WEBVTT NOTE 2. The Christian Middle Ages (continued) 1 00:00:00.000 --> 00:00:06.600 6. Theologians at the University of Paris 2 00:00:06.600 --> 00:00:12.240 Theology in the Middle Ages was the queen of the sciences, that is, the intellectual 3 00:00:12.240 --> 00:00:19.160 disciplines offering truth and wisdom. But theology had fallen on bad times during the 4 00:00:19.160 --> 00:00:25.880 Dark Ages, and the Roman and canon lawyers were left to apply ethical systems to law 5 00:00:25.880 --> 00:00:28.720 and Human Affairs. 6 00:00:28.720 --> 00:00:34.280 Theology began to flourish again in the early 12th century at the University of Paris under 7 00:00:34.280 --> 00:00:36.960 the famous Peter Abelard. 8 00:00:36.960 --> 00:00:43.320 From then on, Paris was the equivalent center for theology during the High Middle Ages that 9 00:00:43.320 --> 00:00:47.720 Bologna was for Roman and canon law. 10 00:00:47.720 --> 00:00:53.160 But during the remainder of the 12th century, the theologians were content to ponder and 11 00:00:53.160 --> 00:01:00.880 and Workout Metaphysical and Ontological Questions and to Leave Social Ethics to the Jurists. 12 00:01:00.880 --> 00:01:07.220 It was typical of 12th century theologians when Peter of Poitiers, later to become the 13 00:01:07.220 --> 00:01:13.860 dominant regent of theology at the Cathedral School of Notre Dame in Paris, declared that 14 00:01:13.860 --> 00:01:20.960 such doubtful questions as usury should be left to the canon lawyers. 15 00:01:20.960 --> 00:01:26.180 After the turn of the thirteenth century, however, when canon and Roman law theories 16 00:01:26.180 --> 00:01:33.380 were already far advanced, the new university-trained philosopher-theologians turned to problems 17 00:01:33.380 --> 00:01:36.720 of social ethics with a will. 18 00:01:36.720 --> 00:01:42.120 Even before the turn of the thirteenth century, such influential theologians at the University 19 00:01:42.120 --> 00:01:49.840 of Paris as Rodolphus Ardent and the Englishman, later Cardinal, Stephen Langton, began to 20 00:01:49.840 --> 00:01:52.760 to Write on Problems of Justice. 21 00:01:52.760 --> 00:01:58.880 Unfortunately in dealing with the concept of just price, the theologians did not follow 22 00:01:58.880 --> 00:02:05.240 the Romanists and Canonists in the sensible view that the free bargaining or market price 23 00:02:05.240 --> 00:02:12.080 is legitimate so long as it stays within a broad zone of the just price. 24 00:02:12.080 --> 00:02:19.400 To the Paris theologians it was immoral, sinful and illicit for the market price to be anything 25 00:02:19.400 --> 00:02:25.840 nothing other than the just price. This of course meant that the just price became a 26 00:02:25.840 --> 00:02:33.920 weapon of compulsion instead of a broadly held standard. Ardent included a just price 27 00:02:33.920 --> 00:02:40.960 as a crucial criterion of a just sale. More emphatically, his colleague and author of 28 00:02:40.960 --> 00:02:47.160 the first constitution of the University of Paris, the Englishman and later Cardinal Robert 29 00:02:47.160 --> 00:02:56.800 of Courson, died 1219, writing about 1204, termed selling goods above the just price 30 00:02:56.800 --> 00:03:03.960 an illicit practice, and the eminent Stephen Langton sternly called any seller who accepts 31 00:03:03.960 --> 00:03:09.360 more than the just price guilty of a mortal sin. 32 00:03:09.360 --> 00:03:15.320 The theologians were well aware of their profound disagreement with the jurists, but clung to 33 00:03:15.320 --> 00:03:18.240 to their New and Extreme Views. 34 00:03:18.240 --> 00:03:28.620 Thus, William of Auzère, 1160-1229, professor of theology at Paris, in 1220 wrote that divine 35 00:03:28.620 --> 00:03:35.960 law which commanded that no sale be higher than the just price, must supersede human 36 00:03:35.960 --> 00:03:40.380 law, which followed Laecio Enormous. 37 00:03:40.380 --> 00:03:47.660 And his colleague, the Englishman Thomas Chabham, also writing about 1220, fanatically insisted 38 00:03:47.660 --> 00:03:54.500 that divine law demanded restitution from the seller, even if the seller were only mistaken 39 00:03:54.500 --> 00:03:58.420 and the mistake was only a penny. 40 00:03:58.420 --> 00:04:04.700 If the theologians insisted that the just price must be strictly obeyed, then what in 41 00:04:04.700 --> 00:04:07.100 the world was it? 42 00:04:07.100 --> 00:04:12.220 While few of the theologians address this critical matter directly, it is clear that 43 00:04:12.220 --> 00:04:18.780 what they had in mind was the same just price as the canonists and romanists, namely the 44 00:04:18.780 --> 00:04:25.140 current price at the particular place, either the common market or the government fixed 45 00:04:25.140 --> 00:04:29.300 price, if such a regulation existed. 46 00:04:29.300 --> 00:04:37.300 The late 12th century Paris theologian Peter Cantor, died 1197, in treating the function 47 00:04:37.300 --> 00:04:44.620 of royal assessors, asserted that the just value of goods is their current price. 48 00:04:44.620 --> 00:04:51.380 More succinctly, the great Franciscan theologian at Paris in the first half of the 13th century, 49 00:04:51.380 --> 00:05:00.900 The Englishman Alexander of Halley's, 1168-1245, declared concisely that a just estimation 50 00:05:00.900 --> 00:05:09.780 of the goods is, as it is sold, commonly in that city or place in which the sale occurs. 51 00:05:09.780 --> 00:05:16.380 Even more clearly, the renowned 13th century German-Dominican professor at Paris, St. Albert 52 00:05:16.380 --> 00:05:25.740 The Great, 1193-1280, put it thus, A price is just which can equal the value of the goods 53 00:05:25.740 --> 00:05:32.180 sold according to the estimation of the market place at that time. 54 00:05:32.180 --> 00:05:38.200 While the theologians in wishing to enforce the current common price were more restrictive 55 00:05:38.200 --> 00:05:44.440 than the canon or Roman jurists, they did constructive work in rehabilitating the image 56 00:05:44.440 --> 00:05:50.440 of the Merchants from the low level to which they had sunk in the writings of the Church Fathers. 57 00:05:50.440 --> 00:06:00.440 As late as Peter Lombard died 1160, Italian professor of theology at Paris and later Bishop of Paris, 58 00:06:00.440 --> 00:06:07.440 the theologians had held the older view that a merchant could not perform his duties without sinning. 59 00:06:07.440 --> 00:06:24.440 The beginning of the full rehabilitation of the merchant came in the form of commentaries on the sentences of Peter Lombard. Strictly, the Sententiarum Quator Libri, 1150-1151. 60 00:06:24.440 --> 00:06:36.440 The commentators, particularly after the turn of the 13th century, engaged in a systematic justification of the merchant and of mercantile profit-making. 61 00:06:36.440 --> 00:06:44.940 In the first place, the leading sentence commentators, including the Dominican professors at Paris, St. Albert the Great, 62 00:06:44.940 --> 00:06:59.940 Commentary 1244-1249, Peter of Tarentes, later Pope Innocent V, died 1276, Commentary 1253-1257, 63 00:06:59.940 --> 00:07:10.640 as well as the Italian theologian at Paris, St. Bonaventure, 1221-1274, a student of Alexander of Halley's, 64 00:07:10.640 --> 00:07:23.140 general of the Franciscan order and later cardinal, commentary 1250-1251, all declared that merchants were essential to society. 65 00:07:23.140 --> 00:07:30.140 This conception was strengthened by the rediscovery of the works of Aristotle by the early 13th century 66 00:07:30.140 --> 00:07:35.140 and the incorporation of Aristotelian philosophy into theology, 67 00:07:35.140 --> 00:07:42.140 first by Albert the Great and most especially by his great student, Thomas Aquinas. 68 00:07:42.140 --> 00:07:49.140 To these new Aristotelians and also to the English Franciscan Alexander of Hales, 69 00:07:49.140 --> 00:07:58.140 The division of labor was necessary to society, as was the concomitant mutual exchange of goods and services. 70 00:07:58.140 --> 00:08:03.140 This was the path of the natural law in society. 71 00:08:03.140 --> 00:08:11.140 More specifically, Thomas Chabham, despite his insistence on every penny of the just price, 72 00:08:11.140 --> 00:08:18.140 observed correctly that merchants performed the function of taking goods from areas of abundance 73 00:08:18.140 --> 00:08:36.060 If trading is a useful and even necessary activity, it follows that profits for maintaining 74 00:08:36.060 --> 00:08:38.900 such activity are justifiable. 75 00:08:38.900 --> 00:08:45.140 Hence, the theologians reiterated the 12th century doctrine of the merchant being allowed 76 00:08:45.140 --> 00:08:50.760 to gain profits for the support of himself and his family. 77 00:08:50.760 --> 00:08:57.080 To the needs justification, the 12th century theologians added the lawful nature of making 78 00:08:57.080 --> 00:09:01.080 profits in order to give to charity. 79 00:09:01.080 --> 00:09:07.620 The Franciscan Alexander of Hales was perhaps the first to call it a just and pious motive 80 00:09:07.620 --> 00:09:12.740 for trading to perform works of charity and mercy. 81 00:09:12.740 --> 00:09:19.900 It was unworthy, however, echoing the Hugguchian doctrine to gain profits for the sake of avarice 82 00:09:19.900 --> 00:09:24.580 or endless and insatiable cupidity. 83 00:09:24.580 --> 00:09:32.100 If the laborer in the Christian tradition was worthy of his hire, Luke 10 verse 7, then 84 00:09:32.100 --> 00:09:37.580 profits from the useful activities of the merchant could be justified as covering his 85 00:09:37.580 --> 00:09:58.940 The Theologians' labor consisted of several types, transporting goods, storage and care, 86 00:09:58.940 --> 00:10:05.400 and as had come in with the 13th century canonists, the assumption of risk. 87 00:10:05.400 --> 00:10:11.540 Its mercantile profits were a payment or reward for the merchant's labor of transportation 88 00:10:11.540 --> 00:10:16.040 and storage, and his assumption of risk. 89 00:10:16.040 --> 00:10:23.180 The risk factor was stressed particularly by Alexander of Hales and St. Thomas Aquinas. 90 00:10:23.180 --> 00:10:29.080 It should be noted, in contrast to many later historians, that the purpose of the jurists' 91 00:10:29.080 --> 00:10:54.880 Robert of Courson was the first 13th century theologian to add a natural law angle to the 92 00:10:54.880 --> 00:11:01.440 The traditional, though flimsily grounded, theological denunciations of usury. 93 00:11:01.440 --> 00:11:05.520 Courson simply appropriated the canonist Hugguccio's 94 00:11:05.520 --> 00:11:12.480 sophisticated moral distinction between a lease and a loan, with the former being licit 95 00:11:12.480 --> 00:11:18.280 and the latter illicit, because ownership of the money had temporarily been shifted 96 00:11:18.280 --> 00:11:20.960 to the borrower. 97 00:11:20.960 --> 00:11:27.400 More influential was fellow Parisian theologian William of Auxerre, who added a string of 98 00:11:27.400 --> 00:11:33.720 new fallacies to the mounting intensity of the Church's assault upon usury. 99 00:11:33.720 --> 00:11:39.840 William ranted that usury was intrinsically evil and monstrous, without really explaining 100 00:11:39.840 --> 00:11:41.320 why. 101 00:11:41.320 --> 00:11:48.480 He also did one better on the standard likening of usury to theft by actually comparing usury 102 00:11:48.480 --> 00:11:51.960 to Murder, to the Detriment of the Former. 103 00:11:51.960 --> 00:11:59.860 Killing, he said, can sometimes be licit, since only certain forms of killing are sinful. 104 00:11:59.860 --> 00:12:05.540 But usury is sinful everywhere, and can never be licit. 105 00:12:05.540 --> 00:12:12.000 Since usury, according to William of Auzère, is sinful by its very nature, this made it 106 00:12:12.000 --> 00:12:19.260 and a violation of the natural law, in addition to its other alleged inequities. 107 00:12:19.260 --> 00:12:25.900 On why usury was a sin against the natural law, William was unclear. 108 00:12:25.900 --> 00:12:32.220 One of his innovative arguments in the anti-usury parade was that a man who charges interest 109 00:12:32.220 --> 00:12:40.840 on a loan is trying to sell time, which is properly the common property of all creatures. 110 00:12:40.840 --> 00:12:47.560 Since time is supposed to be common and free, William of Auxerre and later theologians could 111 00:12:47.560 --> 00:12:54.720 therefore use this argument to condemn as usury not merely a loan, but also charging 112 00:12:54.720 --> 00:12:59.120 a higher price for credit than for cash sales. 113 00:12:59.120 --> 00:13:04.840 In adding the free time argument, William unwittingly touched on the later Austrian 114 00:13:04.840 --> 00:13:09.960 solution to the problem of pure interest on a riskless loan. 115 00:13:09.960 --> 00:13:16.880 The sale not of time, to be sure, but of time preference, where the creditor is selling 116 00:13:16.880 --> 00:13:24.760 the debtor money, a present good, a good useful now, in exchange for an IOU for the 117 00:13:24.760 --> 00:13:32.720 future, which is a future good, a good only available at some point in the future. 118 00:13:32.720 --> 00:13:39.120 But since everyone prefers a present good to an equivalent future good, the universal 119 00:13:39.120 --> 00:13:44.820 and the fact of time preference, the lender will charge and the borrower will be willing 120 00:13:44.820 --> 00:13:48.860 to pay interest on a loan. 121 00:13:48.860 --> 00:13:53.120 Interest is, then, the price of time preference. 122 00:13:53.120 --> 00:13:59.600 The failure of the scholastics to understand or arrive at the concept of time preference 123 00:13:59.600 --> 00:14:06.080 was to do more than anything else to discredit scholastic economics because of its implacable 124 00:14:06.080 --> 00:14:14.280 Universal Hostility to, and Condemnation of, the Universal Practice of Usury. 125 00:14:14.280 --> 00:14:19.400 William of Ozere also tried to grapple with the voluntarist argument. 126 00:14:19.400 --> 00:14:27.080 How could the usury charge be evil and unjust if paid voluntarily by the borrower? 127 00:14:27.080 --> 00:14:32.120 In surely one of the silliest arguments in the history of economic thought, William of 128 00:14:32.120 --> 00:14:38.480 Bozer conceded that the borrower's payment of interest was voluntary, but added that 129 00:14:38.480 --> 00:14:45.640 the borrower would have preferred a free loan still more, so that, in an absolute rather 130 00:14:45.640 --> 00:14:51.840 than a conditional sense, the interest charge was not voluntary. 131 00:14:51.840 --> 00:14:57.480 William somehow failed to see that the same could be said of the buyer of any product, 132 00:14:57.480 --> 00:15:03.920 Since any buyer would prefer a free good to the charge of any price, we could then conclude 133 00:15:03.920 --> 00:15:11.960 that all free exchanges are involuntary and sinful in an absolute sense. 134 00:15:11.960 --> 00:15:18.200 Despite the manifest absurdity of this argument, the conditional voluntary as well as the other 135 00:15:18.200 --> 00:15:25.100 new arguments of William of Auzère were highly influential and immediately incorporated into 136 00:15:25.100 --> 00:15:36.020 The German Dominican St. Albert the Great performed the enormous service to philosophy 137 00:15:36.020 --> 00:15:42.140 of bringing Aristotle and Aristotelianism back to Western thought. 138 00:15:42.140 --> 00:15:47.980 Born in Bavaria to an aristocratic family, Albert was, for a time, German Provincial 139 00:15:47.980 --> 00:15:52.380 of the Dominican Order and Bishop of Regensburg. 140 00:15:52.380 --> 00:15:59.220 But for most of his long life he taught at the universities of Paris and Cologne. 141 00:15:59.220 --> 00:16:04.940 Unfortunately Albert was not nearly as good an economist as he was a philosopher, and 142 00:16:04.940 --> 00:16:10.060 in many ways he took scholastic economics down the wrong road. 143 00:16:10.060 --> 00:16:16.300 It is true that he performed the service of teaching his great pupil, St. Thomas Aquinas, 144 00:16:16.300 --> 00:16:22.300 that the just price is the common market price, and that the merchant is performing a legitimate 145 00:16:22.300 --> 00:16:25.300 and its legitimate social role. 146 00:16:25.300 --> 00:16:40.300 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. 147 00:16:40.300 --> 00:16:50.300 St. Albert did not realize that Aristotle's attack on usury was only part and parcel of the latter's denunciation of all retail trade, 148 00:16:50.300 --> 00:17:01.700 since the Latin translation of Aristotle available to Albert rendered the Greek term for retail trade as a Latin word meaning money changing. 149 00:17:01.700 --> 00:17:14.700 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. 150 00:17:14.700 --> 00:17:23.700 Albert also did great damage to future thought in another of his misinterpretations of Aristotle's Nicomachean Ethics. 151 00:17:23.700 --> 00:17:34.700 Somehow he interpreted the Aristotelian determinant of value not as consumer needs or utility, but as labor and expenses, 152 00:17:34.700 --> 00:17:40.700 thus at least partially prefiguring the later labor theory of value. 153 00:17:40.700 --> 00:17:50.220 7. The Philosopher Theologian, St. Thomas Aquinas 154 00:17:50.220 --> 00:17:58.660 St. Thomas Aquinas, 1225-1274, was the towering intellect of the High Middle Ages, the man 155 00:17:58.660 --> 00:18:05.860 who built on the philosophical system of Aristotle, on the concept of natural law, and on Christian 156 00:18:05.860 --> 00:18:13.320 Theology to Forge Thomism, a mighty synthesis of philosophy, theology, and the sciences 157 00:18:13.320 --> 00:18:15.480 of man. 158 00:18:15.480 --> 00:18:23.040 This young Italian was born an aristocrat, son of Landolf, Count of Aquino at Rocoseca 159 00:18:23.040 --> 00:18:25.780 in the Kingdom of Naples. 160 00:18:25.780 --> 00:18:32.500 Thomas studied at an early age with the Benedictines and later at the University of Naples. 161 00:18:32.500 --> 00:18:38.860 At the age of 15 he tried to enter the New Dominican Order, a place for church intellectuals 162 00:18:38.860 --> 00:18:44.760 and scholars, but was physically prevented from doing so by his parents, who kept him 163 00:18:44.760 --> 00:18:48.240 confined for two years. 164 00:18:48.240 --> 00:18:54.580 Finally St. Thomas escaped, joined the Dominicans, and then studied at Cologne and finally at 165 00:18:54.580 --> 00:18:59.340 Paris under his revered teacher, Albert the Great. 166 00:18:59.340 --> 00:19:04.940 Aquinas took his doctorate at the University of Paris and taught there as well as at other 167 00:19:04.940 --> 00:19:07.980 university centers in Europe. 168 00:19:07.980 --> 00:19:13.980 Aquinas was so immensely corpulent that it was said that a large section had to be carved 169 00:19:13.980 --> 00:19:18.700 out of the round dinner table so that he could sit at it. 170 00:19:18.700 --> 00:19:24.900 Aquinas wrote numerous works, beginning with his commentary on Peter Lombard's sentences 171 00:19:24.900 --> 00:19:31.900 in the 1250s, and ending with his masterful and enormously influential three-part Summa 172 00:19:31.900 --> 00:19:38.500 Theologica, written between 1265 and 1273. 173 00:19:38.500 --> 00:19:44.640 It was the Summa, more than any other work, that was to establish Thomism as the mainstream 174 00:19:44.640 --> 00:19:50.100 of Catholic scholastic theology in centuries to come. 175 00:19:50.100 --> 00:19:57.060 Until recently, historical studies of the just price typically began with St. Thomas, 176 00:19:57.060 --> 00:20:03.260 as if the entire discussion had suddenly leapt into being in the ample person of Aquinas 177 00:20:03.260 --> 00:20:05.860 in the thirteenth century. 178 00:20:05.860 --> 00:20:12.980 We have seen, however, that Aquinas worked in a long and rich canonist, romanist and theological 179 00:20:12.980 --> 00:20:14.620 tradition. 180 00:20:14.620 --> 00:20:20.420 It is not surprising that Aquinas followed his revered teacher, St. Albert, and the other 181 00:20:20.420 --> 00:20:28.160 theologians of the previous century in insisting on the just price for all exchanges, and not 182 00:20:28.160 --> 00:20:34.280 being content with the more liberal legist creed of free bargaining up to the alleged 183 00:20:34.280 --> 00:20:41.200 point of l'ecio enormous, in asserting that divine law, which must take precedence over 184 00:20:41.200 --> 00:20:47.920 for Human Law, Demands Complete Virtue or the Precise Just Price. 185 00:20:47.920 --> 00:20:54.720 Unfortunately, in discussing the just price, St. Thomas stored up great trouble for the 186 00:20:54.720 --> 00:21:02.400 future by being vague about what precisely the just price is supposed to be. 187 00:21:02.400 --> 00:21:08.840 As a founder of a system built on the great Aristotle, Aquinas, following St. Albert before 188 00:21:38.840 --> 00:21:47.480 The Austrian aspect of value based on demand and utility was reinstated in economic thought. 189 00:21:47.480 --> 00:21:55.560 On the other hand, Aristotle's erroneous view of exchange as equating values was rediscovered, 190 00:21:55.560 --> 00:22:00.440 along with the indecipherable shoemaker-builder ratio. 191 00:22:00.440 --> 00:22:06.640 Unfortunately, in the course of the commentary to the Nicomachean Ethics, Thomas followed 192 00:22:06.640 --> 00:22:14.360 St. Albert in seeming to add to utility as a determinant of exchange value, labor plus 193 00:22:14.360 --> 00:22:16.480 expenses. 194 00:22:16.480 --> 00:22:23.160 This gave hostage to the later idea that St. Thomas had either added to Aristotle's utility 195 00:22:23.160 --> 00:22:31.820 theory of value a cost of production theory, labor plus expenses, or even replaced utility 196 00:22:31.820 --> 00:22:34.720 by a cost theory. 197 00:22:34.720 --> 00:22:41.240 Some commentators have even declared that Aquinas had adopted a labor theory of value, capped 198 00:22:41.240 --> 00:22:48.080 by the notorious and triumphant sentence by the 20th century Anglican socialist historian 199 00:22:48.080 --> 00:22:50.900 Richard Henry Taney. 200 00:22:50.900 --> 00:22:56.680 The true descendant of the doctrines of Aquinas is the labor theory of value. 201 00:22:56.680 --> 00:23:01.500 The last of the school men is Karl Marx. 202 00:23:01.500 --> 00:23:08.100 It has taken historians several decades to recover from 20's disastrous misinterpretation. 203 00:23:08.100 --> 00:23:14.620 Indeed, the scholastics were sophisticated thinkers and social economists who favored 204 00:23:14.620 --> 00:23:22.300 trade and capitalism, and advocated the common market price as the just price, with the exception 205 00:23:22.300 --> 00:23:25.340 of the problem of usury. 206 00:23:25.340 --> 00:23:32.540 Even in value theory, the labor plus expenses discussion in Aquinas is an anomaly. 207 00:23:32.540 --> 00:23:41.300 For labor plus expenses, never just labor, appears only in Aquinas' commentary and not 208 00:23:41.300 --> 00:23:44.340 in the Summa, his magnum opus. 209 00:23:44.340 --> 00:23:52.300 Moreover, we have seen that labor plus expenses was a formula generally used in Aquinas' times 210 00:23:52.300 --> 00:24:00.020 to justify the profits of merchants rather than as a means of determining economic value. 211 00:24:00.020 --> 00:24:06.460 It is therefore likely that Aquinas was using the concept in this sense, making the sensible 212 00:24:06.460 --> 00:24:13.280 point that a merchant who failed in the long run to cover his costs and not to make profits 213 00:24:13.280 --> 00:24:15.700 would go out of business. 214 00:24:15.700 --> 00:24:21.220 In addition, there are many indications that Aquinas adhered to the common view of the 215 00:24:21.220 --> 00:24:30.180 Churchman of his and previous times that the just price was the common market price. If so, 216 00:24:30.180 --> 00:24:37.460 then he could scarcely also hold that the just price equaled cost of production, since the two 217 00:24:37.460 --> 00:24:46.100 can and do differ. Thus his conclusion in the Summa was that the value of economic goods is that which 218 00:24:46.100 --> 00:24:53.460 comes into human use and is measured by a monetary price, for which purpose money was invented. 219 00:24:54.980 --> 00:25:03.540 Particularly revealing was a reply Aquinas made as early as 1262 in a letter to Jacopo da Viterbo, 220 00:25:04.180 --> 00:25:12.020 died 1308, a lector of the Dominican monastery in Florence and later Archbishop of Naples. 221 00:25:12.020 --> 00:25:20.260 In his letter, Aquinas referred to the common market price as the normative and just price 222 00:25:20.260 --> 00:25:23.420 with which to compare other contracts. 223 00:25:23.420 --> 00:25:31.300 Moreover, in the Summa, Aquinas notes the influence of supply and demand on prices. 224 00:25:31.300 --> 00:25:39.220 A more abundant supply in one place will tend to lower price in that place, and vice versa. 225 00:25:39.220 --> 00:25:45.480 Furthermore, St. Thomas described without at all condemning the activities of merchants 226 00:25:45.480 --> 00:25:52.460 in making profits by buying goods where they were abundant and cheap, and then transporting 227 00:25:52.460 --> 00:25:56.740 and selling them in places where they are dear. 228 00:25:56.740 --> 00:26:02.100 None of this looks like a cost of production view of the just price. 229 00:26:02.100 --> 00:26:09.580 Finally, and most charmingly and crucially, Aquinas, in his great Summa, raised a question 230 00:26:09.580 --> 00:26:12.820 that had been discussed by Cicero. 231 00:26:12.820 --> 00:26:17.620 A merchant is carrying grain to a famine-stricken area. 232 00:26:17.620 --> 00:26:24.820 He knows that soon other merchants are following him with many more supplies of grain. 233 00:26:24.820 --> 00:26:31.340 Is the merchant obliged to tell the starving citizenry of the supplies coming soon, and 234 00:26:31.340 --> 00:26:40.340 and thereby suffer a lower price. Or is it all right for him to keep silent and reap the rewards of a high price? 235 00:26:40.340 --> 00:26:48.340 To Cicero, the merchant was duty-bound to disclose his information and sell at a lower price. 236 00:26:48.340 --> 00:26:58.340 But St. Thomas argued differently. Since the arrival of the later merchants was a future event and therefore uncertain, 237 00:26:58.340 --> 00:27:04.400 Aquinas declared Justice did not require him to tell his customers about the impending 238 00:27:04.400 --> 00:27:10.820 arrival of his competitors. He could sell his own grain at the prevailing market price 239 00:27:10.820 --> 00:27:19.120 for that area, even though it was extremely high. Of course, Aquinas went on amiably, 240 00:27:19.120 --> 00:27:25.440 if the merchant wished to tell his customers anyway, that would be especially virtuous. 241 00:27:25.440 --> 00:27:29.760 Justice did not require him to do so. 242 00:27:29.760 --> 00:27:37.760 There is no starker example of Aquinas's opting for the just price as the current price determined 243 00:27:37.760 --> 00:27:44.720 by demand and supply rather than the cost of production, which of course did not change 244 00:27:44.720 --> 00:27:49.280 much from the area of abundance to the famine area. 245 00:27:49.280 --> 00:27:57.400 A piece of indirect evidence is that Giles of Lysines died circa 1304, a student of 246 00:27:57.400 --> 00:28:04.760 Albert and Aquinas and a Dominican professor of theology at Paris, analyzed the just price 247 00:28:04.760 --> 00:28:11.040 similarly and flatly declared that it was the common market price. 248 00:28:11.040 --> 00:28:17.960 Giles stressed, furthermore, that a good is properly worth as much as it can be sold for 249 00:28:17.960 --> 00:28:21.460 without Coercion or Fraud. 250 00:28:21.460 --> 00:28:28.080 It should come as no surprise that Aquinas, in contrast to Aristotle, was highly favorable 251 00:28:28.080 --> 00:28:31.060 towards the activities of the merchant. 252 00:28:31.060 --> 00:28:37.360 Mercantile profit, he declared, was a stipend for the merchant's labor and a reward for 253 00:28:37.360 --> 00:28:41.200 shouldering the risks of transportation. 254 00:28:41.200 --> 00:28:48.960 In a commentary to Aristotle's Politics, 1272, Aquinas noted shrewdly that greater risks 255 00:28:48.960 --> 00:28:54.820 in sea transportation resulted in greater profits for merchants. 256 00:28:54.820 --> 00:29:01.420 In his commentary to the sentences of Peter Lombard, written in the 1250s, Thomas followed 257 00:29:01.420 --> 00:29:08.960 preceding theologians in arguing that merchants could ply their trade without committing sin. 258 00:29:08.960 --> 00:29:15.240 But in his later work, he was far more positive, pointing out that merchants perform the important 259 00:29:15.240 --> 00:29:23.000 function of bringing goods from where they are abundant to where they are scarce. 260 00:29:23.000 --> 00:29:28.440 Particularly important was Aquinas's brief outline of the mutual benefit each person 261 00:29:28.440 --> 00:29:31.320 derives from exchange. 262 00:29:31.320 --> 00:29:37.380 As he put it in the Summa, buying and selling seems to have been instituted for the mutual 263 00:29:37.380 --> 00:29:52.540 Building on Aristotle's theory of money, Aquinas pointed out its indispensability as a medium 264 00:29:52.540 --> 00:29:59.420 of exchange, a measure of expression of values, and a unit of account. 265 00:29:59.420 --> 00:30:05.340 In contrast to Aristotle, Aquinas was not frightened at the idea of the value of money 266 00:30:05.340 --> 00:30:30.140 It was the peculiar fate of the usury prohibition in the Middle Ages that every time it seemed 267 00:30:30.140 --> 00:30:36.620 to be weakening in the face of reality, theorists would strengthen the ban. 268 00:30:36.620 --> 00:30:42.780 At a time when the highly sophisticated and knowledgeable Cardinal Hostiensis was seeking 269 00:30:42.780 --> 00:30:50.340 to soften the prohibition, St. Thomas Aquinas unfortunately tightened it once more. 270 00:30:50.340 --> 00:30:56.220 Like his teacher, St. Albert, Aquinas added the Aristotelian objection to the medieval 271 00:30:56.220 --> 00:31:02.860 will ban on usury, except that Aquinas also inserted something new. 272 00:31:02.860 --> 00:31:08.660 In the medieval tradition of starting with the conclusion, the crushing of usury and 273 00:31:08.660 --> 00:31:16.900 seizing any odd argument to hand which might lead to it, Aquinas added a new twist to Aristotelian 274 00:31:16.900 --> 00:31:19.060 doctrine. 275 00:31:19.060 --> 00:31:25.140 Instead of stressing the barrenness of money as a major argument against usury, Aquinas 276 00:31:25.140 --> 00:31:32.700 has seized on the term measure and stress that since money, in terms of money, of course, 277 00:31:32.700 --> 00:31:40.100 has a fixed legal face value, this means that the formal nature of money must be to remain 278 00:31:40.100 --> 00:31:41.900 fixed. 279 00:31:41.900 --> 00:31:48.640 The purchasing power of money can fluctuate due to changes in the supply of goods. 280 00:31:48.640 --> 00:31:51.380 That is legitimate and natural. 281 00:31:51.380 --> 00:31:58.900 But when the holder of money sets out to produce variations in its value by charging interest, 282 00:31:58.900 --> 00:32:06.780 he violates the nature of money and is therefore sinful and mindless of the natural law. 283 00:32:06.780 --> 00:32:13.980 That such errant nonsense should swiftly assume a central place in all later scholastic prohibitions 284 00:32:13.980 --> 00:32:22.260 is testimony to the way that irrationality can seize the thought of even so great a champion 285 00:32:22.260 --> 00:32:26.500 of reason as Aquinas and his followers. 286 00:32:26.500 --> 00:32:34.340 Why the fixed legal face value of a coin should mean that its value in exchange, at least 287 00:32:34.340 --> 00:32:40.480 from the side of money, should not change, or why the charging of interest should be 288 00:32:40.480 --> 00:32:55.480 The theory, which can be confused with a change in the purchasing power of money, simply testifies to the human propensity for fallacy, especially when prohibiting usury had already become the overriding goal. 289 00:32:55.480 --> 00:33:08.480 But Aquinas' argument against usury involved another invention of his own. Money, to him, is totally consumed. It disappears in exchange. 290 00:33:08.480 --> 00:33:15.780 Therefore, money's use is equivalent to its ownership. Hence, when one charges interest 291 00:33:15.780 --> 00:33:23.260 on a loan, one is charging twice, for the money itself and for its use, although they 292 00:33:23.260 --> 00:33:26.120 are one and the same. 293 00:33:26.120 --> 00:33:31.760 Highlighting this odd thesis was Aquinas's discussion of why it was legitimate for an 294 00:33:31.760 --> 00:33:38.040 of Money to charge rent for someone to display a coin. 295 00:33:38.040 --> 00:33:44.720 In that case, there is a bailment, a charge for keeping one's money in trust. 296 00:33:44.720 --> 00:33:51.800 But the reason why this charge is licit for Aquinas is that the display of money is only 297 00:33:51.800 --> 00:34:00.680 a secondary use, a use separate from its ownership, since money is not consumed or does not disappear 298 00:34:00.680 --> 00:34:09.360 in the process. The primary use of money is to disappear in the purchase of goods. 299 00:34:09.360 --> 00:34:14.640 There are several grave problems with this new weapon invented by Aquinas with which 300 00:34:14.640 --> 00:34:23.600 to beat usury. First, what is wrong with charging twice for ownership and use? Second, even 301 00:34:23.600 --> 00:34:30.000 if somehow wrong, this act scarcely bears the weight of sin and excommunication that 302 00:34:30.000 --> 00:34:35.760 that the Catholic Church had loaded for centuries upon the hapless usurer. 303 00:34:35.760 --> 00:34:42.280 And third, if Aquinas had looked beyond the legal formalism of money and at the goods 304 00:34:42.280 --> 00:34:47.960 which the borrower purchased with his loan, he might have seen that these purchased goods 305 00:34:47.960 --> 00:34:55.480 were, in an important sense, fruitful, so that while the money disappeared in purchases, 306 00:34:55.480 --> 00:35:01.920 In an economic sense, the goods equivalent of money was retained by the borrower. 307 00:35:01.920 --> 00:35:10.380 St. Thomas's stress on consumption of money led to a curious shift on the usury question. 308 00:35:10.380 --> 00:35:17.980 In contrast to all theorists since Gratian, the sin now became not charging interest on 309 00:35:17.980 --> 00:35:27.380 on a loan per se, but only on a good, money, that disappears. Therefore, for Aquinas, charging 310 00:35:27.380 --> 00:35:34.500 interest on a loan of goods in kind would not be condemned as usury. 311 00:35:34.500 --> 00:35:41.160 But if the usury prohibition on money was tightened with new arguments, Aquinas continued 312 00:35:41.160 --> 00:35:49.720 and strengthened the previous tradition of justifying investments in a partnership, Societas. 313 00:35:49.720 --> 00:35:56.560 A Societas was licit because each partner retained ownership of his money and ran the 314 00:35:56.560 --> 00:36:03.160 risk of loss, hence profit on such risky investments was legitimate. 315 00:36:03.160 --> 00:36:10.040 In the late 11th century, Ivo of Chartres had already briefly distinguished a Societas 316 00:36:10.040 --> 00:36:16.720 from a usurious loan, and the distinction was elaborated in the early thirteenth century 317 00:36:16.720 --> 00:36:25.640 by the theologian Robert of Courson circa 1204 and in John Teutonicus's Gloss on Gracian 318 00:36:25.640 --> 00:36:34.160 1215. Courson had made it clear that even an inactive partner risked his capital in 319 00:36:34.160 --> 00:36:36.160 and an enterprise. 320 00:36:36.160 --> 00:36:42.400 This of course meant that types of inactive partnerships such as sea loans for specific 321 00:36:42.400 --> 00:36:49.280 voyages slid over into actual loans and the lines were often fuzzy. 322 00:36:49.280 --> 00:36:56.200 Besides, and this was a problem that no one at the time would face, wasn't any lender 323 00:36:56.200 --> 00:37:03.520 necessarily risking his capital since a borrower could always turn out to be unable to repay 324 00:37:03.520 --> 00:37:06.520 Even the Principle of a Loan? 325 00:37:06.520 --> 00:37:12.720 Aquinas now lent his enormous authority to the view that the societas was perfectly 326 00:37:12.720 --> 00:37:16.080 licit and not usurious. 327 00:37:16.080 --> 00:37:22.400 He succinctly declared that the investor of money does not transfer ownership to a working 328 00:37:22.400 --> 00:37:23.840 partner. 329 00:37:23.840 --> 00:37:30.720 That ownership is retained by the investor, so that he risks his money and can legitimately 330 00:37:30.720 --> 00:37:40.760 The Trouble with this, however, is that Aquinas here abandons his own thesis that the ownership 331 00:37:40.760 --> 00:37:44.880 of money is the same thing as its use. 332 00:37:44.880 --> 00:37:51.440 For the use of the money was transferred to the working partner, and therefore, on St. 333 00:37:51.440 --> 00:37:58.820 Thomas's own grounds, he should have condemned all partnerships, as well as the societas, 334 00:37:58.820 --> 00:38:02.300 is illicit and usurious. 335 00:38:02.300 --> 00:38:08.260 Confronting a 13th century world in which the societas flourished and was crucial to 336 00:38:08.260 --> 00:38:14.500 commercial and economic life, it was unthinkable to Aquinas that he should throw the economy 337 00:38:14.500 --> 00:38:22.140 into chaos by condemning this well-established instrument of trade and finance. 338 00:38:22.140 --> 00:38:28.580 Instead of ownership going with the use of a consumable item then, Aquinas now advanced 339 00:38:28.580 --> 00:38:33.660 That's the idea of ownership going with incidents of risk. 340 00:38:33.660 --> 00:38:40.820 The investor risks his capital, therefore he retains ownership of his investment. 341 00:38:40.820 --> 00:38:44.940 A seemingly sensible way out, but flimsy. 342 00:38:44.940 --> 00:38:51.640 Not only did Aquinas thereby contradict his own bizarre ownership theory, he also failed 343 00:38:51.640 --> 00:38:59.300 to realize that, after all, not all ownership need be particularly risky. 344 00:38:59.300 --> 00:39:05.120 Another problem is that the risk-taker is making a profit on the investment of money, 345 00:39:05.120 --> 00:39:08.080 which is supposed to be sterile. 346 00:39:08.080 --> 00:39:14.260 Instead of stating that all profit should go to the working partner, St. Thomas explicitly 347 00:39:14.260 --> 00:39:20.960 says that the capitalist rightly receives the gain coming thence, that is, from the 348 00:39:20.960 --> 00:39:25.720 the use of his money as from his own property. 349 00:39:25.720 --> 00:39:32.400 It looks very much as if St. Thomas is here treating money as fertile and productive, 350 00:39:32.400 --> 00:39:37.000 providing an independent reward to the capitalist. 351 00:39:37.000 --> 00:39:42.720 Yet despite the inner contradictions rife in St. Thomas's treatment of usury and the 352 00:39:42.720 --> 00:39:49.720 societas, his entire doctrine continued to be dominant for 200 years. 353 00:39:49.720 --> 00:39:58.720 Finally, Aquinas was a firm believer in the superiority of private to communal property and resource ownership. 354 00:39:58.720 --> 00:40:04.720 Private ownership becomes a necessary feature of man's earthly state. 355 00:40:04.720 --> 00:40:09.720 It is the best guarantee of a peaceful and orderly society, 356 00:40:09.720 --> 00:40:15.720 and it provides maximum incentive for the care and efficient use of property. 357 00:40:15.720 --> 00:40:19.720 Thus in the Summa, St. Thomas Keanley writes, 358 00:40:40.720 --> 00:40:44.720 Furthermore, developing the Roman law theory of acquisition, 359 00:40:44.720 --> 00:40:51.960 Aquinas, anticipating the famous theory of John Locke, grounded the right of original 360 00:40:51.960 --> 00:40:59.360 acquisition of property on two basic factors, labor and occupation. 361 00:40:59.360 --> 00:41:06.480 The initial right of each person is to ownership over his own self, in Aquinas' view, in a 362 00:41:06.480 --> 00:41:10.620 proprietary right over himself. 363 00:41:10.620 --> 00:41:17.420 Each individual's self-ownership is based on the capacity of man as a rational being. 364 00:41:17.420 --> 00:41:26.020 Next, cultivation and use of previously unused land establishes a just property title in 365 00:41:26.020 --> 00:41:30.340 the land in one man, rather than in others. 366 00:41:30.340 --> 00:41:36.980 St. Thomas's theory of acquisition was further clarified and developed by his close student 367 00:41:36.980 --> 00:41:47.420 and Disciple, John of Paris, Jean Quidor, circa 1250-1306, a member of the same Dominican 368 00:41:47.420 --> 00:41:53.220 community of Saint Jacques in Paris as Aquinas. 369 00:41:53.220 --> 00:41:59.180 Championing the absolute right of private property, Quidor declared that lay property 370 00:41:59.180 --> 00:42:06.760 is acquired by individual people through their own skill, labor and diligence, and individuals 371 00:42:06.760 --> 00:42:13.200 Individuals as individuals have right and power over it and valid lordship. 372 00:42:13.200 --> 00:42:20.960 Each person may order his own and dispose, administer, hold or alienate it as he wishes, 373 00:42:20.960 --> 00:42:28.340 so long as he causes no injury to anyone else, since he is Lord. 374 00:42:28.340 --> 00:42:34.280 This homesteading theory of property has been held by many historians to be the ancestor 375 00:42:34.280 --> 00:42:38.080 of the Marxian Labor Theory of Value. 376 00:42:38.080 --> 00:42:44.920 But this charge confuses two very different things, determination of the economic value 377 00:42:44.920 --> 00:42:52.760 or price of a good, and a decision on how unused resources are to go over into private 378 00:42:52.760 --> 00:42:54.640 hands. 379 00:42:54.640 --> 00:43:02.780 The Aquinas John of Paris Locke view is the labor theory, defining labor as the expenditure 380 00:43:02.780 --> 00:43:10.380 of Human Energy, rather than working for a wage, of the origin of property, not a labor 381 00:43:10.380 --> 00:43:13.500 theory of value. 382 00:43:13.500 --> 00:43:21.020 In contrast to his forerunner, Aristotle, labor for Aquinas was scarcely to be despised. 383 00:43:21.020 --> 00:43:28.340 On the contrary, labor is a dictate of positive, natural and divine law. 384 00:43:28.340 --> 00:43:33.900 Aquinas is very much aware that God in the Bible gave the dominion over all the earth 385 00:43:33.900 --> 00:43:36.780 to man for his use. 386 00:43:36.780 --> 00:43:43.960 Man's function is to take the materials provided by nature and, by discerning natural law, 387 00:43:43.960 --> 00:43:48.620 to mold that reality to achieve his purposes. 388 00:43:48.620 --> 00:43:55.100 While Aquinas scarcely has any conception of economic growth or capital accumulation, 389 00:43:55.100 --> 00:44:00.600 He clearly posits man as active molder of his life. 390 00:44:00.600 --> 00:44:06.820 Gone is the passive Greek ideal of conforming to given conditions or to the requirements 391 00:44:06.820 --> 00:44:08.940 of the polis. 392 00:44:08.940 --> 00:44:15.320 Perhaps St. Thomas's most important contribution concerned the underpinning or framework of 393 00:44:15.320 --> 00:44:20.300 economics rather than strictly economic matters. 394 00:44:20.300 --> 00:44:25.960 For in reviving and building on Aristotle, St. Thomas introduced and established in the 395 00:44:25.960 --> 00:44:32.660 Christian world a philosophy of natural law, a philosophy in which human reason is able 396 00:44:32.660 --> 00:44:36.780 to master the basic truths of the universe. 397 00:44:36.780 --> 00:44:42.700 In the hands of Aquinas, as in Aristotle, philosophy, with reason as its instrument 398 00:44:42.700 --> 00:44:48.140 of knowledge, became once again the queen of the sciences. 399 00:44:48.140 --> 00:44:54.380 Human reason demonstrated the reality of the universe and of the natural law of discoverable 400 00:44:54.380 --> 00:44:57.140 classes of entities. 401 00:44:57.140 --> 00:45:02.300 Human reason could know about the nature of the world and it could therefore know the 402 00:45:02.300 --> 00:45:06.140 proper ethics for mankind. 403 00:45:06.140 --> 00:45:10.220 Ethics then became decipherable by reason. 404 00:45:10.220 --> 00:45:16.460 This rationalist tradition cut against the Fideism of the earlier Christian Church, the 405 00:45:16.460 --> 00:45:25.260 Debilitating idea that only faith and supernatural revelation can provide an ethics for mankind. 406 00:45:25.260 --> 00:45:31.580 Debilitating because if the faith is lost, then ethics is lost as well. 407 00:45:31.580 --> 00:45:40.020 Thomism, in contrast, demonstrated that the laws of nature, including the nature of mankind, 408 00:45:40.020 --> 00:45:45.580 provided the means for man's reason to discover a rational ethics. 409 00:45:45.580 --> 00:45:52.140 To be sure, God created the natural laws of the universe, but the apprehension of these 410 00:45:52.140 --> 00:45:59.400 natural laws was possible whether or not one believed in God as Creator. 411 00:45:59.400 --> 00:46:05.980 In this way, a rational ethic for man was provided on a truly scientific rather than 412 00:46:05.980 --> 00:46:09.860 on a supernatural foundation. 413 00:46:09.860 --> 00:46:16.520 In the subset of natural law theory that deals with rights, St. Thomas led a swing back from 414 00:46:16.520 --> 00:46:24.520 the 12th century concept of a right as a claim on others, rather than as an inviolable area 415 00:46:24.520 --> 00:46:32.260 of property right, of the dominion of an individual to be defended from all others. 416 00:46:32.260 --> 00:46:38.100 In a brilliant work, Professor Richard Tuck points out that early Roman law was marked 417 00:46:38.100 --> 00:46:45.340 by an active property-right dominion view of rights, while the later 12th century Romanists 418 00:46:45.340 --> 00:46:51.940 at Bologna converted the concept of right to the passive listing of claims on other 419 00:46:51.940 --> 00:46:53.780 men. 420 00:46:53.780 --> 00:47:00.660 This passive as opposed to active concept of rights reflected the network of interwoven 421 00:47:00.660 --> 00:47:06.020 customary and status claims that marked the Middle Ages. 422 00:47:06.020 --> 00:47:12.160 Curse is, in an important sense, the ancestor of the modern assertion of such claim rights 423 00:47:12.160 --> 00:47:19.540 as the right to a job, the right to three square meals a day, etc., all of which can 424 00:47:19.540 --> 00:47:25.280 only be fulfilled by coercing others to obtain them. 425 00:47:25.280 --> 00:47:32.420 At 13th century Bologna, however, a curseus began a swing back to an active property rights 426 00:47:32.420 --> 00:47:40.420 and the natural rights theory, with the property of each individual a dominion which must be defended against all others. 427 00:47:40.420 --> 00:47:50.420 Aquinas adopted the idea of a natural dominion without, however, going all the way to a genuine natural rights theory, 428 00:47:50.420 --> 00:47:58.420 which asserts that private property is natural and not a convention created by society or government. 429 00:47:58.420 --> 00:48:05.320 Aquinas was moved to adopt the dominion theory because of the mighty late thirteenth century 430 00:48:05.320 --> 00:48:11.140 ideological battles between the dominican and franciscan orders. 431 00:48:11.140 --> 00:48:17.860 The franciscans, committed to total poverty, claimed that their subsistence use of resources 432 00:48:17.860 --> 00:48:21.180 was not really private property. 433 00:48:21.180 --> 00:48:26.860 This pleasant fiction enabled the franciscans to claim that in their state of voluntary 434 00:48:26.860 --> 00:48:33.100 In contemporary poverty, they had risen above the ownership or possession of property. 435 00:48:33.100 --> 00:48:40.580 They maintained, oddly, that purely consumption use of resources, such as they engaged in, 436 00:48:40.580 --> 00:48:44.340 did not imply the possession of property. 437 00:48:44.340 --> 00:48:52.500 Supposedly the sale or giving away of a resource was necessary to qualify it as property. 438 00:48:52.500 --> 00:48:59.020 Self-sufficiency or isolation did not, according to the Franciscan view, allow property to 439 00:48:59.020 --> 00:49:00.980 exist. 440 00:49:00.980 --> 00:49:08.960 The rival Dominicans, including Aquinas, understandably upset by this claim, began to insist that 441 00:49:08.960 --> 00:49:17.700 all use necessarily implied dominion, the possession and control of resources, and therefore 442 00:49:17.700 --> 00:49:20.700 property. 443 00:49:20.700 --> 00:49:31.340 8. Late 13th Century Scholastics, Franciscans and Utility Theory 444 00:49:31.340 --> 00:49:37.340 The first victory in the struggle over property right concepts was won by the Franciscans, 445 00:49:37.340 --> 00:49:44.660 whose theory was upheld by their protector, Pope Nicholas III, in his bull, Exeot, issued 446 00:49:44.660 --> 00:49:47.580 in 1279. 447 00:49:47.580 --> 00:49:53.040 This dominant theory was elaborated by the first great critic of Thomism, the British 448 00:49:53.040 --> 00:50:02.480 Franciscan scholastic John Duns Scotus, 1265-1308, professor of theology at Oxford and later 449 00:50:02.480 --> 00:50:09.920 at Paris. Aquinas had maintained that neither private nor communal property was a necessary 450 00:50:09.920 --> 00:50:23.440 Scotus, on the contrary, boldly maintained that in a state of natural innocence, both 451 00:50:23.440 --> 00:50:31.600 natural and divine law decree that all resources be held in common, so that no private property 452 00:50:31.600 --> 00:50:34.840 or dominion may exist. 453 00:50:34.840 --> 00:50:41.040 In this supposedly idyllic primitive communism, each person may take what he needs from the 454 00:50:41.040 --> 00:50:43.600 common store. 455 00:50:43.600 --> 00:50:50.120 Wright's theory was scarcely the only Franciscan deviation from mainline Thomism. 456 00:50:50.120 --> 00:50:56.240 As Fideasts, the Franciscans harked back to earlier Christian tradition before it had 457 00:50:56.240 --> 00:51:00.500 been superseded by the rationalism of St. Thomas. 458 00:51:00.500 --> 00:51:08.980 They began, therefore, to deprecate the idea of irrational ethics, and hence, of natural law. 459 00:51:08.980 --> 00:51:14.300 In the matter of rights theory, at least, the Franciscans were soon smashed. 460 00:51:14.300 --> 00:51:25.380 Reacting against the Franciscans, Pope John XXII issued his famous bull, Quia Vir Reprobus, 1329. 461 00:51:25.380 --> 00:51:31.980 Quea asserted trenchantly that God's dominion over the earth was reflected in man's dominion 462 00:51:31.980 --> 00:51:36.660 or property over his material possessions. 463 00:51:36.660 --> 00:51:42.580 Property rights, therefore, were not, as even Aquinas had believed, a product of positive 464 00:51:42.580 --> 00:51:45.140 law or social convention. 465 00:51:45.140 --> 00:51:51.140 They were rooted in man's nature as created by divine law. 466 00:51:51.140 --> 00:51:57.140 Property rights were therefore natural and coextensive with man's actions in the material 467 00:51:57.140 --> 00:51:58.380 world. 468 00:51:58.380 --> 00:52:02.420 The Franciscans were effectively routed on this point. 469 00:52:02.420 --> 00:52:08.700 It was now established, as Richard Tuck puts it, that property was a basic fact about human 470 00:52:08.700 --> 00:52:15.420 beings, on which their social and political concepts had to be posited. 471 00:52:15.420 --> 00:52:21.720 In more strictly economic matters, Franciscans could either adhere to or deviate from the 472 00:52:21.720 --> 00:52:26.440 mainline Thomist concept of the just price. 473 00:52:26.440 --> 00:52:30.580 Scotus himself set forth a deviationist view. 474 00:52:30.580 --> 00:52:37.120 In his commentary on Peter Lombard's sentences, Scotus elaborated a minority view that many 475 00:52:37.120 --> 00:52:45.160 historians have wrongly attributed to scholasticism as a whole, that the just price was the merchant's 476 00:52:45.160 --> 00:52:55.160 The Merchant's cost of production plus compensation for the industry, labor and risk involved in bringing his product to market. 477 00:52:55.160 --> 00:53:02.160 The compensation, furthermore, was supposed to provide adequate support for the family of the merchant. 478 00:53:02.160 --> 00:53:12.160 In this way, labor plus expenses plus risk, previously employed to justify whatever profits the merchant might obtain, 479 00:53:12.160 --> 00:53:18.400 in 2009, was now transformed into the determinant of the just price. 480 00:53:18.400 --> 00:53:25.560 SCOTUS made this cost of production a theory of just price, in contrast to the long-standing 481 00:53:25.560 --> 00:53:33.360 mainstream scholastic view that the just price was the common price on the market. 482 00:53:33.360 --> 00:53:39.840 Although a Franciscan, the British scholastic at the University of Paris, Richard of Middleton, 483 00:53:39.840 --> 00:53:48.040 circa 1249 to 1306, followed the economic doctrine of Aquinas and stressed need and 484 00:53:48.040 --> 00:53:55.920 utility as the determinants of economic value. The just price following the main scholastic 485 00:53:55.920 --> 00:54:03.120 line was equivalent to the common market price determined by these needs. Middleton also 486 00:54:03.120 --> 00:54:11.880 also underlined Aquinas' vitally important concept that both parties to an exchange benefit. 487 00:54:11.880 --> 00:54:18.220 Becoming more precise than Aquinas, Middleton pointed out that, say, when a horse is sold 488 00:54:18.220 --> 00:54:25.520 for money, both the buyer and the seller gain from the transaction, since the buyer demonstrates 489 00:54:25.520 --> 00:54:31.140 that he needs the horse more than the money, while the seller prefers the money to the 490 00:54:31.140 --> 00:54:38.900 In addition to developing this crucial concept of mutual benefit, Richard of Middleton was 491 00:54:38.900 --> 00:54:44.520 the first to apply that concept to international trade. 492 00:54:44.520 --> 00:54:50.840 International trade, as well as individual exchange, brings mutual benefits. 493 00:54:50.840 --> 00:54:57.200 Middleton illustrated this idea by postulating two countries, country A, which has a super 494 00:54:57.200 --> 00:55:03.800 for Abundance of Grain but a Dirth of Wine, and Country B which has an abundance of wine 495 00:55:03.800 --> 00:55:10.800 but little grain. Both countries will then benefit by exchanging their respective surpluses. 496 00:55:11.640 --> 00:55:17.760 The merchants will also profit by transporting grain from Country A where it is abundant 497 00:55:17.760 --> 00:55:24.760 and its price is therefore cheap, to Country B where it is scarce and commands a high price. 498 00:55:24.760 --> 00:55:35.760 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. 499 00:55:35.760 --> 00:55:46.760 By buying and selling at current market prices, the merchants are trading at the just price, and make a profit, yet exploit no one. 500 00:55:46.760 --> 00:55:54.760 The merchants are justly compensated for performing a useful service and for taking trouble and risks. 501 00:55:54.760 --> 00:55:59.760 The only point missed by Middleton in this sophisticated analysis 502 00:55:59.760 --> 00:56:06.760 is that the actions of the various merchants will move toward equalizing prices in the two countries. 503 00:56:06.760 --> 00:56:14.760 An even more dazzling contribution to economic thought was made by a Provencal Franciscan friar 504 00:56:14.760 --> 00:56:24.200 prior, for many years lector at Florence. Pierre de Jean-Olivier, 1248-1298, in Two 505 00:56:24.200 --> 00:56:31.320 Treatises on Contracts, one on usury and the other on purchases and sales, pointed out 506 00:56:31.320 --> 00:56:41.640 that economic value was determined by three factors, scarcity, raritas, usefulness, virtuositas, 507 00:56:41.640 --> 00:56:50.400 Desirability or Desiredness, Complacibilitas. The effect of scarcity, or what we would now 508 00:56:50.400 --> 00:56:57.680 call supply, is clear. The scarcer a product, the more valuable it is, and therefore the 509 00:56:57.680 --> 00:57:04.400 higher the price. The more abundant the product, the greater the supply, on the other hand, 510 00:57:04.400 --> 00:57:08.400 and the lower the value and the price. 511 00:57:08.400 --> 00:57:17.400 Olévy's remarkable contribution was to investigate the previously vague concept of need or utility. 512 00:57:17.400 --> 00:57:25.400 Aquinas's student and disciple, the Dominican Giles of Lecine, teaching at the University of Paris, 513 00:57:25.400 --> 00:57:33.400 had taken the utility concept a step further by stating that goods are more or less valuable on the market 514 00:57:33.400 --> 00:57:36.400 according to the degree of their utility. 515 00:57:36.400 --> 00:57:41.400 But now, Olivier separated utility into two parts. 516 00:57:41.400 --> 00:57:47.400 One was virtuositas, or the objective utility of a good, 517 00:57:47.400 --> 00:57:52.400 the objective power it has to satisfy human wants. 518 00:57:52.400 --> 00:57:58.400 But, as Olivier explains, the important factor in determining price 519 00:57:58.400 --> 00:58:06.340 is complacibilitas, or subjective utility, the subjective desirability of a product to 520 00:58:06.340 --> 00:58:08.800 the individual consumers. 521 00:58:08.800 --> 00:58:16.040 Furthermore, Olavi squarely confronted the paradox of value which would later confound 522 00:58:16.040 --> 00:58:22.880 Adam Smith and the classical economists, and did far better than they at solving it. 523 00:58:22.880 --> 00:58:30.280 The value paradox is that a good such as water or bread essential to life, and therefore, 524 00:58:30.280 --> 00:58:36.760 according to the classical economists, having a high use value, should be very cheap and 525 00:58:36.760 --> 00:58:40.120 have a low value on the market. 526 00:58:40.120 --> 00:58:47.520 At the same time, in contrast, gold or diamonds, non-essential luxuries and therefore of far 527 00:58:47.520 --> 00:59:08.520 The classical economists of the 18th and 19th centuries simply threw up their hands at this paradox and unsatisfactorily posed a sharp dichotomy between use and exchange value. 528 00:59:08.520 --> 00:59:12.560 Olivier, on the other hand, pointed to the solution. 529 00:59:12.560 --> 00:59:19.480 Water, though necessary to human life, is so highly abundant and easily available that 530 00:59:19.480 --> 00:59:26.240 it commands a very low price on the market, while gold is far more scarce and therefore 531 00:59:26.240 --> 00:59:29.080 more valuable. 532 00:59:29.080 --> 00:59:36.560 Utility in the determination of price is relative to supply and not absolute. 533 00:59:36.560 --> 00:59:41.720 The complete solution to the value paradox had to wait for the Austrian school of the 534 00:59:41.720 --> 00:59:43.960 late 19th century. 535 00:59:43.960 --> 00:59:52.200 The marginal utility, the value of each unit of a good, diminishes as its supply increases. 536 00:59:52.200 --> 01:00:00.320 Thus, a superabundant good, such as bread or water, will have a low marginal utility, 537 01:00:00.320 --> 01:00:04.960 while a rare good, such as gold, will have a high one. 538 01:00:04.960 --> 01:00:12.760 The value of a good on the market, and therefore its price, is determined by its marginal utility, 539 01:00:12.760 --> 01:00:18.960 not the philosophical utility of the good as a whole or in the abstract. 540 01:00:18.960 --> 01:00:25.500 But of course, before the Austrians, the marginal concept was lacking. 541 01:00:25.500 --> 01:00:31.960 The marketplace for Olivier, then, was an arena in which prices for goods are formed 542 01:00:31.960 --> 01:00:38.480 and out of the interaction of individuals with differing subjective utilities and valuations 543 01:00:38.480 --> 01:00:40.680 of the good. 544 01:00:40.680 --> 01:00:46.840 Just market prices, then, are not determined by referring to the objective qualities of 545 01:00:46.840 --> 01:00:54.120 the good, but by the interaction of subjective preferences on the market. 546 01:00:54.120 --> 01:00:59.280 In addition to his monumental achievement in being the first to discover subjective 547 01:00:59.280 --> 01:01:05.800 of Utility Theory, Olivier was the first to bring into economic thought the concept of 548 01:01:05.800 --> 01:01:13.160 capital, capitali, as a fund of money invested in a business venture. 549 01:01:13.160 --> 01:01:19.640 The term capital had appeared in numerous business records since the mid-12th century, 550 01:01:19.640 --> 01:01:23.480 but this is the first time it was conceptualized. 551 01:01:23.480 --> 01:01:29.440 The concept of capital was used by Olivier to show that it was possible to use money 552 01:01:29.440 --> 01:01:33.760 in a fruitful way, to gain a profit. 553 01:01:33.760 --> 01:01:40.220 Olivier retained the usury ban where capital was invested without being altered in some 554 01:01:40.220 --> 01:01:44.320 way by the labor and industry of the investor. 555 01:01:44.320 --> 01:01:51.100 However, Olivier was one of the minority of scholastics to adopt the hostiensis allowance 556 01:01:51.100 --> 01:01:57.740 of Lucrum Cessans, permitting an interest charge on a loan wherever the profit on an 557 01:01:57.740 --> 01:02:01.740 investment was foregone in the process. 558 01:02:01.740 --> 01:02:09.500 Unfortunately, Olivier continued Hostianz's careful limitation of confining Lucrum Cessans 559 01:02:09.500 --> 01:02:15.940 to loans granted out of charity so that the activities of a professional moneylender could 560 01:02:15.940 --> 01:02:19.980 still in no way be justified. 561 01:02:19.980 --> 01:02:25.840 It is a notable irony in the history of economic thought that the discoverer of the subjective 562 01:02:25.840 --> 01:02:33.100 utility theory, a highly sophisticated analyst of how the market economy worked, a believer 563 01:02:33.100 --> 01:02:40.180 in the just price as the common market price, the initiator of the concept of capital and 564 01:02:40.180 --> 01:02:47.700 a defender of at least the partial use of lucrum cessans as a way of justifying interest, 565 01:02:47.700 --> 01:02:53.900 that this great market thinker should have been the leader of the rigorous wing of the 566 01:02:53.900 --> 01:02:59.380 Franciscan order that believed in living in extreme poverty. 567 01:02:59.380 --> 01:03:05.140 Perhaps one explanation is that Olivier was born in the highly important market town of 568 01:03:05.140 --> 01:03:06.780 Narbonne. 569 01:03:06.780 --> 01:03:12.780 He was the main intellectual leader of the spiritual Franciscans, who believed devoutly 570 01:03:12.780 --> 01:03:19.100 in Following Faithfully the Rule of Total Poverty Laid Down by the Founder of the Order, 571 01:03:19.100 --> 01:03:24.300 St. Francis of Assisi, 1182-1226. 572 01:03:24.300 --> 01:03:30.340 It is a further irony that Olivier's opponents, the conventional Franciscans, who believed 573 01:03:30.340 --> 01:03:37.700 in a far laxer interpretation of the rule, hurled anathemas at Olivier and other spirituals 574 01:03:37.700 --> 01:03:43.700 and managed to destroy many physical as well as intellectual traces of Olivier's work. 575 01:03:44.900 --> 01:03:51.380 In 1304, six years after his death, a chapter general of the Franciscan order 576 01:03:51.380 --> 01:03:58.180 commanded the destruction of all Olivier's works, and 14 years later the unfortunate 577 01:03:58.180 --> 01:04:02.180 Olivier's body was disinterred and his bones scattered. 578 01:04:02.180 --> 01:04:10.440 Not only were many physical copies of Olivier's writings destroyed, but it became unhealthy 579 01:04:10.440 --> 01:04:14.760 for Franciscans at least to refer to his works. 580 01:04:14.760 --> 01:04:21.480 As a result, when, nearly a century and a half later, Olivier's forgotten work was rediscovered 581 01:04:21.480 --> 01:04:28.880 by the great Franciscan saint, San Bernardino, Saint Bernardine of Siena, Bernardino thought 582 01:04:28.880 --> 01:04:35.120 it prudent not even to refer to the heretic Olivier, even though he used the latter's 583 01:04:35.120 --> 01:04:40.880 theory of utility virtually word-for-word in his own work. 584 01:04:40.880 --> 01:04:46.880 This reticence was necessary because Bernardino belonged to the strict observant wing of the 585 01:04:46.880 --> 01:04:52.120 Franciscans, in a way, descendants of Olivier's spirituals. 586 01:04:52.120 --> 01:04:58.360 Indeed, it has only been since the 1950s that the illuminating economic writings of 587 01:04:58.360 --> 01:05:05.120 Olivier and their appropriation by San Bernardino have come to light. 588 01:05:05.120 --> 01:05:10.360 Perhaps another reason for the hysteria with which the mainstream Franciscans greeted the 589 01:05:10.360 --> 01:05:18.560 religious views of Pierre Olivier was his continuing dalliance with the Joachimite heresy. 590 01:05:18.560 --> 01:05:24.640 One of the founders of mystical Christian messianism was the Calabrian hermit and abbot 591 01:05:24.640 --> 01:05:30.680 Joachim of Fior, 1145-1202. 592 01:05:30.680 --> 01:05:37.360 In the early 1190s, Joachim adopted the thesis that there had been in history not just two 593 01:05:37.360 --> 01:05:46.000 ages, pre-Christian and post-Christian, but a third age, of which he himself was the prophet. 594 01:05:46.000 --> 01:05:51.960 The pre-Christian epoch was the age of the Father of the Old Testament, the Christian 595 01:05:51.960 --> 01:05:59.160 era the age of the Son of the New Testament, and now was coming the fulfillment, the new 596 01:05:59.160 --> 01:06:05.680 third age, the apocalyptic age of the Holy Spirit, in which history was soon to come 597 01:06:05.680 --> 01:06:07.760 to an end. 598 01:06:07.760 --> 01:06:14.080 The third age, which for Joachim was to be ushered in during the next half century in 599 01:06:14.080 --> 01:06:20.760 of the Early or Mid-13th Century was to be an age of pure love and freedom. 600 01:06:20.760 --> 01:06:27.320 The knowledge of God would be revealed directly to all men and there would be no work or property 601 01:06:27.320 --> 01:06:35.160 because human beings would possess only spiritual bodies, their material bodies having disappeared. 602 01:06:35.160 --> 01:06:41.720 There would be no church or Bible or state, but only a free community of perfect spiritual 603 01:06:41.720 --> 01:07:03.760 Seemingly tiny divergences in premises often have grave social and political consequences, 604 01:07:03.760 --> 01:07:10.800 and such was true of disagreements among Christians on the apparently recondite question of eschatology, 605 01:07:10.800 --> 01:07:17.360 The Science or Discipline of the Last Days Since St. Augustine, the orthodox Christian 606 01:07:17.360 --> 01:07:20.440 view has been a millennialist. 607 01:07:20.440 --> 01:07:27.120 That is, that there is no special millennium or kingdom of God in human history except 608 01:07:27.120 --> 01:07:32.160 the life of Jesus and the establishment of the Christian Church. 609 01:07:32.160 --> 01:07:38.100 This is the view of Catholics, of Lutherans, and probably of Calvin himself. 610 01:07:38.100 --> 01:07:45.180 The ideological or social conclusion is that Jesus will return to usher in the last judgment 611 01:07:45.180 --> 01:07:51.240 and the end of history in his own time, so that there is nothing that human beings can 612 01:07:51.240 --> 01:07:54.920 do to speed the last days. 613 01:07:54.920 --> 01:08:00.620 One variant of this doctrine is that after Jesus' return, he will launch a thousand 614 01:08:00.620 --> 01:08:05.780 years of the kingdom of God on earth before the last judgment. 615 01:08:05.780 --> 01:08:12.100 In practical terms, however, there is little of a significant difference here, since Christianity 616 01:08:12.100 --> 01:08:19.500 remains in place and there is still nothing man can do to usher in the millennium. 617 01:08:19.500 --> 01:08:26.260 The crucial difference comes with teleastic ideas such as those of Joachim of Fior, where 618 01:08:26.260 --> 01:08:33.520 not only was the world coming to the end soon, but man must do certain things to usher in 619 01:08:33.520 --> 01:08:39.080 in the last days, to prepare the way for the last judgment. 620 01:08:39.080 --> 01:08:45.920 These are all post-millennial doctrines, that is, that man must first set up a kingdom of 621 01:08:45.920 --> 01:08:54.120 God on earth as a necessary condition either for Jesus' return or for the last judgment. 622 01:08:54.120 --> 01:09:00.320 Generally, as we shall see further in the Protestant Reformation, post-millennial views 623 01:09:00.320 --> 01:09:07.080 will lead to some form of theocratic coercion of society to pave the way for the culmination 624 01:09:07.080 --> 01:09:09.720 of history. 625 01:09:09.720 --> 01:09:16.120 For Joachim of Fior, the path to the last days would be blazed by a new order of highly 626 01:09:16.120 --> 01:09:23.480 spiritual monks, from whom would come twelve patriarchs, headed by a supreme teacher, who 627 01:09:23.480 --> 01:09:36.480 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. 628 01:09:36.480 --> 01:09:48.480 Then, for a brief, blazing three-and-a-half years, a secular king, the Antichrist, would chastise and destroy the corrupt Christian Church. 629 01:09:48.480 --> 01:10:02.640 In view of the radical and potentially explosive nature of Joachim's heresy, it is remarkable 630 01:10:02.640 --> 01:10:10.120 that no less than three contemporary popes expressed great interest in his doctrine. 631 01:10:10.120 --> 01:10:16.540 By the middle of the 13th century, however, Joachimism was neglected and little known. 632 01:10:16.540 --> 01:10:22.660 It is small wonder that the Joachimite heresy was revived by the spiritual Franciscans who 633 01:10:22.660 --> 01:10:29.140 were tempted to see in their own flourishing new order and in their devotion to poverty 634 01:10:29.140 --> 01:10:35.820 the very monastic order that had been foretold by Joachim to bring about the last days.