student of Roman and canon law at Bologna, a professor of Roman law at that university, and finally a cardinal and a famous statesman.
If transactions were to be sinful and illegal beyond a certain zone above or below the just price, then the Church and the authorities had to find some way of figuring out what the just price was supposed to be. This had not been a problem before the twelfth and thirteenth centuries, since the doctrine of laesio enormis had not really been applied before. The Romanist and canonist solution, reminiscent of Carolingian doctrine, was that the just price was the going, current, common market price (the communis aestimatio). This meant either the competitive, general market price as contrasted to single isolated transactions, or it could refer to prices fixed by governments or government-privileged guilds, since such controls, by strict legality, would be the going de jure price. Perhaps it would have been beneath the dignity of these jurists to sanction or even recognize any black market prices that violated such regulations.
Placentinus used this criterion in late twelfth century Roman jurisprudence, as did in particular Azo in the early thirteenth. Azo was liberal enough to refer to the price of a sale equalling that of any other comparable sale as being a ‘just price’, but Accursius, and after him Odofredus, explicitly referred to the general or common market price as being the standard of justice. As Accursius put it, ‘a thing was valued at that for which it could be commonly sold’.
The canon lawyers adopted the same criterion for the just price. Influenced by Carolingian practice, and by hints from the sixth century Rule of St Benedict, the late twelfth century canonist and student of Gratian, Simon of Bosignano, first described the true value of goods as the price for which they commonly sold. The same position was then taken by the decretalists in the thirteenth century. Canonists and Romanists alike were now agreed on the common price of a good as the just one.
But still the developed canonists of the thirteenth century had a problem. On the one hand, they had adopted the Roman law view that all free bargaining was legitimate except for a zone more than a certain degree above or beyond the ‘just price’, which they held to be the going, common market price. But on the other hand, they had inherited from the Church Fathers and the earlier decretists a hostility toward mercantile, especially speculative, transactions. How could they square this contradiction?
Partly, as we have seen, they were able to weaken the extent of shameful speculation. Also, from the thirteenth century on, the Church and its canon lawyers largely solved the problem through the highly sensible doctrine of the ‘two forums’ over which the Church exercised jurisdiction. The ‘external forum’ – the jus fori – judged the social activities of Christians in public ecclesiastical courts. There the courts judged offences against the Church and her common law in much the same procedures as the secular courts. On the other hand, the ‘internal forum’ – the jus poli – was the confessional, in which the priest judged individual Christians on the basis of their personal relation to God. The two forums were separate and distinct, the respective judgements on two different levels. While the Church presumed to rule over both, the one was external and social, the other private and personal.
The doctrine of the two forums enabled the canonists to resolve the seeming contradiction in canon law. The free-bargaining, laesio enormis, common market principle was the realm of external law and the open court, where, in other words, a roughly free market could prevail. On the other hand, the strictures against mercantile profits going beyond labour, costs, and risk were a matter not for the state and external law, but for conscience in the confessional. Even more obviously for the confessional alone were the injunctions against trade or speculation based on avarice as going beyond honourable need to support one’s family. Clearly, only the man himself, internally in his conscience, could know his intentions; they were scarcely observable by external law.
2.5 The canonist prohibition of usury
The great relaxation of moral and legal restrictions and prohibitions against trade that permeated the canonists and Romanists in the Middle Ages, unfortunately did not apply to the stern prohibitions levelled against usury. Modern people think of ‘usury’ as very high interest rates charged on a loan, but this was by no means the meaning until recent times. Classically ‘usury’ means any rate whatsoever charged on a loan, no matter how low. The prohibition of usury was a prohibition against any interest charge on a loan.
With one exception, no one in the ancient world – whether in Greece, China, India or Mesopotamia – prohibited interest. That exception was the Hebrews who, in an expression of narrow tribal morality, permitted charging interest to non-Jews but prohibited it among Jews.
The fierce medieval Christian assault on usury is decidedly odd. For one thing, there is nothing in the Gospels or the early Fathers, despite their hostility to trade, that can be construed as urging the prohibition of usury. In fact, the parable of the talents in Matthew (25:14–30) can easily be taken as approval for earning interest on commercial loans. The campaign against usury begins with the first Church council, in Nicaea in 325, which itself prohibited only the clergy from charging interest on a loan. But the Nicene council grabbed on to one phrase of Psalm 14 in the Old Testament, ‘Lord, who shall dwell in thy tabernacle? He that hath not put out his money to usury’, and this was to become the favourite – and virtually the only – biblical text against usury during the Middle Ages. The Nicene injunctions were repeated in later fourth century councils at Elvira in Spain and at Carthage, and then in the fifth century Pope Leo I extended the prohibition to the laity as well, condemning lay usurers as indulging in turpe lurcum. Several local councils in Gaul in the seventh century repeated Leo’s denunciation, as did Pope Adrian and several English church synods in the eighth century.
But the prohibition of all usury enters secular legislation for the first time in the all-embracing totalitarian regime of the Emperor Charlemagne. At the fateful imperial synod of Aachen in 789, Charlemagne prohibited usury to everyone in his realm, lay and cleric alike. The prohibition was renewed and elaborated in the later council at Nijmegen in 806, where usury is defined for the first time, as an exchange where ‘more is demanded back than what is given’. So that, from the time of Charlemagne, usury was intensely held to be a special and particularly malevolent form of turpe lucrum, and attempts to relax this ban were fiercely resisted. The sweeping definition, ‘more demanded than what is given’, was repeated intact by canonists from the tenth century Regino of Prum through Ivo of Chartres to Gratian.
But oddly, though the hostility towards usury continued and was indeed greatly strengthened among the canonists, the explicit basis for the antagonism changed considerably. During the first centuries of the Christian era, usury was shameful as a form of avarice or lack of charity; it was not yet considered a vicious sin against justice. As commerce began to revive and flourish in eleventh century Europe, indeed, denouncing interest-taking as a form of lack of charity began to be considered wide of the mark, since charity had little to do with commercial loans. It was the Italian monk St Anselm of Canterbury (1033–1109) who first shifted the ground of attack to rail against usury as ‘theft’. This new doctrine was developed by St Anselm’s disciple Anselm of Lucca, a fellow Italian and native of a city with a burgeoning textile industry. In his collection of canons, made about 1066, Anselm of Lucca explicitly condemned usury as theft and a sin against the Seventh Commandment, and demanded restitution of usuries to the borrower as ‘stolen goods’. This expansion of ‘theft’ to a voluntary contract where no coercion was used was surely bizarre, and yet this outrageous new concept caught hold and was repeated by Hugh of St Victor (1096–1141) and by the collections of Ivo of Chartres.
In 1139, the second lateran council of the Church explicitly prohibited usury to all men, laity as well as clergy, and held all usurers to be infamous. The council vaguely declared that the Old and New Testaments mandated such a prohibition, but gave no explicit reference. Nine years later, Pope Eugene III moved against the common practice of monasteries charging interest on mortgages.
Finally, the canon law reached mature form with the Decretum of Gratian. Gratian hammers away against usury with whatever weapons he can find from Psalm 14 to the new view that usury is theft and therefore requires restitution. Expounding on the strict prohibition of usury, Gratian extended it to the loan of goods as well as money, so long as anything is demanded beyond the principal, and he expressly declared that, in such a case, the ‘just price’ was not the common market price but zero, i.e. the exact equivalent of the goods or money lent.
The great decretalist Pope Alexander III might have been inclined towards a free market in other areas, but on the usury question he merely deepened and extended the ban, applying the condemnation to charging higher prices for credit than for cash sales. This practice was denounced as implicit usury, even though it was not explicitly interest on a loan. The third lateran council, presided over by Pope Alexander III in 1179, condemned usury, and excommunicated and denied Christian burial to all manifest usurers. The next pope, Urban III (1185–87), in his decretal Consoluit, dredged up a previously unused citation from Jesus, ‘Lend freely, hoping nothing thereby’ (Luke 6: 35), which from then on became the centrepiece of the theological condemnation of usury as a mortal sin; and not only that: even the very hope of obtaining usury was supposed to be a virtually equivalent sin.
So pervasive was the canonist obsession with usury that Gratian, his predecessors and his successors, largely worked out their theories of sale, profit, or just price in terms of whether or not any particular transaction fell under the dread rubric of ‘usury’. Thus, late twelfth century decretists like Simon of Bosignano in 1179 and the great Huguccio in 1188, maintained the strict prohibition of any interest charged on a loan as usury, while allowing the renting of a good or buying cheap in order to sell dear as not being cases of usury. Huguccio’s tortured moral distinction maintained that a commodatum – a rental contract that transferred only the use of a good – was somehow morally very different from a mutuum – a pure loan where ownership was transferred for a time. Charging for a lease, a commodatum was all right because the owner retains ownership and charges for the use of his own good; but somehow it becomes sinful when a lender charges for the use of a good which he no longer (temporarily) owns. Profits on trade, too, could be legitimate and lawful as a reward for risk, but interest on a loan – where the risk is borne by the borrower and not the lender – was always usury.
The later decretalists, attempting to combat practices of merchants in disguising usury in various contracts, pressed on to condemn such contracts as ‘implicit usury’, provided, as we have seen in treatment of sales contracts, that there is no uncertainty on the future price in the minds of buyer and seller. The early thirteenth century canonist Alanus Anglicus declared that if there was uncertainty in such a contract, and buyer and seller stood equal chance to gain or lose, usury did not exist. Providing the first real, if small, loophole in the sweeping prohibition against usury, Anglicus explained that this form of implicit usury could exist only in the mind and could not be subject to legal enforcement. This uncertainty loophole was widened slightly in the Decretals of Gregory IX.
On the other hand, the canonists persisted in cracking down on evasions of the usury ban which the market kept creatively inventing. Contracts providing for deferred payment on a sale were treated with suspicion, and very high prices in such a contract were taken by the canonists to prove intent to commit usury beyond a reasonable doubt. The Decretals also went so far as to condemn creditors charging interest for loans to travelling merchants, even though the canonists realized that the interest was a direct compensation for risks. Although canonists after Innocent IV began to talk of risks justifying profits, so that a profit on risky investments was considered perfectly justified, any interest on a pure loan (or mutuum) was condemned as usury despite reasonably mitigating circumstances.
The usury prohibition was the tragic flaw in the economic views of medieval jurists and theologians. The prohibition was economically irrational, depriving marginal borrowers and high credit risks of any borrowed capital whatever. It had no groundwork in natural law and virtually none in Old or New Testament teachings. And yet it was clung to fiercely throughout the Middle Ages, so that jurists and theologians had to engage in ingenious and artful twists in reasoning in order to make exceptions from the prohibition and to accommodate the growing practice of lending money and charging interest on a loan. And yet the medievalists, especially the later philosophers and theologians, had a fascinating and important point: for what was the moral or economic justification for interest on a pure loan? As we will see, medieval scholastics came to understand full well the economic and moral justifications for almost every aspect of interest charges: as an implicit profit on risk, as an opportunity foregone for making profits on investments, and many others. But why is there still interest charged on a simple, riskless, non-opportunity-foregone loan? That answer was not to come fully until the Austrian School of the late nineteenth century. Where the scholastics were gravely lacking was in not realizing that if interest was paid as well as charged voluntarily, that in itself is sufficient moral justification. And further that there must have been an economic explanation, even though economic science had not yet discovered it.
The first systematic breach in the usury prohibition came with the last of the thirteenth century canonists, Cardinal Hostiensis. In addition to having been a distinguished law professor, Hostiensis was a worldly cosmopolite, having been the ambassador of Henry III to his friend Pope Innocent IV. First Hostiensis reverted to the old milder tradition that usury is uncharitable, but not a sin against justice. Then he listed no less than 13 instances in which the usury prohibition could be broken and interest charged on a loan. One is as surety required by the guarantor of a loan; another that a seller may charge a higher price for a good sold on credit than for cash, provided that there is uncertainty (as indeed there always is) about the future price of the commodity. Another important exception allowed a creditor to write a penalty clause into a loan so that the debtor would have to pay a penalty above the principal if he did not repay on the date due. This of course paved the way for covert agreement on both sides to delay payment so as to allow the ‘penalty’. Another exception was that the creditor might charge for labour which he undertook in making the particular loan.
These were all some form of penalty or special payment. But, in addition, Hostiensis provided the first path-breaking argument for charging a rate of interest on a loan from the very beginning, a charge that does not involve delay or guarantees. This is lucrum cessans (profit ceasing), a legitimate interest charge by the creditor to compensate him for profit foregone in investing the money himself. In short, lucrum cessans anticipated the Austrian concept of opportunity cost, of income foregone, and applied it to the charging of interest. Unfortunately, however, Cardinal Hostiensis’s use of lucrum cessans was limited to non-habitual lenders who lend money out of charity to a debtor. Thus lenders could not be in the business of charging money on a loan, even on the ground of lucrum cessans.
Another exception made by Hostiensis also provided an open channel for the charging of interest on loans. He allowed the debtor to give a free gift to the creditor, so long as the ‘gift’ was not required by the creditor. But in that case debtors, in particular Florentine bankers who received deposits, felt obliged to make ‘gifts’ to their depositors, else the depositors would shift their funds to competitors who habitually made such ‘gifts’. The making of a fake gift became an important mechanism in allowing the de facto charging of interest.
2.6 Theologians at the University of Paris
Theology, in the Middle Ages, was the queen of the ‘sciences’: i.e. 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 twelfth century at the University of Paris, under the famous Peter Abelard. From then on, Paris was the equivalent centre for theology during the High Middle Ages that Bologna was for Roman and canon law. But during the remainder of the twelfth century, the theologians were content to ponder and work out metaphysical and ontological questions and to leave social ethics to the jurists. It was typical of twelfth 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. Even before the turn of the thirteenth century, such influential theologians at the University of Paris as Radulphus Ardens and the Englishman – later Cardinal – Stephen Langton, began 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 other than the just price. This of course meant that the just price became a weapon of compulsion instead of a broadly held standard. Ardens 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 Courçon (d. 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 more than the just price guilty of a mortal sin.
The theologians were well aware of their profound disagreement with the jurists, but clung to their new and extreme views. Thus, William of Auxerre (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 laesio enormis. 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.
If the theologians insisted that the just price must be strictly obeyed, then what in the world was it? While few of the theologians addressed 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 twelfth century Paris theologian Peter Cantor (d. 1197), in treating the function of royal assessors, asserted that the just value of goods is their current price. More succinctly, the great Franciscan theologian at Paris in the first half of the thirteenth century, the Englishman Alexander of Hales (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 thirteenth century German Dominican professor at Paris, Saint 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’.
While 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 (d. 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– 51). The commentators, particularly after the turn of the thirteenth 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, 1244–49), Peter of Tarentaise (later Pope Innocent V, d. 1276) (Commentary, 1253–57), as well as the Italian theologian at Paris, St Bonaventure (1221–74) a student of Alexander of Hales, general of the Franciscan Order and later cardinal (Commentary, 1250–51), all declared that merchants were essential to society. This conception was strengthened by the rediscovery of the works of Aristotle by the early thirteenth 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 labour 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 and distributing them to areas of deficiency. Albert the Great repeated this insight later in the thirteenth century.
If trading is a useful and even necessary activity, it follows that profits for maintaining such activity are justifiable. Hence the theologians reiterated the twelfth century doctrine of the merchant being allowed to gain profits for the support of himself and his family. To the needs justification, the twelfth 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 Huguccian doctrine – to gain profits for the sake of avarice or endless and insatiable cupidity.
If the labourer in the Christian tradition was ‘worthy of his hire’ (Luke 10:7), then profits from the useful activities of the merchant could be justified as covering his ‘labour’, or rather his labour and expenses as the jurists had already declared. Aquinas considered the earnings of the merchant a stipend for labour. For the theologians, ‘labour’ consisted of several types: transporting goods; storage and care; and – as had come in with the thirteenth century canonists – the assumption of risk. Thus mercantile profits were a payment or reward for the merchant’s labour of transportation and storage, and his assumption of risk. The 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’ and theologians’ discussions of labour, cost, and risk was not to use these factors in determining the just price (which was simply the current common price) but to justify the profits obtained by the merchant.
Robert of Courçon was the first thirteenth century theologian to add a natural law angle to the traditional though flimsily grounded theological denunciations of usury. Courçon simply appropriated the canonist Huguccio’s sophistical 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. Killing, 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 Auxerre, is sinful by its very nature, this made it a violation of the natural law in addition to its other alleged iniquities.
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. Since 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). But since everyone prefers a present good to an equivalent future good (the universal 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 hostility to and condemnation of the universal practice of ‘usury’.
William of Auxerre also tried to grapple with the voluntarist argument: how 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 Auxerre 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.
Despite the manifest absurdity of this argument, the ‘conditional’ voluntary as well as the other new arguments of William of Auxerre were highly influential and immediately incorporated into the standard theological arguments against usury.
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.
Unfortunately, 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 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 realise 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’. Hence, 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 Nichomachean Ethics. Somehow he interpreted the Aristotelian determinant of value not as consumer needs or utility, but as ‘labour and expenses’, thus at least partially prefiguring the later labour theory of value.
2.7 The philosopher–theologian: St Thomas Aquinas
St Thomas Aquinas (1225–74) 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. This young Italian was born an aristocrat, son of Landulph, count of Aquino at Rocco Secca 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 centres in Europe. Aquinas 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. We 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 laesio enormis, in asserting that divine law, which must take precedence over 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. As a founder of a system built on the great Aristotle, Aquinas, following St Albert before him, felt obliged to incorporate the Aristotelian analysis of exchange into his theory, with all the ambiguities and obscurities that that entailed. St Thomas was clearly an Aristotelian in adopting the latter’s trenchant view that the determinant of exchange value was the need, or utility, of consumers, as expressed in their demand for products. And so, this proto-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 (Nichomachean) Ethics, Thomas followed St Albert in seeming to add to utility, as a determinant of exchange value, labour 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 (labour plus expenses), or even replaced utility by a cost theory. Some commentators have even declared that Aquinas had adopted a labour theory of value, capped by the notorious and triumphant sentence by the twentieth century Anglican socialist historian Richard Henry Tawney: ‘The true descendant of the doctrines of Aquinas is the labour theory of value. The last of the Schoolmen is Karl Marx.’2
It has taken historians several decades to recover from Tawney’s disastrous misinterpretation. Indeed, the scholastics were sophisticated thinkers and social economists who favoured trade and capitalism, and advocated the common market price as the just price, with the exception of the problem of usury. Even in value theory, the labour plus expenses discussion in Aquinas is an anomaly. For labour plus expenses (never just labour) appears only in Aquinas’s Commentary and not in the Summa, his magnum opus.3 Moreover, we have seen that labour plus expenses was a formula generally used in Aquinas’s 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.
In addition, there are many indications that Aquinas adhered to the common view of the Churchmen 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 equalled 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 (d. 1308), a lector of the Dominican monastery in Florence and later archbishop of Naples. In 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.
Finally, 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 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. But 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, but 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).
A piece of indirect evidence is that Giles of Lessines (d. c.1304), a student of Albert and Aquinas and a Dominican professor of theology at Paris, analysed 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 favourable towards the activities of the merchant. Mercantile profit, he declared, was a stipend for the merchant’s labour, and a reward for shouldering the risks of transportation. In 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. As he put it in the Summa: ‘buying and selling seems to have been instituted for the mutual advantage of both parties, since one needs something that belongs to the other, and conversely’.
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 fluctuating on the market. On the contrary, Aquinas recognized that the purchasing power of money was bound to fluctuate, and was content if it fluctuated, as it usually did, more stably than did particular prices.
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. At 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 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 seized on the term ‘measure’ and stressed 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. The 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 arrant nonsense should swiftly assume a central place in all later scholastic prohibitions of usury 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 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.
But Aquinas’s 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 owner 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. But 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 the Catholic Church had loaded for centuries upon the hapless usurer. And 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 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’.
But 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 eleventh 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 Courçon (c. 1204), and in John Teutonicus’ Gloss on Gratian (1215). Courçon had made it clear that even an inactive partner risked his capital in an enterprise. This 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 principal of a loan?
Aquinas now lent his enormous authority to the view that the societas was perfectly licit and not usurious. He succintly declared that the investor of money does not transfer ownership to a working partner; that ownership is retained by the investor; so that he risks his money and can legitimately earn a profit on the investment. 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, as illicit and usurious. Confronting a thirteenth 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.
Instead of ownership going with the use of a consumable item, then, Aquinas now advanced the idea of ownership going with incidence 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. Instead of stating that all profit should go to the working partner, St Thomas explicitly says that the capitalist rightly receives the ‘gain coming thence’, i.e. from 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. Private 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 keenly writes: ‘every man is more careful to procure what is for himself alone that that which is common to many or to all since each one would shirk the labour and leave to another that which concerns the community, as happens where there are a great number of servants’.
Furthermore, 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: labour and occupation. The initial right of each person is to ownership over his own self, in Aquinas’s view in a ‘proprietary right over himself’. Such individual 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. St Thomas’s theory of acquisition was further clarified and developed by his close student and disciple, John of Paris (Jean Quidort, c.1250–1306), a member of the same Dominican community of St Jacques in Paris as Aquinas. Championing the absolute right of private property, Quidort declared that lay property
is acquired by individual people through their own skill, labour and diligence, and 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.
This ‘homesteading’ theory of property has been held by many historians to be the ancestor of the Marxian labour 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 ‘labour theory’ (defining ‘labour’ as the expenditure of human energy rather than working for a wage) of the origin of property, not a labour theory of value.
In contrast to his forerunner Aristotle, labour for Aquinas was scarcely to be despised. On the contrary, labour 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 mould that reality to achieve his purposes. While Aquinas scarcely has any conception of economic growth or capital accumulation, he clearly posits man as active moulder of his life. Gone 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. Human 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. To 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 twelfth 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. In a brilliant work, Professor Richard Tuck4 points out that early Roman law was marked by an ‘active’ property right/dominion view of rights, while the later twelfth 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. This 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.
At thirteenth century Bologna, however, Accursius began a swing back to an active property 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. The 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 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. The 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.
2.8 Late thirteenth 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 Exiit, issued in 1279. This 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 feature of the state of nature, so that one condition was no more natural than the other. 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. In this supposedly idyllic primitive communism, each person may take what he needs from the common store.
Rights theory was scarcely the only Franciscan deviation from mainline Thomism. As fideists, 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 a rational 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). Quia 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’.5
In 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 cost of production plus compensation for the industry, labour and risk involved in bringing his product to market. The compensation, furthermore, was supposed to provide adequate support for the family of the merchant. In this way, labour plus expenses plus risk, previously employed to justify whatever profits the merchant might obtain, 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 (c. 1249–1306), 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 underlined Aquinas’s vitally important concept that both parties to an exchange benefit. Becoming 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 horse.
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 superabundance of grain but a dearth of wine, and country B which has an abundance of wine but little grain. Both countries will then benefit by exchanging their respective surpluses. The 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.
An even more dazzling contribution to economic thought was made by a Provençal Franciscan friar, for many years lector at Florence. Pierre de Jean Olivi (1248–98), 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); and 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, the lower the value and the price.
Olivi’s remarkable contribution was to investigate the previously vague concept of need or utility. Aquinas’s student and disciple, the Dominican Giles of Lessines, 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 Olivi 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 Olivi explains, the important factor in determining price is complacibilitas, or subjective utility, the subjective desirability of a product to the individual consumers.
Furthermore, Olivi 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 lower use-value, have far higher exchange value on the market. The classical economists of the eighteenth and nineteenth centuries simply threw up their hands at this paradox and unsatisfactorily posed a sharp dichotomy between use- and exchange-value. Olivi, 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 nineteenth 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. The 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 Olivi, then, was an arena in which prices for goods are formed 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.
In addition to his monumental achievement in being the first to discover subjective utility theory, Olivi was the first to bring into economic thought the concept of capital (capitale) as a fund of money invested in a business venture. The term ‘capital’ had appeared in numerous business records since the mid-twelfth century, but this is the first time it was conceptualized. The concept of capital was used by Olivi to show that it was possible to use money in a fruitful way, to gain a profit. Olivi retained the usury ban where capital was invested without being altered in some way by the labour and industry of the investor. However, Olivi 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, Olivi continued Hostiensis’ careful limitation of confining lucrum cessans to loans granted out of charity, so that the activities of a professional money-lender 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 rigourist wing of the Franciscan order that believed in living in extreme poverty. Perhaps one explanation is that Olivi 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 Olivi’s opponents, the Conventual Franciscans, who believed in a far laxer interpretation of the rule, hurled anathemas at Olivi and other Spirituals and managed to destroy many physical as well as intellectual traces of Olivi’s work. In 1304, six years after his death, a chapter general of the Franciscan Order commanded the destruction of all Olivi’s works, and 14 years later, the unfortunate Olivi’s body was disinterred and his bones scattered.
Not only were many physical copies of Olivi’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, Olivi’s forgotten work was rediscovered by the great Franciscan saint San Bernardino (St Bernardine) of Siena, Bernardino thought it prudent not even to refer to the heretic Olivi, 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 Olivi’s Spirituals. Indeed, it has only been since the 1950s that the illuminating economic writings of Olivi, 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 Olivi was his continuing dalliance with the Joachimite heresy. One of the founders of mystical Christian messianism was the Calabrian hermit and Abbot Joachim of Fiore (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. The 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 fulfilment, 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 the early or mid-thirteenth 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. There would be no Church or Bible or state, but only a free community of perfect spiritual beings who would spend all their time in mystical ecstasy praising God until this millennial Kingdom of the Saints would usher in the Last Days, the days of the Last Judgement.
Seemingly tiny divergences in premisses 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 amillennialist, that 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 Judgement 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’s return He will launch a thousand years of the Kingdom of God on earth before the Last Judgement; in 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 chiliastic ideas such as those of Joachim of Fiore, where not only was the world coming to the end soon, but man must do certain things to usher in the Last Days, to prepare the way for the Last Judgement. 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’s return or for the Last Judgement. Generally, as we shall see further in the Protestant Reformation, post-millennial views lead to some form of theocratic coercion of society to pave the way for the culmination of history.
For Joachim of Fiore the path to the Last Days would be blazed by a new order of highly spiritual monks, from whom would come 12 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. The swift overthrow of the Antichrist would then usher in the total age of the Spirit.
In 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 thirteenth 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.
2.9 Notes
- 1 Saint Augustine, The City of God (Cambridge, Mass.: Loeb Classical Library/Harvard University Press, 1963), Vol. II, Book IV, IV, p. 17.
- 2 Richard Henry Tawney, Religion and the Rise of Capitalism (New York: Harcourt, Brace and World, 1937, orig. 1926), p. 36.
- 3 There is controversy among historians on when the Commentary was written. The older view, that it was written in 1266 or even earlier, would imply the simple explanation that Aquinas’s views had matured from his earlier close adherence to his teacher, St Albert. The newer view, that the Commentary was written at the same time as the Summa, leaves the anomaly intact.
- 4 Richard Tuck, Natural Rights Theories: Their Origin and Development (Cambridge: Cambridge University Press, 1979).
- 5 Ibid., p. 24.
