The Development of Economic Doctrine: An Introductory Survey

CHAPTER II

THE MIDDLE AGES. ST. THOMAS AQUINAS. ORESME

St. Thomas Aquinas

ANYONE who would essay to present in a few pages what purports to be a statement of the economic doctrines current in the Middle Ages must be conscious, if he has a conscience, that he is postulating a simplicity that does not exist. It may be left to the historians to decide what period should be assigned to the “Middle Ages,” and to specify the limits of that yawning gulf of time which must be allowed to have begun somewhere, and which certainly came to an end with the fall of Constantinople and the discovery of America, if indeed it had not ended a century earlier. Viewing the twelfth and the thirteenth centuries from afar, it is now dangerously easy to consider that the condition of Europe was relatively static for a vast period of time, and to speak as though Europe, like a sleeping princess, slumbered through many centuries until the elfin horns of the Renaissance heralded a new and a rosy morning.

Yet though the tendency to look upon the Middle Ages as static is deceptive, there is a certain convenience for our purpose in looking comprehensively at the economic doctrines of the Middle Ages, especially if that vague period be left undelimited. Indubitably, opinion on economic matters developed; but there was certainly a point of view which was dominant for a lengthy period of time, and which, though subject to modification, reached its highest expression in the twelfth and thirteenth centuries, above all in the writings of St. Thomas Aquinas (1225-1274). Without attempting to notice its development or modifications, this chapter will be devoted to a consideration of what may be fairly called the mediaeval point of view, above all as that is represented in St. Thomas Aquinas, whose thought governed an epoch.

Here, as elsewhere, the theory reflects the conditions and the circumstances of men’s lives. For an understanding of the mediaeval point of view—for “theory” is here hardly the fitting word—it is necessary to bear in mind the dominant characteristics of the structure of society at the time with which we are concerned, both on the secular and religious side. On the secular side, the Middle Ages are for many people more or less synonymous with the feudal system. It is unnecessary to consider how feudalism worked in practice; it is equally unnecessary to idealize it, as Müller (and many others) have done in an attempt to escape from the nineteenth or the twentieth century, forgetting that the past will always win a glory from its being far. Yet, without doubt, the theory of feudalism in its essence implied a system in which society was held together by mutual obligations and services, so that each one had his place assigned to him, and his tenure of that place involved the giving and receiving mutually of support and assistance. The same was true of the guilds and crafts when these began to develop. There rested on the crafts the obligation to render good service to the public; so also, as in the regulations governing the relationship of the members of the same body to each other, it is evident that the accepted code of honour required the members to share opportunities and to play the game honestly by one another. On the whole, then, the accepted theory was that the members of society held their places in society on condition that they rendered certain specified services to their fellows. There was thus a considerable element of status. Rank, of whatsoever kind, imposed obligations, but it also conferred privileges. Each one should not merely discharge the obligations resting oh him; he should also live as his position in life required—“convenienter,” as the mediaeval Latinist expressed it. To complete the picture on the secular side, the Middle Ages inevitably lived to a large extent in a “natural economy.” Though there is much talk of trade, the actual volume of trade must have been relatively small; men lived in small units, which to a large extent must have been virtually self-supporting. Nor was it merely the difficulties of transport that stood in the way of exchange on any large scale. Until the discovery of the silver-mines in America—that is, until after the passing of the Middle Ages—there was something of the nature of a dearth of money throughout Europe, and money transactions were perforce naturally limited. Enterprise, as we understand it to-day, presented few openings. It was consequently a society in which the members were expected to maintain themselves by rendering service to the community, and in which to a large extent the possibility of making gains, or laying up treasure on earth, was excluded.

On the religious side the great all-dominating fact was the Church. The effect of its teaching is a matter for more detailed consideration later. Here it is sufficient to observe, firstly, that the Church sought to regulate all human relationships, on the postulate that this earthly life is but a preparation for another, and that the only reality is eternal salvation; and secondly, that the Church was, in its very nature, a cosmopolitan organization. The curiously non-national atmosphere of the Middle Ages, in so violent contrast to the presuppositions of the later mercantile period, is in part the gift of the Church, which thus conferred a certain unity on Europe before centralized nations found satisfaction in the misfortunes of their neighbours. In these days Latin was still a universal language for those who were sufficiently clerkly to read. All Europe could join in the Crusades, and wandering scholars were equally at home in Oxford or Paris, in Padua or Cologne.

These conditions are in themselves almost sufficient to explain the point of view of the Middle Ages on economic questions. If we turn to the exponents of mediaeval thought, we find above all two dominant influences. The one is the authority of Aristotle; the other is seen in the transformation of values effected by Christianity, as found expounded not only in the original sources of the Christian religion, but also in the writings of the early Christian Fathers. The Bible, Aristotle, and the Christian Fathers are the authorities to whom St. Thomas turns with equal reverence, and there is much to be said for the old view that what the angelic doctor aimed at was a synthesis of Christianity and Aristotelian doctrine. Aristotle is chiefly influential in moulding the views of the Middle Ages with regard to the nature and functions of money, the iniquity of usury, the principles which should govern exchange and the nature of justice. On much of these, indeed, St. Thomas merely repeats Aristotle, with an added buttress drawn from Christian sources.

Much more important is the influence of Christianity on those points in which the Christian view was directly opposed to certain aspects of the Greek and classical tradition; and even though nothing is easier than to point to certain phases of mediaeval life in which the implications of Christianity were not fully accepted, nevertheless these continued to work as a leaven, modifying increasingly the views held on certain fundamental economic aspects of life.

Firstly, and most comprehensively of all, there was the view derived from Judaism, but generalized by Christianity beyond the limits of one race, that all men were the children of a common father; if the children of a common father, then brothers. Here was a principle ultimately destructive of class distinctions, ultimately destructive likewise of national distinctions. It was a principle which made it impossible permanently to defend such an institution as slavery, even though on this question St. Thomas is surprisingly prepared to swallow what Aristotle had said. The other side of the question is no less significant. Each individual represents an immortal soul, so that each in the light of eternity is of equal value. Here at the outset is implied an emphatic affirmation of human dignity, of the equality of all men in the sight of God, and of the brotherhood of all peoples. As an immediate practical inference from this implied brotherhood of all, it is necessary to note, even though there be no space for comment on, the emphasis laid on almsgiving, both as an act of charity and as a means of salvation.

Secondly, there is implied in Christianity a further point of view which, curiously, prevented some of these conclusions from being drawn or applied, or at least made their application relatively a matter of indifference. This world is but a preparation, and all that is is transitory. If the only thing of substance for each individual is to work out his salvation with fear and trembling, then every other mundane consideration sinks into insignificance, except in so far as it is a means to that higher end. Viewed from the altitude of the next world, there is so little that really matters in this. Here, fundamentally, is the explanation of St. Thomas Aquinas’s attitude on slavery. Even a slave may enter the Kingdom of Heaven. Anyone to whom eternity is as real as the present (and vastly more enduring) must arrive at an attitude of detachment with regard to the things of this life; and an air of detachment leads to an attitude of tolerance with regard to things doubtless indefensible in themselves. Thus, though the initial assumptions of mediaeval Christianity ought to have led to an extreme equality, nevertheless it accepted inequality as part of the arrangement ordained by the Almighty for this present state of preparation, in which all things ought to be seen, illumined by the burning light of eternity, in their true proportion and in their true insignificance.

On a third point Christianity represented an even more complete reversal of the traditional Greek view. It insisted on the dignity of work in a manner which would have been repugnant in a State resting on slave labour, where work was consequently the mark of a slave. The New Testament, on the other hand, is .a prolonged incitement to “work with your own hands.” St. Paul, who was somewhat boastful that he had laboured night and day that he “might not be chargeable to any of you,” laid down the rule that if any man would not work, neither should he eat. With few exceptions the Apostles were mean workers. Work, indeed, had been prescribed by God; and even if it were part of the curse resting on mankind, it was also part of the way of salvation. Christ continually spoke of Himself as working; and indeed to go back to the Book of Genesis, God Himself worked, and rested from His work on the seventh day. It need therefore occasion no surprise that Christianity brought with it a new conception, not merely of the dignity and the nobility of work, but also of its inevitability.

In the nature of things, one need not expect to find a specifically economic literature in the Middle Ages, for it was of the essence of the mediaeval point of view that the economic factor should be rigorously subordinated to more important considerations. Just as in Greek thought economic speculation was at most a by-product (and a minor by-product) of ethical and political thought, so in the Middle Ages, when economic questions are touched on, they are considered strictly in relation to private morality. Moreover the Church, which from the secular point of view was also a large and efficient administrative machine intent on the enforcement of the Church’s point of view, took into its control the whole moral life of the community. It is not infrequently said that the two cardinal economic doctrines of the Middle Ages are found in the notion of the “just price” and in the prohibition of usury. Certainly round these two points most controversy raged. But this is to view matters too superficially. These two principles are neither independent nor are they fundamental. They are but two aspects of a deeper and more comprehensive conception. If one word were sought to cover all phases of mediaeval economic teaching, it would probably be found in the idea of “justice,” which has unfortunately tended to become associated primarily with the notion of “price.” We are brothers and should behave as brothers, respecting each other’s rights and position in life. Each should receive that to which he is entitled. Justice, as the mediaevalist understood it, should be done. No one, under any circumstances, should take advantage of his neighbour. This is the sum and substance of mediaeval economic teaching.

The relationship in which the two most familiar of mediaeval economic doctrines stand to the sum total of mediaeval teaching in these matters is most conveniently seen in the writings of St. Thomas Aquinas, The best method of approach is perhaps to consider in the first place his teaching on the vexed question of the permissibility of private property, and the allied question of the theoretical desirability of a system of communism. Here, however, the position is confused by the fact that there had been so much previous history, and there has indeed been endless discussion of the extent to which the early Christian Church at Jerusalem and the Christian Fathers had left a tradition in favour of some communistic form of life. Certainly the Gospels had underlined the truth that wealth might be a snare; for is it not easier for a camel to go through the eye of a needle than for a rich man to enter the Kingdom of God? In one case also the way of perfection was said to lie in selling all and giving to the poor. Yet it is equally certain that no words of Christ can be invoked directly in aid of an argument for a communistic mode of life. More importance is attached to the early position of the Church at Jerusalem, where “they had all things common” (Acts iv. 32), yet a careful perusal of the relevant passage appears to point to a condition of, at most, unrestrained liberality, which nevertheless remained voluntary.1 There remain the Christian Fathers, from whom it would be easy to cull a nosegay of explosive aphorisms which might make it appear that Moscow was their spiritual home. Yet if they denounce wealth and roundly call the rich man a thief, it is equally true that passages may be cited in support of the legitimate use of private property. Probably, like less wise people, they were not always guarded in their expressions: on a survey of all the passages commonly cited, it is probable that the Fathers in the main were concerned merely to condemn the improper use of wealth, and to underline the deceitful-ness of riches. That the early Fathers were communists might equally appear from selected passages chosen for the purpose. Certainly the state in which all things are held in common is their professed ideal, and evokes a wealth of glowing language. Yet again it is doubtful how far any of the passages usually cited can be regarded as a precept for the introduction of a communistic system, or as an argument for its practicability under existing circumstances. That men do not hold all things in common may be a mark of the depravity of man; but the depravity of man has to be accepted along with the fall of man. Praise of communism is indeed, in the Christian Fathers, largely praise of the blessed state which man by his sins has forfeited. This probably is the true significance of the communism of the Christian Fathers.2

If this interpretation be right, there is not, in fact, on this question of private property, that contradiction between St. Thomas Aquinas and the Christian Fathers that is sometimes assumed. Fundamentally, his view of external things rests on their subordination to the ends of men: always the more imperfect exists on account of that which is more perfect.3 But, having regard to the use of external things, St. Thomas holds, following Aristotle, that possession is “natural to man.” The argument that seeks in natural law a sanction for community of possessions he counters by contending that natural law does not indeed require that all things should be held in common; all that can be derived from the argument is negative in its nature, namely, that under natural law there can be no justification for distinction of possessions. This, however, rests on human agreements, which is a matter of positive law. Thus private property is not contrary to natural law; rather is it added to natural law by a further creation of human reason.4

Possession being thus justified, as in accordance with human nature, St. Thomas distinguishes the two kinds of right which men may have in things. The first is the power of acquisition and administration (potestas procutandi et dispensandi), and here the full right of private property is allowed on lines which are similar to the Aristotelian argument. Greater care, greater order, greater satisfaction result when each has his own, and the disputes which spring from the common purse are avoided. But the second right in things, that of use (usus ipsarum), is in a different case. Here things are to be regarded as common, ready to be shared with others in need. It is the old Aristotelian solution, that property should be private in possession but common in use.

Thus, while the right of property remains, the harshness of the Roman conception of the jus utendi et abutendi has gone. The owner is, in fact, the administrator of his possessions in the general interest, even though the administration of the property is left to the judgment of each individual. How far St. Thomas is prepared to carry this doctrine may be seen in his argument that theft is permissible in the case of extreme necessity.5 For human law cannot abrogate from natural law or divine law, and it is part of the divine providence that inferior things are ordained that men may be aided in their necessities. Consequently that which is held in superfluity belongs by natural law to the maintenance of the poor. Here we are not concerned with what constitutes “necessity,” nor with what is to be understood by “superfluity”; but it is significant of the mediaeval respect paid to the rights of status that St. Thomas should expressly stipulate that almsgiving should be restricted so as to leave such a residue as will enable a man to live as his status in life requires, convenienter, secundum proprium statum.6

St. Thomas’s view of the value of earthly goods is in accordance with these general principles. The life that men live here leads to the life of blessedness in heaven as its final goal, and the good things of this life are to be judged in respect of their efficiency from this point of view.7 Wealth is, or may be, good, but a good of a lower order, as a means to an end. It is good if it helps to a life of virtue. So also poverty may be good, if it frees men from the burdens in which many are entangled by wealth. But poverty in itself is not good; it is only good in so far as it frees a man from what may hinder his spiritual life. Neither poverty nor wealth nor any other external thing (“any other creature,” St. Paul would have said) is good in itself; nor is anything evil apart from its evil use. Here, surely, is the supreme indifference of the Middle Ages.8

Granted the existence of private property, there arises the question of the principles which should regulate exchange. Human relations should be governed by “justice,” and hence the central conception is that of the “just price.” Into that large field which is concerned with the mediaeval analysis of justice and with the two kinds of justice as derived from Aristotle (commutativa and distributiva) it is unnecessary to enter here. Of the two aspects of justice—one governing the relations of the part to the part, and the other that of the part to the whole—it is essentially commutative justice, or justice in exchange, which governs the conception of the just price. Cutting down to the roots of things, justice consists in rendering to each one what belongs to him. Justice implies equality, and there should therefore be equality in exchange. In effecting exchanges, therefore, a measure is necessary, and it is for this purpose that money has been invented. Money is thus primarily, and almost merely, a measure of values. If the price exceeds the value of a thing, or conversely if the value of a thing exceeds the price, justice is violated; and therefore to sell a thing at a higher price or buy it at a lower price than it is worth is unjust and impermissible.9

Carius vendere quam valeat—here indeed is a very fine hare which, with no obvious asthmatic symptoms, is still gallantly breasting the uplands, pursued from afar by a great company of short-winded metaphysicians and economists. But St. Thomas at least did not join in the chase, nor indeed was the hare of his starting. On the contrary, the idea of value, lurking behind the just price, receives singularly little analysis from St. Thomas. It might be inferred that it is an objective quality inherent in each thing, but he seems to assume that we know what it is, rather than explains how in any given case we may determine it. Probably a comparison of many passages would suggest that at the back of his mind he had a cost-of-production theory, linked up with his views as to the remuneration of labour. Yet the idea of need and of use also figure in mediaeval theory; but it is not the need of any individual, rather is there everywhere the idea of a “common estimate,” of the common usefulness. In sum, the just price is largely the customary price—a concept natural in a customary age. Perhaps one cannot get nearer the truth than by recalling Mr. Gonnard’s felicitous phrase that the just price is determined, less by positive elements than in accordance with the conscience of the honest producer—the “reputable employer” of Australian wage-fixing legislation.

Yet the just price, though apparently objective in character, was not exempt from modification by external circumstances. To take one instance cited, in the case of the exchange of a commodity of great use to the original owner, regard should be had not only to the thing itself (and what one might call its normal “just price”) but also to the loss which the seller would incur in parting with it.10 But it is characteristic of the mediaeval view that the contrary case of excessive urgency of need on the side of the buyer, accompanied by no special detriment to the seller, affords no justification for advancing the just price. These and other considerations indicate that there must be a certain margin allowed with regard to the just price. It cannot, as St. Thomas says, be fixed with complete accuracy, but must depend on a certain process of estimation; therefore within limits, a certain slight variation up or down need not be regarded as impairing the equality which justice demands.11 The discussion of the obligation resting on the seller to reveal to the purchaser defects in the thing sold indicates more clearly than much argument that the fundamental idea of the Middle Ages was that no one should take advantage of another, and that in this life of trial brothers should observe towards each other the golden rule that “as ye would that men should do to you, do ye also to them likewise.”

It is almost self-evident that the principle of the “just price” includes the idea of the “just wage”—indeed the example which St. Thomas takes in illustration of the equality which is inherent in justice is the payment of the due wage for services rendered. Elsewhere he places the payment of wages on exactly the same footing as the obligation of the just price.12 It might even be said that the doctrine of the just price was built up on that of the just wage; for that the labourer was worthy of his hire was a living principle in the Middle Ages. In so far as the idea of the just price represented vaguely a cost-of-production theory, then the labourer’s hire was a dominant, if not exclusive, factor in the determination of prices. By the just wage was meant that rate of remuneration which was required to enable the worker to live decently in the station of life in which he was placed; and thus, if one may so express it, such a wage, representing reasonable decency, was made a first charge on industry. The mediaeval doctrines of the just price and the just wage should appear less strange to a generation which has become familiar with trade boards and with various attempts to devise price-fixing machinery.

The other main feature of economic doctrine, the prohibition of usury, appears on analysis to be likewise merely a particular case of the just price. Usury, for the mediaevalist, was not merely what the modern economist would call “pure interest”; it covered likewise any injustice in trade, any violation of the just price. Nevertheless, as Aristotle had exalted usury to an evil eminence among the various kinds of bad finance, so usury, although frequently used in a wider sense, was more specifically identified with the making of profits out of loans as a particularly heinous example of the sin of avarice. Here was a subject on which the natural authorities of the Middle Ages seemed to be in agreement. Usury had been condemned by Aristotle on the grounds of the barrenness of money; to use money which was properly merely a means of exchange as a device for making more money, was unnatural, and therefore to be condemned. In the Bible there were the various prohibitions of usury in Leviticus and Deuteronomy, though how far these prohibitions related to the taking of usury from a “brother” need not detain us. The Psalmist had indicated, as one of the qualities of a citizen of Zion, that he should not put his money to usury (Ps. xv. 5). There was above all the passage in the Gospels which was more frequently cited than any other authority, to the effect that the Christian should lend, hoping for nothing again (Luke vi. 35).13

Two points call for notice before considering what is more specifically the canonical view of the offence of usury. The first is that, despite the passage in St. Luke and certain obiter dicta of the Christian Fathers, the attitude of the Church was not at first so rigid as it became later. When the question first emerged, usury was forbidden only to clerics; it was not till relatively late that the prohibition was made general and usury became an offence in the laity. Secondly, it is impossible to appreciate the mediaeval attitude towards usury unless it be remembered that in an age of little enterprise and industry, loans were made mostly to those who for one reason or another were in distress. The typical loan, therefore, was probably advanced to someone who had suffered the scourge of fire or of flood, who had been ruined by bad seasons, whether occasioned by blight, by pestilence, or by the inclemency of the heavens. Moreover, in a community undeveloped financially, loans were to a large extent made as between people who were known to each other apart from their relationship of borrower and lender. Doubtless there were transactions of various types, but probably the characteristic loan was one, not designed for productive purposes, springing out of a misfortune and designed to tide the sufferer over the consequences of that misfortune, and advanced moreover by someone purporting to be a friend of the victim. That the taking of usury should be discouraged under these circumstances is but natural, for it assumes the appearance (to fall back on one of the Fathers) of “trafficking in the miseries of others.” Even the Merchant of Venice recognizes this point of view when he asks: “When did friendship take a breed of barren metal of his friend?”

The early condemnation of usury rested in part on the authority of the Bible and Aristotle, being compounded of the Aristotelian doctrine of sterility and the view that usury represents a grinding of the faces of the poor in their distress. In the hands of St. Thomas Aquinas, however, the objection to usury becomes more deeply grounded, and by reasoning of some subtlety it is demonstrated that usury involves an offence against justice. The argument rests on the distinction between those things in which use and consumption are identical, and those in which they can be separated (res jungihiles and res non fungibiles, to use a legal expression). In the case of wine and bread, for instance, there cannot be use without consumption. When the use is granted, the thing itself is granted. You cannot give a man the use of a loaf without, by that very act, giving him the loaf itself; and if he uses the loaf, it is idle to expect its return. On the other hand, there are things in which the use and consumption are not identical. A man may have the use of a house without destroying it. He may therefore be given the use of a house, and at the end of the period he may properly be expected to return the house in its original condition. Putting it in a manner more germane to the controversy, it is possible to sell a house, and it is possible to sell the use of a house, since they are distinct; but it is not possible to sell bread and the use of bread, since the sole purpose of bread is to be consumed. Come now to money, and invoke Aristotle’s definition of money. Money exists for the purpose of effecting exchanges. It is the function of money to part company with its possessor; its proper use lies in its consumption or alienation. It is therefore pre-eminently a fungible commodity: use and consumption are inseparable.14

In a sense St. Thomas’s argument is that what purports to be a loan of a fungible is in fact bound to be a sale. As it is inadmissible to sell a loaf to a man and simultaneously charge him for the use of it, so it is inadmissible to sell money and charge also for its use. The proper price, on mediaeval doctrine, is the return of the same money; the additional charge for its use is of the nature of a swindle. What, then, is the offence of the usurer? Bearing in mind the foregoing analysis, it may be variously expressed. Either he is selling something that does not exist (the use, apart from the consumption, when the two are identical), or he is charging for the same thing twice, or, if the lapse of time be invoked, he is selling time, which belongs to God, and which no man may appropriate.

It is not infrequently said that the mediaeval view of usury rests essentially on the Aristotelian view of money, as being merely a medium of exchange, and as being consequently inherently barren. It would perhaps be truer to say that they regarded a loan of money (being a fungible) as essentially involving a change of ownership; that while they realized that money could be productively used, it could only be so used when brought into conjunction with labour. The productivity, in fact, springs primarily from the labour of the borrower, to whom also the full use of the money has been granted. The usurer, therefore, from this angle, is levying a toll on the labour of another. The just price for the money advanced is the return of the money; anything more is injustice.

The development and gradual refinement of the doctrine with regard to usury constitute one of the most interesting chapters in economic thought and practice; but it can only be glanced at here. It was in accordance with the mediaeval conception of justice and equality that the lender, by lending, should not suffer. In such a case the restoration of the original capital would not be sufficient; the borrower should also make good such losses as the lender had suffered on his behalf. Thus arose a number of modifications which in practice tended to break down the prohibition of usury, though in theory they were merely variations necessary for the fuller attainment of the idea of justice. The two which figure most largely in discussion were the payments permissible in the case of damnum emergens and lucrum cessans. If the lender could prove that, arising out of the loan, he had suffered a definite loss, or that alternatively a source of gain had dried up, then it was but equitable that the borrower should indemnify him. Somewhat different was the poena conventionalis, which stipulated for the return of the money on a certain date, under penalty of a further payment in respect of the inconvenience alleged to result from the lender being prevented from receiving his money when, as anticipated, he should have occasion for its use. A fourth exception was the periculum sortis, a payment to cover the risk inherent in the possibility of the money not being repaid. In the light of this discussion, two conclusions are evident. Firstly, in practice these various modifications were in time sufficient to break down the prohibition of usury, especially with the development of industry and of financial technique. For implicitly the exceptions assume that the lender could not normally himself make use of his money. In an economy offering unlimited scope for investment and enterprise, it would be increasingly possible for a lender to plead either a damnum emergens or a lucrum cessans. Secondly, these exceptions are no exceptions in principle. Taking interest where there is no risk, no loss incurred, no inconvenience suffered, still remained evil in the eyes of the mediaevalist. The emphasis on the permissibility of payment in respect of those elements which in modern language constitute the difference between gross interest and economic interest, merely underlines the fact that economic interest, the payment for the use of money pure and simple, continued to be regarded as illegitimate.

To guard against misapprehension it should, however, be added that the mediaeval doctrine did not condemn investment when investment took the form of a partnership, provided the partner did in fact share the risks of the business. The commenda, the original form of partnership, had always been regarded as entirely legitimate, and here one party might advance money to another and share in his profits, while refraining from taking any direct part in the enterprise. It was essential, however, that he should not be absolutely entitled to receive his money back in full, for such a position would clearly involve usury. But if he merely “entrusts” his money by a kind of partnership, the money remains his; “so that the merchant trades with it, or the craftsman uses it at the owner’s risk.” The original owner may therefore claim a portion of the profit which has sprung from the use of the money, which has never in fact left his possession, although entrusted to another.15 As Mr. Tawney has well put it, the person whom mediaeval doctrine condemns is the debenture-holder, the man who eschews all risk, whose money is safe and who yet looks for a reward.

One last point in mediaeval doctrine, above all as exemplified in St. Thomas Aquinas. The Middle Ages had their theory of division of labour, based on the Aristotelian doctrine of the essentially social nature of man. But if people live in society they must aid each other by doing different things. (Hence, indeed, the peculiar human property of speech, so that men may communicate regarding their diverse needs and attainments).16 Different occupations are necessary, but are all equally honourable? Only one aspect of this need detain us here, namely, the attitude towards trade. The test of the reputability of any occupation lay in the extent to which it was serviceable to the community; private gain was, in a sense, the antithesis of public service, and therefore those occupations which offered opportunities of private gain were, to say the least, dangerous—and perhaps something worse. Originally the view had been that a merchant could hardly be pleasing to God. In St. Thomas Aquinas we have advanced to the view that trading is not necessarily sinful, but he clearly regards the calling of the trader as so beset with the opportunities of sin that a man mindful of his immortal soul will shun it. First of all, what is a trader? Only he who buys a thing with the express intention of selling it at a higher price. If a man buys an article, having no such intention, he may subsequently re-sell it (and at a higher price) without thereby becoming a trader. And the causes which are enumerated as justifying a higher price are interesting as revealing the considerable degree of haziness in which the just price shrouded itself. A higher price might be justified either because the buyer had improved the article in some respect, or because the price had varied through changes in time or place, or because of the danger involved in its transport.17 But on the main question St. Thomas repeats ominously the distinction drawn by Aristotle between natural and unnatural exchange, the latter being designed not to meet the needs of life, but to acquire gain. As such it is regarded as somewhat dishonourable. Nevertheless, even if gain does not involve anything honourable, it does not logically involve anything sinful. Thus the centre of the argument is rather moved from the gains to the use made of these gains; and St. Thomas contemplates the case where a man may devote himself to trade for the public welfare, seeking gain not as an end but as a a reward for his efforts. Gains, if reasonable, may thus be regarded as a kind of wage.

More interesting because less negative is a passage in De Regimine Principum, wherein St. Thomas discusses the two methods whereby a State may obtain what it requires. These are, firstly, by its own natural fruitful-ness; and secondly, by trade. The argument is all in favour of the self-sufficient State, partly on mercantilist grounds of the beauty of self-sufficiency; but partly also because of the corrupting influence of the trading class. The conclusion, however, is that merchants are a necessity, if only owing to the difficulty of obtaining for the State a situation which has potentially a prospect of complete self-sufficiency. Hence the perfect state will make use of merchants—but in moderation.18

Oresme

No survey of the economic views of the Middle Ages would be adequate without a reference, if only by way of a corrective, to the remarkable treatise written by Nicholas Oresme, Bishop of Lisieux (?1320-1382), entitled De Origine, Natura, Jure et Mutationibus Monetarum.19 This treatise of twenty-six short chapters, although scarcely deserving the wild praise bestowed upon it by Roscher as a theory of money which is still perfectly valid to-day, is nevertheless a sufficiently remarkable performance. In its spirit it anticipates the scientific, objective frame of mind of writers of a much later age. In truth, however, it is less a treatise on money than a sustained and emphatic refutation of the rights of the Prince to tamper with the currency. He begins on orthodox lines, dealing with primitive barter and its difficulties, which led les hommes subtilz to resort to money and thus devise a more suitable method of exchange. Money is thus artificial wealth merely; a man may be possessed of much money and yet die of hunger, as witness the often cited example of Croesus. It is merely an instrument for circulating wealth, an instrumentum permutandi divitias naturales, a medium of exchange, as we should say to-day.

Two points perhaps are specially notable in Oresme. As a medium of exchange, in the modern tag, money must have certain properties, but the problem of finding any one substance convenient both for large and small exchanges, leads Oresme to the principle of bimetallism. He is remarkably clear as to the difficulties that may arise from a divergence between the mint ratio and the market ratio, and is definite that the mint ratio should follow the market ratio: “Cette proportion,” as he says, “doit ensuivir le naturel habitude ou valeur de l’or à l’argent.” Further, it is evident that he is familiar with Gresham’s law that the over-valued metal will drive the under-valued metal out of circulation; the Prince therefore must not arbitrarily fix or alter the ratio, as this would open the door to all kinds of hanky-panky—as in buying silver with gold at one ratio, altering the ratio, and thereafter buying gold with silver.

The second point of importance is his strict delimitation of the powers of the Sovereign with regard to the currency and the inferences he draws therefrom. Currency may not be issued by everyone, but only by a public person, acting on behalf of the community. Naturally, therefore, it falls to the Prince to issue currency, but he does so purely in a representative capacity: “convenienter est quod ipse pro communitate faciat fabricare monetam et eam congrua impressione signare.” This act is merely done on behalf of the community, and it follows therefore that the mere fact of issue by the Prince does not make him the owner and the proprietor of the money so issued.

This principle is of importance when Oresme comes to discuss the various ways in which money may be altered, changed or debased. It is unnecessary to differentiate these various mutationes, as of appellation, weight, substance, etc. What is important is the vigour, one might almost say the rudeness, with which Oresme denounces all debasements of the currency. A prince who does these things is a liar; he commits perjury; he bears false witness; for it is clearly a shame for a king to certify that a thing is gold when it is not gold, or that it weighs a pound when it does not do so. The gain which flows from such practices is not merely dishonest, it is also unnatural. Money-changing, usury, debasement of the currency are all alike, in the Aristotelian and Thomist sense, unnatural methods of making a profit out of money; but they represent an ascending scale of turpitude. Towards the close, Oresme’s treatise almost becomes a political tract in its denunciation of debasement of the currency as an engine to create a tyranny. Once the path of rectitude has been abandoned, he sees the possibility, almost the inevitability of repeated debasements, transferring by degrees the whole wealth of the people to the Prince, and thus reducing them to a state of servitude.20 Oresme clearly sees the evils of a debased currency, and records its natural manifestations in a general impoverishment of the community, in the flight of money elsewhere, in the cessation of foreign trade, and in the general disorganization of life. Even if the enthusiastic critics lead one to expect too much of Oresme, his is nevertheless an extraordinarily realistic and practical voice to hear in the fourteenth century.

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21 Otherwise it is difficult to give any meaning to Peter’s question to Ananias: “Whiles it remained, was it not thine own?” Ananias was not a martyr in the cause of individualism; popular sentiment rightly regards Ananias and Sapphira as being primarily liars.

22On all this see O’Brien, Essay on Mediaeval Economic Teaching.

23 Sum. Theol., II/II, quæstio 66, art. 1.

24 “Unde proprietas possessionum non est contra jus naturale, sed juri naturali superadditur per adinventionem rationis humanæ.” (11/II, quæstio 66, art. 2.)

25 II/II, quæstio 66, art. 7.

26 II/II, quæstio 32, art. 6.

27 De Regimine Principum, Book I, chap. 15.

28 Summa Contra Gentiles, Book III, in particular chap. 133 “Quomodo paupertas sit bona.”

29 The statement is so fundamental that perhaps the Latin of St. Thomas Aquinas may be forgiven: “... et ideo debet secundum æqualitatem rei inter eos contractus institui. Quantitas autem rei, quæ in usum hominis venit, mensuratur secundum pretium datum; ad quod est inventum numisma, ut dicitur. Et ideo si vel pretium excedat quantitatem valoris rei, vel e converso res excedat pretium, tolletur justitisæ æqualitas. Et ideo carius vendere vel villus emere rem quam valeat, est secundum se injustum et illicitum.” (Sum. Theol., 11/II, quæstio 77, art. 1.)

30 “Et in tali casu justum pretium erit ut non solum respiciatur ad rem quæ venditur, sed ad damnum quod venditor ex venditione incurrit.” (II/II, quæstio 77, art. 1.)

31 “Quod ideo dico, quia justum pretium rerum non est punctualiter determinatum, sed magis in quadam æstimatione consistit; ita quod modica additio vel minutio non videtur tollere æqualitatem justitiæ.” (II/II, quæstio 77, art. 1.)

32 “Unde sicut reddere justum pretium pro re accepta ab aliquo, est actus justitiæ ita etiam recompensare mercedem operis vel laboris, est actus justitiæ. (I/II, quæstio 114, art. 1.)

33 Mutuum date nihil inde spevantes. Or should the correct reading be: Mutuum date nihil desperantes? Should loans be made “hoping for nothing therefrom,” or “without worrying about them”? Even on the former reading, does the nihil imply that the lender is not merely to hope for no interest, but that he is equally not to look for the return of the capital? It is curious that so many doubts should subsequently be raised with regard to the interpretation of a verse which was so authoritative in the Middle Ages. See O’Brien, op. cit., on this.

34 “lta proprius et principalis pecuniæ usus est ipsius coniumptio, sive distractio.” (Sum. TheoL, 11/II, quæstio 78.)

35 “Sed ille qui committit pecuniam suam vel mercatori vel artifici per modum societatis cujusdam, non transfert dominium pecuniæ suæ in ilium, sed remanet ejus; ita quod cum periculo ipsius mercator de ea negotiatur, vel artifex operatur; et ideo sic licite potest partem lucri inde provenientis expetere, tanquam de re sua.” (Sum. Theol., 11/II, quæstio 78, art. 2.)

36 De Regimine Principum, Book I, chap. 1.

37 “Vel quia in aliquo rem melioravit, vel quia pretium rei est mutatum secundum diversitatem loci, vel temporis, vel propter periculum, cui se exponit, transferendo rem de loco ad locum.” (11/II, quæstio 78, art. 4.)

38 “Unde oportet quod perfecta civitas moderate mercatoribusutatur.” (De Regimine Principum, Book II, chap. 3.)

39 In addition to the Latin original, there is a French translation by Oresme himself.

40 “Car nature humaine est toujours encline et preste à augmenter Richesses à elle, quant legiérement les peut acquerir, que en fin le prince pourroit attraire à luy comme la pécune et les Richesses de tous les subjectz et par ce ramener en servitude.”

• 1The Republic, Jowett’s translation, p. 49.
• 2Ibid., Book III, p. 106.
• 3Beer, Social Struggles in Antiquity, p. 97.
• 4The Republic, Jowett’s translation, p. 154.
• 5Ibid., p. 127.
• 6The Laws, Jowett’s translation, p. 121.
• 7Ibid., p. 87.
• 8Ibid., p. 124.
• 9Ibid., p. 230.
• 10Politics, Book II, chap. 3, Welldon’s translation, p. 43.
• 11Ibid., Book II, chap. 5, p. 49.
• 12Ibid., Book II, chap. 5, p. 48.
• 13Ibid., Book I, chap. 6, Welldon, p. 13.
• 14Ibid., Book I, chap. 9.
• 15Ethics, Book V, chap. 5, Welldon’s translation, p. 149.
• 16Politics, Book III, chap. 5, Welldon, p. 113.
• 17Ibid., Book I, chaps. 3 and 8.
• 18Loeb translation, pp. 367, 409.
• 19Ibid., Book I, chap. 8.
• 20Printed in Laistner, Greek Economics.
• 21So far as economic theory is concerned, it is in Plato that Greek thought advances beyond the level of such wise saws as may be extracted from Hesiod and others, and arrives at some consecutiveness. Yet Plato is the supreme example of the classical tendency to regard economics as a minor subsection of ethics and politics. It is above all in The Republic, and to a lesser extent in The Laws, where he indulges in “an old man’s game,” that Plato turns to economic questions. The former is primarily a discussion on Justice, and it is because the essential nature of Justice may perhaps be most easily discerned in the State—since for the short-sighted the larger letters may be more easily read—that the disputants turn aside in the second book to discuss the State and its origin, and are thus led to construct from the foundation an ideal polity. It is noticeable that the origin of the State is attributed wholly to economic considerations: “A state arises out of the needs of mankind; no one is self-sufficing, but all of us have many wants,” and moreover, Plato indicates that no other origin of a state can be imagined. This line of argument, after a consideration of the essential needs of mankind, leads to Plato’s discussion of division of labour, which has so often been compared with the famous chapter in Adam Smith. The essential needs of mankind are food, dwelling and clothing, so that the barest notion of a state must include four or five men—a husbandman, a builder, a weaver, and perhaps a shoemaker or a representative of some other similar occupation. Each of these is, moreover, to confine himself to his own calling. The governing considerations in the application of the principle of division of labour, as conceived by Plato, are then, firstly, that there are “diversities of natures among us which are adapted to different occupations,” and secondly, and as a consequence of this, that “all things are produced more plentifully and easily, and of a better quality, when one man does one thing which is natural to him and does it at the right time, and leaves other things.” It is in order that this principle may be satisfied that Plato then extends his State to include a considerable diversity of other crafts—sailors, traders, retailers and others.
• 22Thus we arrive at the guardians, who practise an art which is not to be combined with any other occupation, since one man cannot practise many arts with success. The guardians require careful selection; likewise very careful education. They must combine apparently contradictory qualities, inasmuch as they must be dangerous to their enemies and gentle to their friends. We are not here concerned with the lengthy discussion of the education of the guardians, nor with the subsequent distinction between “guardians in the fullest sense” (the real rulers) and the auxiliaries, but the words in which communism is enacted are of importance in specifying both the scope and the purpose of the communism prescribed. The guardians are to look round for a spot where they can best suppress insurrections within and defend the State from enemies without, and they are to encamp there. Further, in order to ward off the danger that they may become enemies instead of friends of the citizens, their whole mode of life is to be such that they will not be tempted to prey upon the other citizens. Consequently they are devoted to an ascetic method of life; they are to have no property beyond what is necessary; they are to receive a fixed rate of pay, sufficient to meet expenses and no more: “Should they ever acquire homes or lands or moneys of their own, they will become housekeepers and husbandmen instead of guardians, enemies and tyrants instead of allies of the other citizens.”
• 23Firstly, as to the scope of Plato’s communism, it is clear from the whole argument that it is prescribed only for the limited class of the guardians, who are indeed throughout to live a semi-military life. It is, in fact, the communism of the camp. The contrary view has been argued along lines which need not here be indicated, and one authority has contended that “a superficial reading of The Republic gives the impression . . . that Plato recommends communism solely for these upper sections.” It is almost sufficient to note that Aristotle himself is one of these superficial readers; it is entirely sufficient that Plato expressly describes the regulations as “appointed by us for the guardians,” and even more conclusive is his statement that if the guardians depart from their communistic life, they will become housekeepers and husbandmen.
• 24Then secondly, as to the purpose of the guardians’ communism, it is noticeable that Plato in his motives is poles asunder from other communistic dreamers. Elsewhere the cry for communism arises from an aggrieved sense of the injustice and monstrous inequality of the world. It is not so in Plato. For his guardians, communism is an act of ascetic renunciation; it is the condition on which alone they can efficiently discharge their duties. The work they have to do is so important that they may only do it properly on condition that they remain free of the snares and the entanglements of this world. In its motive therefore it is akin to the celibacy of the Roman Catholic priesthood. The object of Plato’s communism is in no way to establish a right to equal enjoyment; rather it is a part of the price that must be paid by a class on whom special responsibilities have been imposed. An interesting, if trivial sidelight, illustrative of the fact that the whole arrangements with regard to the guardians are designed to free them from the ordinary troubles of life, is furnished by the provision that when a woman guardian has a child, the process of suckling shall not be protracted too long: “the mothers will have no getting up at night or other trouble, but will hand over all this sort of thing to the nurses and attendants.”
• 25A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 26A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 27Among other points it is perhaps worthy of mention that the second best State is to enjoy free trade and complete immunity from import and export duties, subject only to the importation of unnecessary luxuries and the exportation of what is wanted in the country being prohibited. Retail trade is forbidden, and there is also a curious desire to preserve the virtues and the purity of the city by removing it to a safe distance from the sea, for “the sea is pleasant enough as a daily companion, but has indeed also a bitter and brackish quality; filling the streets with merchants and shopkeepers, and begetting in the souls of men uncertain and unfaithful ways.” But into the rather wearisome details of the State contemplated in The Laws, it is unnecessary here to enter.
• 28A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 29Among other points it is perhaps worthy of mention that the second best State is to enjoy free trade and complete immunity from import and export duties, subject only to the importation of unnecessary luxuries and the exportation of what is wanted in the country being prohibited. Retail trade is forbidden, and there is also a curious desire to preserve the virtues and the purity of the city by removing it to a safe distance from the sea, for “the sea is pleasant enough as a daily companion, but has indeed also a bitter and brackish quality; filling the streets with merchants and shopkeepers, and begetting in the souls of men uncertain and unfaithful ways.” But into the rather wearisome details of the State contemplated in The Laws, it is unnecessary here to enter.
• 30When we turn to Aristotle, we are confronted with a writer who, by his analytical frame of mind, went further than any other thinker in antiquity in the direction of detaching a separate science of economics. This is not the place to consider his political theories, but his starting point that man is by nature a political animal enthroned for him the science of politics, so that ethics and economics alike were viewed by him from a political angle. Two points are of peculiar interest to the economist. The first is his destructive criticism of Plato’s communism in the second book of the Politics, and the other is his analysis of the household, leading to a discussion of the economic bases of society. On the former point, with the arguments of all the ages ringing in our ears, Aristotle’s contentions may appear hackneyed. What he says about the snares inherent in community of wives need not detain us; it never has been, and is not now (it may be hoped) an urgent question. But his arguments on the general question of community of property might date from the present year of grace. It is still true that “people pay most attention to their own private property and less to that in which they have but a part interest”—as witness the carved hieroglyphics on the seats in any public park contrasted with the reverence paid to the domestic Chesterfield.
• 31Aristotle’s arguments, in the main, are of a highly practical character; in short, that a system of communism would not work, and that it violates natural human instincts. There would be disputes between those who get less and work more, and those who get much and work little—the old difficulty of distribution among frail, grudging and suspicious men. Unity built on communism is in fact a delusion; the common purse leads to quarrels arising out of trivial causes. Moreover there is an immense advantage in the sense of private property. It corresponds to natural instincts; “the love each individual bears to himself is not purposeless,” as he remarks in a phrase in which we seem to catch the tones of Adam Smith’s invisible hand. Again, in an argument which is still common, though of doubtful cogency, he urges that community of property would destroy the virtue of liberality. His own position is not, however, merely negative. As against reformers in a hurry in all ages, he contends that the evils are due, not to the institution which it is proposed to destroy (in this case private property), but to defects in human nature. Unless that is first amended, he would seem to say, there will be no advantage in abolishing something which in itself may be used for good or evil. “The existing system, if embellished by the moral tone of those who live under it and by a code of wise laws, would be far superior.” The ideal which Aristotle outlines is thus that of private possession with use in common, so far as that may be practicable—in modern language, private property mellowed by a sense of the responsibility of wealth, a position not so different from that of the Christian Socialists.
• 32Aristotle’s arguments, in the main, are of a highly practical character; in short, that a system of communism would not work, and that it violates natural human instincts. There would be disputes between those who get less and work more, and those who get much and work little—the old difficulty of distribution among frail, grudging and suspicious men. Unity built on communism is in fact a delusion; the common purse leads to quarrels arising out of trivial causes. Moreover there is an immense advantage in the sense of private property. It corresponds to natural instincts; “the love each individual bears to himself is not purposeless,” as he remarks in a phrase in which we seem to catch the tones of Adam Smith’s invisible hand. Again, in an argument which is still common, though of doubtful cogency, he urges that community of property would destroy the virtue of liberality. His own position is not, however, merely negative. As against reformers in a hurry in all ages, he contends that the evils are due, not to the institution which it is proposed to destroy (in this case private property), but to defects in human nature. Unless that is first amended, he would seem to say, there will be no advantage in abolishing something which in itself may be used for good or evil. “The existing system, if embellished by the moral tone of those who live under it and by a code of wise laws, would be far superior.” The ideal which Aristotle outlines is thus that of private possession with use in common, so far as that may be practicable—in modern language, private property mellowed by a sense of the responsibility of wealth, a position not so different from that of the Christian Socialists.
• 33Under the section which deals with the relationship of master and slave occurs Aristotle’s celebrated defence of slavery, which sounds so oddly in modern ears. The principle of rule and subjection is, he says, inevitable and beneficent, and there are “natural slaves,” persons who are as far inferior to others as the body is to the soul, or a beast to a man. In these cases a life of slavish subjection is advantageous. Aristotle is not blind to the obvious objection that, as he puts it, it may happen “contrary to the intention of Nature that those who possess the bodies do not possess the souls of free men and vice versa” for even if there be those who are “slaves by nature,” it calls for supreme faith to believe that the accidents of life should at any time sort out the slaves and the non-slaves, in accordance with the definition of a “natural slave.” Hence he distinguishes between natural and legal slaves, and speaks of the law being a convention according to which all conquests in war are the property of the conqueror. The whole discussion is curious and unconvincing, and is perhaps best viewed as a reflection of the fact, not merely that many slaves were well-treated, but also that their position would have been worse but for the institution of slavery.
• 34As against this, there is another kind of finance, which does not have a natural existence and which is ultimately based on the distinction, familiar long afterwards as that between value in use and value in exchange. Every object has two uses; the shoe has a use as a covering for the feet; it has also a use as an article of exchange. So long as we are in the region of primitive barter, we are still concerned with what is natural, but this has ceased when we come to retail trading, where exchange is “carried beyond the point of satisfying mere requirements.” Out of mere simple barter to satisfy a real need, the evil art of finance—retail trading—develops as a natural consequence after the introduction of a system of currency, the successive stages of which are noted with a fair approximation to the discussion in Jevons’s textbook. Finance, in the natural sense, is a part of Domestic Economy. Unnatural finance is not; it produces money merely by means of exchange, and here wealth is unlimited. The one, the healthy, might be described as the acquisition of the means of living, the securing of the “pre-requisites which Nature ought to provide”; the other is merely money-making. The one is laudable; the other enriches one party at the expense of the other. But of all evil forms of finance, the worst is usury, since here money produces the gain itself, and is diverted from the purpose for which it was devised.
• 35Apart from the Politics, there is also a passage in the Nicomachcean Ethics (Book V, chaps. 7 and 8) which is of some economic interest. Aristotle is there concerned with justice in private dealings. Discarding the mathematical theory of proportion in which his doctrine is embedded, the central point of his teaching is that “when people get as the result of exchange exactly what they had at the beginning, neither more nor less, they are said to have what belongs to them and to be neither losers nor gainers.” How is this principle to be carried out? That things may be exchanged, they must in some sense be comparable, and hence money is invented. It measures all things, and consequently, in the case taken, that of a cobbler and a builder, it measures the number of shoes which are equivalent to a house. “As a builder then is to a cobbler, so must so many shoes be to a house or a meal.” It is the demand for mutual services which binds society together, and money is the recognized representative of this demand. Money, Aristotle says in this passage, has not a natural but a conventional (vóμω) existence, and for this reason it is called money (vóμlσμα): it is within our power to change it and make it useless, a doctrine which would seem to possess kinship with Knapp’s theory that money is a creature of the law. Money, he adds, is serviceable for future exchanges; it is a guarantee that if we do not desire a thing now, we shall be able to get it when we do want it. Though the value of money is not always the same, it tends to have a more constant value than anything else. Aristotle was obviously not unfamiliar with certain orthodox views regarding the nature and the functions of money.
• 36One last point worthy of passing mention is that Aristotle’s attitude towards “mechanics” and their share in the State is in line with that of most writers in antiquity. It is summed up in the general statement that all who are indispensable to the existence of the State cannot be regarded as citizens, and that in the best State (whatever may happen elsewhere) citizenship will not be conferred upon any mechanic. There is here a striking similarity to the passage in the Book of Ecclesiasticus in praise of artificers: “Without these cannot a city be inhabited”; yet “they shall not be sought for in publick counsel.”
• 37Apart from the dispute regarding communism, the main part of Aristotle’s economic teaching is to be found in the first book of the Politics. The place which this discussion occupies in his general treatment flows from his general theory of the State. The State has in all cases a natural existence; it is the complete development of the earlier associations, the household and the village, and Aristotle accordingly proceeds to consider, as the logical first step, the economy of the household. Here there are three fundamental relationships to be borne in mind, that of master and slave, of husband and wife, and of parent and children. The fourth and last of the parts of Domestic Economy is the art of finance, which is not to be confused with Domestic Economy, since it is the business of finance to provide and of Domestic Economy to use that which is provided.
• 38The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 39Coming to the question of acquisition or wealth-getting,Aristotle is concerned to show how far it is or is not a part of Domestic Economy. Clearly part of wealth-getting must belong to Domestic Economy, since the household requires to be supplied with what is necessary, if this is not already provided. This leads to the rather curious distinction between true or genuine wealth to which there is a limit, and another unnatural kind of acquisition (finance in the bad sense) to which there is no limit. Nature supplies men with the means of subsistence which are gathered in various ways, so that men’s lives may be classified as those of the nomad, the husbandman, the brigand, the fisherman and the hunter. Property which so arises is “assigned by Nature,” and such property and such alone constitutes genuine wealth. Apart from the odd appearance of the brigand in this galley, this is merely, in the main, an anticipation of Physiocratic thought. Here also, so far as concerns real wealth, that is to say the acquisition of the means of subsistence, there is a definite limit assigned, since wealth in this sense must be limited by the needs and the purpose of the household and the State.
• 40It is, however, in the short essay on The Ways and Means to Increase the Revenues of Athens that Xenophon is most interesting, most enlightened and perhaps also most confused. Here he is concerned with finding a “remedy for the poverty of our citizens,” and the tract therefore resolves itself into an elementary discussion of public finance. Throughout, a more liberal view than customary is manifested. The foreign residents are seen as a source of revenue, and Xenophon argues for the abolition of all regulations that inflict disabilities on this class. He is indeed anxious to attract “more and better class foreigners to settle at Athens,” and in pursuance of this policy he would show favour to merchants—by free seats at festivals and invitations to banquets. No less significant is his suggestion to raise a capital sum to provide accommodation for merchants and shops and houses for retail dealers. Equally enlightened is his contention that it is the cities which have been longest at peace that have been most prosperous; despite the booty of war, it is in peace that wealth is accumulated; it is in war-time that it is spent.