WEBVTT NOTE 4. The Late Spanish Scholastics 1 00:00:00.000 --> 00:00:05.000 Chapter 4. The Late Spanish Scholastics 2 00:00:05.000 --> 00:00:11.000 1. The Commercial Expansion of the Sixteenth Century 3 00:00:11.000 --> 00:00:23.000 The great secular depression of the fourteenth and first half of the fifteenth century began to give way to economic recovery in the second half of the fifteenth. 4 00:00:23.000 --> 00:00:39.000 The overland trade from the Mediterranean to Northern Europe, cut off by the French king's depredations against the Fairs of Champagne, was increasingly replaced by sea trade off the Atlantic coast. 5 00:00:39.000 --> 00:00:53.000 Vessels now went through the Straits of Gibraltar and up the coast, increasingly sailing to Antwerp and making that city the big trading center in Northern Europe during the 16th century. 6 00:00:53.000 --> 00:01:13.000 Commerce moved away from the restrictions and high taxation of Flemish Bruges and shifted to and expanded in free market Antwerp, whose business and trade could flourish free of hampering legislation, privileges and high taxes. 7 00:01:13.000 --> 00:01:35.000 In addition, Atlantic ships headed south and west, and the famous explorations and discoveries of the late 15th century changed the face of world history by making European countries world powers, and began to integrate Africa and the new world into the European economy. 8 00:01:35.000 --> 00:01:45.500 Spain and Portugal, the leading explorers of the new continents, became the dominant nation states and empires of the 16th century. 9 00:01:45.500 --> 00:01:56.000 Slowly but surely, the Italian city-states, which had been in the forefront of economic advance and the spearhead of Renaissance culture, 10 00:01:56.000 --> 00:02:02.000 began to be left behind in the advance of economic and political power. 11 00:02:02.000 --> 00:02:17.000 Along with commercial expansion came inflation, fueled by the immense increase of gold and silver brought to Europe by the Spaniards from the newly found mines of the Western Hemisphere. 12 00:02:17.000 --> 00:02:28.000 An approximate tripling of the stock of specie in Europe resulted in a century of inflation, with prices tripling during the 16th century. 13 00:02:28.000 --> 00:02:43.000 The new money flowed first into the main Spanish port of Seville, then into the rest of Spain, and finally into other countries of Europe, and the geography of price rises followed accordingly. 14 00:02:43.000 --> 00:02:52.000 As Atlantic powers, England and France grew in strength along with the other Atlantic nations of Western Europe. 15 00:02:52.000 --> 00:03:01.000 They were greatly aided by the end of the destructive Hundred Years War between the two nations in 1453. 16 00:03:01.000 --> 00:03:10.000 The doctrines of the Absolute State, previously limited largely to theorists and rulers of the Italian city-states, 17 00:03:10.000 --> 00:03:14.000 now spread to all the nation-states of Europe. 18 00:03:14.000 --> 00:03:21.000 Absolutism eventually triumphed throughout Europe by the early 17th century. 19 00:03:21.000 --> 00:03:33.000 The victory was fueled, as we shall see below, by the rise of Protestantism, and, a bit later, of secularism, beginning in the 16th century. 20 00:03:33.000 --> 00:03:41.560 2. Cardinal Kajetan, Liberal Thomist 21 00:03:41.560 --> 00:03:47.080 Late scholasticism was the product of the 16th century, the century that ushered in 22 00:03:47.080 --> 00:03:54.200 the Protestant Reformation and the Catholic Counter-Reformation. If the 13th century was 23 00:03:54.200 --> 00:04:01.240 well described as the golden age of scholastic philosophy, then the 16th century was its 24 00:04:01.240 --> 00:04:08.040 Silver Age, the era of a shining renaissance of scholastic thought before the shades of 25 00:04:08.040 --> 00:04:11.660 night closed in for good. 26 00:04:11.660 --> 00:04:18.480 As we have seen, the 14th and 15th centuries saw the emergence of nominalism and at least 27 00:04:18.480 --> 00:04:27.080 the weakening of the idea of a rational, objective natural law, including a natural law ethics, 28 00:04:27.080 --> 00:04:30.320 discoverable by man's reason. 29 00:04:30.320 --> 00:04:36.560 The 16th century witnessed a renaissance Thomism spearheaded by one of the greatest churchmen 30 00:04:36.560 --> 00:04:47.000 of his age, Thomas de Vio, Cardinal Cajetan, 1468-1534. 31 00:04:47.000 --> 00:04:53.560 Cardinal Cajetan was not only the preeminent Thomist philosopher and theologian of his day, 32 00:04:53.560 --> 00:05:01.120 He was also an Italian Dominican, who became General of the Dominican Order in 1508. 33 00:05:01.120 --> 00:05:06.760 A Cardinal of the Church, he was the Pope's favorite upholder of the faith in debates 34 00:05:06.760 --> 00:05:11.900 with the great founder of Protestantism, Martin Luther. 35 00:05:11.900 --> 00:05:18.840 In his commentary on Aquinas Summa, Kajetan, of course, endorsed the standard scholastic 36 00:05:18.840 --> 00:05:26.560 view that the just price is the common market price, reflecting the estimation of the buyers, 37 00:05:26.560 --> 00:05:34.400 and held that that price will fluctuate upon changing conditions of demand and supply. 38 00:05:34.400 --> 00:05:40.840 In attempting to purge scholastic economics of any trace of Langensteinian station in 39 00:05:40.840 --> 00:05:48.480 life theory, however, Kajetan went further to criticize Aquinas for denouncing accumulation 40 00:05:48.480 --> 00:05:55.300 of Wealth Beyond One's Status as Suffering from the Sin of Avarice. 41 00:05:55.300 --> 00:06:02.660 On the contrary, declared Cajetan, it is legitimate for highly able persons to move up the social 42 00:06:02.660 --> 00:06:07.260 ladder in a way that matches their attainments. 43 00:06:07.260 --> 00:06:12.820 This candid endorsement of upward mobility in a free market was the broadest attempt 44 00:06:12.820 --> 00:06:20.440 Yet to Rid Scholasticism of All Traces of the Ancient Contempt for Trade and Economic 45 00:06:20.440 --> 00:06:22.780 Gain. 46 00:06:22.780 --> 00:06:31.900 In his comprehensive treatise on foreign exchange, De Cambias, 1499, the great Cajetan set forth 47 00:06:31.900 --> 00:06:38.820 the fullest and most unqualified defense yet penned of the foreign exchange market. 48 00:06:38.820 --> 00:06:46.340 Sweeping aside the dithering indecisiveness of his fellow-Dominican, Fra Santi Rucelai, 49 00:06:46.340 --> 00:06:55.180 1437-1497, himself a former exchange banker and the son of a banker, the cardinal was 50 00:06:55.180 --> 00:06:58.060 firm and hard-hitting. 51 00:06:58.060 --> 00:07:03.900 Since the role of the merchant has long since been established as legitimate, then so should 52 00:07:03.900 --> 00:07:31.900 In the course of his defense of the Exchange Banker, who is simply engaging in a kind of commodity transaction. Besides, modern trade could not function without the foreign exchange market, and cities could not exist without trade. Hence, it is needful and right that the exchange market exist. As in other markets, the customary market price is the just price. 53 00:07:31.900 --> 00:07:38.300 In the course of his defense of the exchange market in Decambias, Cajetan proceeded to 54 00:07:38.300 --> 00:07:42.820 advance the state of the art in monetary theory. 55 00:07:42.820 --> 00:07:49.820 He showed trenchantly that money is a commodity, particularly when moving from one city to 56 00:07:49.820 --> 00:07:58.900 another, and is therefore subject to the demand and supply laws governing the prices of commodities. 57 00:07:58.900 --> 00:08:06.000 At this point, Cajetan made a great advance in monetary theory, indeed in economic theory 58 00:08:06.000 --> 00:08:07.440 generally. 59 00:08:07.440 --> 00:08:15.560 He pointed out that the value of money depends not only on existing demand and supply conditions, 60 00:08:15.560 --> 00:08:22.620 but also on present expectations of the future state of the market. 61 00:08:22.620 --> 00:08:30.620 The definition of wars and famines, and of future changes in the supply of money, will affect its current value. 62 00:08:30.620 --> 00:08:41.620 Thus Cardinal Cajetan, a 16th century prince of the church, can be considered the founder of expectations theory and economics. 63 00:08:41.620 --> 00:08:48.620 Furthermore, Cajetan distinguished between the two kinds of value of money, 64 00:08:48.620 --> 00:08:57.620 Its purchasing power in terms of goods, so that gold or silver are equated with goods being bought and sold, 65 00:08:57.620 --> 00:09:05.620 and the value of one coin or currency in terms of another on the foreign exchange market. 66 00:09:05.620 --> 00:09:17.620 Here each kind of coin tends to move to that region where its value is highest, and away from wherever its value is lowest. 67 00:09:18.620 --> 00:09:26.060 On the vexed usury question, though Cajetan was not as radical as his German contemporary 68 00:09:26.060 --> 00:09:33.380 Zumenhardt in virtually eradicating the usury prohibition, he did join Zumenhardt on the 69 00:09:33.380 --> 00:09:40.340 doctrine of implicit intention and was even more radical in the one area where Zumenhardt 70 00:09:40.340 --> 00:09:45.020 had hung back, lucrum cessans. 71 00:09:45.020 --> 00:09:51.940 That intention meant that if someone really believed his contract not to be alone, then 72 00:09:51.940 --> 00:09:58.220 it was not usurious, even though it might be alone in practice. 73 00:09:58.220 --> 00:10:04.580 This of course paved the way for the practical elimination of the ban on usury. 74 00:10:04.580 --> 00:10:11.180 In addition, Kajetan also joined his fellow liberals in endorsing the guaranteed investment 75 00:10:11.180 --> 00:10:13.720 contract. 76 00:10:13.720 --> 00:10:19.220 But Cardinal Cajetan's great breakthrough on the usury front was his vindication of 77 00:10:19.220 --> 00:10:21.460 lucrum cessans. 78 00:10:21.460 --> 00:10:28.340 Wielding the mighty authority of being the greatest Thomist since Aquinas himself, Cajetan 79 00:10:28.340 --> 00:10:37.100 offered a point-by-point critique of his master's rejection of this exception to the usury ban. 80 00:10:37.100 --> 00:10:44.620 He then vindicates, not indeed all of lucrum cessans, but any loan to businessmen. 81 00:10:44.620 --> 00:10:52.220 Thus, a lender may charge interest on any loan as payment for profit foregone on other 82 00:10:52.220 --> 00:10:58.060 investments, provided that loan be to a businessman. 83 00:10:58.060 --> 00:11:05.820 This untenable split between loans to businessmen and to consumers was made for the first time 84 00:11:05.820 --> 00:11:13.820 as a means of justifying all business loans. The rationale was that money retained its 85 00:11:13.820 --> 00:11:21.340 high profit-forgone value in the hands of business, but not of consumer borrowers. 86 00:11:21.340 --> 00:11:29.020 Thus, for the very first time in the Christian era, Cardinal Cajetan justified the business 87 00:11:29.020 --> 00:11:36.740 of Money Lending, provided they were loans to business. Before him, all writers, even 88 00:11:36.740 --> 00:11:44.220 the most liberal, even Konrad Zumenhart, had justified interest charges on lucrum cessans 89 00:11:44.220 --> 00:11:52.340 only for ad hoc charitable loans. Now, the great Kajetan was justifying the business 90 00:11:52.340 --> 00:11:56.020 of money lending at interest. 91 00:11:56.020 --> 00:12:04.220 3. THE SCHOOL OF SALAMANCA, THE FIRST GENERATION 92 00:12:04.220 --> 00:12:10.940 If the newly burgeoning liberal Thomism began with Cardinal Cajetan in Italy, the torch 93 00:12:10.940 --> 00:12:19.140 was soon passed to a set of 16th century theologians who revived Thomism and scholasticism and 94 00:12:19.140 --> 00:12:22.380 and kept them alive for over a century. 95 00:12:22.380 --> 00:12:26.740 The School of Salamanca in Spain. 96 00:12:26.740 --> 00:12:31.860 It is no more than fitting that Spain should be the center of scholastic learning in the 97 00:12:31.860 --> 00:12:33.940 16th century. 98 00:12:33.940 --> 00:12:38.180 That century was preeminently the century of Spain. 99 00:12:38.180 --> 00:12:44.140 Spain, the leader in the explorations and conquests in the New World. 100 00:12:44.140 --> 00:12:51.140 Spain, the nation that brought the treasures of gold and silver across the Atlantic to Europe. 101 00:12:51.140 --> 00:12:57.620 Spain, along with Italy and Portugal, the nation in Europe that remained resoundingly 102 00:12:57.620 --> 00:13:03.680 Catholic and proved immune to the spread of Protestantism. 103 00:13:03.680 --> 00:13:08.820 The acknowledged founder of the School of Salamanca was the great legal theorist and 104 00:13:08.820 --> 00:13:19.060 A pioneer in the discipline of international law, Francisco de Vitoria, circa 1485-1546. 105 00:13:19.060 --> 00:13:26.260 A Basque raised in Burgos in northern Spain and born into a prosperous family, Vitoria 106 00:13:26.260 --> 00:13:31.660 became a Dominican and went to study and then teach in Paris. 107 00:13:31.660 --> 00:13:38.220 There, in one of the ironies of the history of thought, he became a disciple of a Fleming 108 00:13:38.220 --> 00:13:44.380 who had been a pupil of one of the last of the Akhamites, John Major. 109 00:13:44.380 --> 00:13:53.620 This man, Pierre Croquer, circa 1450 to 1514, had become a student and then teacher of theology 110 00:13:53.620 --> 00:13:56.060 late in life. 111 00:13:56.060 --> 00:14:03.100 Turning away from his teacher Major, Croquer abandoned nominalism and moved to Thomism, 112 00:14:03.100 --> 00:14:08.660 Entering the Dominican Order and Coming to Teach at the Dominican College of Saint-Jacques 113 00:14:08.660 --> 00:14:10.940 in Paris. 114 00:14:10.940 --> 00:14:18.220 After spending over 17 years imbibing and then teaching Thomism in Paris, Vittoria returned 115 00:14:18.220 --> 00:14:26.260 to Spain to lecture in theology at Valladolid, finally coming to Salamanca. 116 00:14:26.260 --> 00:14:34.460 and the Queen of Spanish Universities as Prime Professor of Theology in 1526. 117 00:14:34.460 --> 00:14:40.540 A brilliant and highly influential teacher and lecturer, Vitoria set the framework for 118 00:14:40.540 --> 00:14:44.480 the Salamanca School for the rest of the century. 119 00:14:44.480 --> 00:14:50.680 Even though he did not publish any writings, his lectures have come down to us as transcribed 120 00:14:50.680 --> 00:14:55.460 by his students, much as in the case of Aristotle. 121 00:14:55.460 --> 00:15:01.940 Much of the glory of the University of Salamanca was the result of reforms instituted by Vitoria 122 00:15:01.940 --> 00:15:10.480 himself. Consequently, the University soon had no less than 70 professorial chairs filled 123 00:15:10.480 --> 00:15:16.740 by the best scholars of the day, providing instruction not only in the traditional medieval 124 00:15:16.740 --> 00:15:24.100 curriculum but also in such newfangled disciplines as navigational science and the Chaldean 125 00:15:24.100 --> 00:15:26.900 and Language. 126 00:15:26.900 --> 00:15:32.320 Vitoria's lectures were largely commentaries on Aquinas moral theory. 127 00:15:32.320 --> 00:15:38.200 In the course of the lectures, Vitoria founded the great Spanish scholastic tradition of 128 00:15:38.200 --> 00:15:44.640 denouncing the conquest, and particularly the enslavement by the Spanish, of the Indians 129 00:15:44.640 --> 00:15:47.060 in the New World. 130 00:15:47.060 --> 00:15:53.060 In an age when thinkers in France and Italy were preaching secular absolutism and the 131 00:15:53.060 --> 00:16:00.580 The Power of the State, Vitoria and his followers revived the idea that natural law is morally 132 00:16:00.580 --> 00:16:05.900 superior to the mere might of the state. 133 00:16:05.900 --> 00:16:12.300 Vitoria did not expound much on economic topics, but he was interested in commercial morality 134 00:16:12.300 --> 00:16:17.060 and his views followed the mainstream scholastic tradition. 135 00:16:17.060 --> 00:16:23.100 The just price was the common market price, even though if there were a legally fixed 136 00:16:23.100 --> 00:16:27.420 price it would also be considered just. 137 00:16:27.420 --> 00:16:31.900 In short, legal price edicts are to be obeyed. 138 00:16:31.900 --> 00:16:39.340 However, for those goods without a common market, say with only one or two sellers, 139 00:16:39.340 --> 00:16:43.120 Vitoria advanced beyond his forebears. 140 00:16:43.120 --> 00:16:49.880 Instead of having cost of production determinate, Vittoria, while stating that cost could well 141 00:16:49.880 --> 00:16:57.240 be considered, returned to the old, nearly forgotten laissez-faire Roman law tradition 142 00:16:57.240 --> 00:17:03.120 of free individual bargaining as providing the just price. 143 00:17:03.120 --> 00:17:09.640 For in this situation, Vittoria maintained, the price had to be settled by the exchanging 144 00:17:09.640 --> 00:17:13.000 parties themselves. 145 00:17:13.000 --> 00:17:21.400 Victoria, however, then added a curious distinction between luxury and non-luxury goods. 146 00:17:21.400 --> 00:17:28.240 Luxuries could be sold for a fancy price, since the buyer pays the high price voluntarily 147 00:17:28.240 --> 00:17:31.280 and out of his free will. 148 00:17:31.280 --> 00:17:41.560 Why this free will should disappear with non-luxury items, Victoria unfortunately does not explain. 149 00:17:41.560 --> 00:17:52.560 His most eminent student and fellow theologian at Salamanca was the Dominican Domingo de Soto, 1494-1560. 150 00:17:52.560 --> 00:18:01.560 Born in Segovia of comfortable but not wealthy parents, de Soto studied at the University of Alcala near Madrid, 151 00:18:01.560 --> 00:18:08.560 and then went to Paris where he studied under Vitoria and later became a professor. 152 00:18:08.560 --> 00:18:14.680 Turning to Spain, de Soto became professor of metaphysics at Alcala and then entered 153 00:18:14.680 --> 00:18:23.240 the Dominican order, joining his mentor as a theology professor at Salamanca in 1532. 154 00:18:23.240 --> 00:18:30.120 Though a shy personality, de Soto was repeatedly involved in university administration and 155 00:18:30.120 --> 00:18:36.840 was several times prior of the College of Esteban in the university. 156 00:18:36.840 --> 00:18:42.120 De Soto's work in physics is also considered outstanding. 157 00:18:42.120 --> 00:18:49.440 In 1545 the Emperor Charles V honored De Soto by naming him as his representative at the 158 00:18:49.440 --> 00:18:56.360 Great Council of Trent, the mighty council of the Catholic Counter-Reformation. 159 00:18:56.360 --> 00:19:02.280 Soon De Soto became confessor to the Emperor, but gave it up in a few years to return to 160 00:19:02.280 --> 00:19:05.920 his professorship at Salamanca. 161 00:19:05.920 --> 00:19:15.040 Mises' fame rested on his treatise De Justitia et Jure, published in 1553 and based on lectures 162 00:19:15.040 --> 00:19:21.680 given originally at Salamanca in 1540 and 1541. 163 00:19:21.680 --> 00:19:29.720 De Justitia et Jure was reprinted no less than 27 times before the end of the century 164 00:19:29.720 --> 00:19:37.160 and was read and quoted by jurists and moralists until the mid-18th century. 165 00:19:37.160 --> 00:19:44.360 Unfortunately on economics De Soto was a reactionary thinker and set back some of the liberal gains 166 00:19:44.360 --> 00:19:46.640 of the previous scholastics. 167 00:19:46.640 --> 00:19:53.260 Thus, while De Soto conceded that the price of goods is not determined by their nature 168 00:19:53.260 --> 00:19:58.080 but by the measure in which they serve the needs of mankind. 169 00:19:58.080 --> 00:20:05.120 This utility analysis was weakened by vague concessions to the labor, trouble and risk 170 00:20:05.120 --> 00:20:07.900 involved in a sale. 171 00:20:07.900 --> 00:20:13.800 Worse than that, De Soto was not content to concede the propriety of government fixing 172 00:20:13.800 --> 00:20:17.740 the price of goods and letting it go at that. 173 00:20:17.740 --> 00:20:25.180 Instead, he declared flatly that a fixed price is always superior to the market price, and 174 00:20:25.180 --> 00:20:30.620 that ideally all prices should be fixed by the state. 175 00:20:30.620 --> 00:20:37.980 And even lacking such control, prices for de Soto should be set by the opinion of prudent 176 00:20:37.980 --> 00:20:45.820 and fair-minded men, whoever they might be, who have nothing to do with any transactions. 177 00:20:45.820 --> 00:20:51.620 They should not be determined by the free bargaining of the buyers and sellers involved. 178 00:20:51.620 --> 00:20:58.940 Thus, De Soto, more than any other scholastic thinker, called for statism, rather than market 179 00:20:58.940 --> 00:21:02.340 determination of price. 180 00:21:02.340 --> 00:21:08.780 On foreign exchange, De Soto's influence was confusing, cutting both for and against 181 00:21:08.780 --> 00:21:10.820 that market. 182 00:21:10.820 --> 00:21:17.080 In its favor, he contributed perhaps the first cogent explanation of the movements of currencies 183 00:21:17.080 --> 00:21:23.840 and exchange rates on the foreign exchange market, what would later be called the purchasing 184 00:21:23.840 --> 00:21:28.700 power parity theory of exchange rates. 185 00:21:28.700 --> 00:21:35.860 The economy of the 16th century was marked by an inflation which first hit Spain in response 186 00:21:35.860 --> 00:21:41.580 to gold and silver discoveries in the New World, and the consequent importation of 187 00:21:41.580 --> 00:21:44.960 specie into Spain. 188 00:21:44.960 --> 00:21:50.500 Inflation first struck in Spain and then spread to the rest of Europe as the Spaniards 189 00:21:50.500 --> 00:21:53.720 spent the increased supply of money. 190 00:21:53.720 --> 00:22:00.940 The result was the first large-scale secular inflation in history, prices in Europe doubling 191 00:22:00.940 --> 00:22:05.220 over the first half of the 16th century. 192 00:22:05.220 --> 00:22:12.240 Plato was concerned to explain the curious fact that more abundant species in Spain caused 193 00:22:12.240 --> 00:22:18.660 it to have an unfavorable balance of payment, with money flowing out of Spain and into the 194 00:22:18.660 --> 00:22:20.740 rest of Europe. 195 00:22:20.740 --> 00:22:27.360 As he put it, the more plentiful money is in Medina, the more unfavorable are the terms 196 00:22:27.360 --> 00:22:34.040 of exchange, and the higher the price that must be paid by whoever wishes to send money 197 00:22:34.040 --> 00:22:41.800 from Spain to Flanders, since the demand for money is smaller in Spain than in Flanders. 198 00:22:41.800 --> 00:22:48.400 And the scarcer money is in Medina, the less he need pay there, because more people want 199 00:22:48.400 --> 00:22:53.240 money in Medina than are sending it to Flanders. 200 00:22:53.240 --> 00:23:00.640 In short, more abundant money in one place causes money to flow out and lowers the exchange 201 00:23:00.640 --> 00:23:07.040 Exchange Rate Relation to Other Currencies. A more abundant money supply means that money 202 00:23:07.040 --> 00:23:15.360 is less wanted there, a primitive way of pointing to the supply increasing along a given falling 203 00:23:15.360 --> 00:23:24.320 demand curve for money, so that each unit or coin is less valued. Here is also a rudimentary 204 00:23:24.320 --> 00:23:29.840 Re-Purchasing Power Parity Analysis of Exchange Rates. 205 00:23:29.840 --> 00:23:36.300 But despite this subtle advance in analyzing the workings of the market, De Soto backslid 206 00:23:36.300 --> 00:23:44.260 on usury to such an extent that he advocated banning the foreign exchange market as usurious. 207 00:23:44.260 --> 00:23:52.520 In fact, De Soto managed to influence the court in 1552 to outlaw all internal currency 208 00:23:52.520 --> 00:23:58.020 exchange at anything other than the legal par. 209 00:23:58.020 --> 00:24:05.000 As can be seen, De Soto exercised a reactionary influence on the usury ban, and managed to 210 00:24:05.000 --> 00:24:11.960 block any general acceptance of the revolutionary contributions of Zumanhart and Kajetan on 211 00:24:11.960 --> 00:24:14.640 the usury issue. 212 00:24:14.640 --> 00:24:21.220 Attempting to turn back the tide, De Soto went so far as to declare the standard guaranteed 213 00:24:21.220 --> 00:24:29.300 or insured investment contract as sinful and usurious, on the old discredited medieval 214 00:24:29.300 --> 00:24:34.660 ground that risk and ownership must never be separated. 215 00:24:34.660 --> 00:24:41.460 He tried to roll back lucrum cessans and, in general, was more rigorously anti-usury 216 00:24:41.460 --> 00:24:48.000 than almost any of the medieval scholastics, insisting anachronistically that money is 217 00:24:48.000 --> 00:24:55.400 is sterile and bears no fruit, and therefore cannot lawfully command interest. 218 00:24:55.400 --> 00:25:02.280 Ironically, however, while anxious to reverse the tide of liberalization of usury, De Soto 219 00:25:02.280 --> 00:25:08.580 himself contributed to the long-run demise of the usury ban. 220 00:25:08.580 --> 00:25:16.320 We remember that Pope Urban III in his Decretal Consuluit in the late 12th century had suddenly 221 00:25:16.320 --> 00:25:24.160 Finally pulled a forgotten quotation from Luke, chapter 6, verse 35, out of the hat, 222 00:25:24.160 --> 00:25:32.080 Lend freely, hoping nothing thereby, and use this vague counsel to charity as a stick with 223 00:25:32.080 --> 00:25:36.260 which to prohibit all interest on loans. 224 00:25:36.260 --> 00:25:44.260 More remarkably, all later scholastics had followed this dubious divine ban on interest-taking. 225 00:25:44.260 --> 00:25:50.260 Even the radical Zumenhardt had conceded the divine injunction against interest and simply 226 00:25:50.260 --> 00:25:54.140 narrowed it down to virtually nothing. 227 00:25:54.140 --> 00:26:00.900 It paradoxically now fell to the conservative De Soto to cast the first stone. 228 00:26:00.900 --> 00:26:07.540 The Luke statement, he declared contemptuously, has no relevance to lending at interest, and 229 00:26:07.540 --> 00:26:12.980 Christ most definitely did not declare usury to be sinful. 230 00:26:12.980 --> 00:26:25.980 Therefore, he concluded, if usury is not against the natural law, it is perfectly licit. Theologically, there is no problem with usury. 231 00:26:25.980 --> 00:26:32.980 4. The School of Salamanca, Azpilcueta and Medina 232 00:26:32.980 --> 00:26:40.300 Fortunately, de Soto's reactionary and statist influence was at least partially offset by 233 00:26:40.300 --> 00:26:51.640 another of Victoria's distinguished students, Martin de Azpilcueta Navarres, 1493-1586. 234 00:26:51.640 --> 00:26:58.940 Renowned for his saintly life and vast learning, the gaunt, hook-nosed Dominican Azpilcueta 235 00:26:58.940 --> 00:27:03.780 was regarded as the most eminent canon lawyer of his day. 236 00:27:03.780 --> 00:27:10.620 After teaching canon law in Cahors and Toulouse in France, Azpilcueta returned to take up 237 00:27:10.620 --> 00:27:16.800 a chair at Salamanca, where his overflowing lectures featured a new method of teaching 238 00:27:16.800 --> 00:27:21.820 civil law by combining it with canon law. 239 00:27:21.820 --> 00:27:30.260 In 1538, Azpilcueta was sent by Emperor Charles V to be rector of the new University of Coimbra 240 00:27:30.260 --> 00:27:32.660 in western Portugal. 241 00:27:32.660 --> 00:27:40.260 There he developed the principles of international law originally set forth by his master, Vitoria. 242 00:27:40.260 --> 00:27:47.300 Azpilcueta spent his last years in Rome, a trusted advisor to three popes, dying at the 243 00:27:47.300 --> 00:27:51.100 advanced age of 93. 244 00:27:51.100 --> 00:27:57.780 Azpilcueta used his great influence to advance economic liberalism farther than it had ever 245 00:27:57.780 --> 00:28:02.900 gone before, among the scholastics or anywhere else. 246 00:28:02.900 --> 00:28:09.460 In sharp contrast to De Soto's admiration for comprehensive price control, Azpilcueta 247 00:28:09.460 --> 00:28:16.420 was the first economic thinker to state clearly and boldly that government price fixing was 248 00:28:16.420 --> 00:28:19.840 imprudent and unwise. 249 00:28:19.840 --> 00:28:26.720 When goods are abundant, he sensibly pointed out, there is no need for maximum price control, 250 00:28:26.720 --> 00:28:33.040 and when goods are scarce, controls would do the community more harm than good. 251 00:28:33.040 --> 00:28:39.620 But Azpilcueta's outstanding contribution to economics was his Theory of Money, published 252 00:28:39.620 --> 00:28:50.600 in his Commentario Resolutoio de Usuras, 1556, as an appendix to a manual on moral theology. 253 00:28:50.600 --> 00:28:56.880 The manual and the commentaries in the appendix were translated into Latin and Italian and 254 00:28:56.880 --> 00:29:02.320 proved to be influential for Catholic writers for many years. 255 00:29:02.320 --> 00:29:09.600 As Pilqueta built on the analysis of Cardinal Cajetan to present the first clear and unambiguous 256 00:29:09.600 --> 00:29:16.880 This presentation of the quantity theory of money, or, rather, he breaks firmly with the 257 00:29:16.880 --> 00:29:25.000 tradition that money can, in any sense, be a fixed measure of value of other goods. 258 00:29:25.000 --> 00:29:32.880 In contrast to older emphasis on foreign exchange, or money in terms of other monies, as Pilqueta 259 00:29:32.880 --> 00:29:40.280 Queta clearly identified the value of money as its purchasing power in terms of goods. 260 00:29:40.280 --> 00:29:46.560 Once Aspil Queta grasped these two points firmly, then the quantity theory followed 261 00:29:46.560 --> 00:29:48.180 directly. 262 00:29:48.180 --> 00:29:55.600 For then, like other goods, the value of money varied inversely with its supply, or quantity 263 00:29:55.600 --> 00:29:57.320 available. 264 00:29:57.320 --> 00:30:04.000 As Aspil Queta put it, all merchandise becomes dearer when it is in great demand and short 265 00:30:04.000 --> 00:30:11.620 supply, and that money, in so far as it may be sold, bartered or exchanged by some other 266 00:30:11.620 --> 00:30:19.920 form of contract, is merchandise, and therefore also becomes dearer when it is in great demand 267 00:30:19.920 --> 00:30:22.720 and short supply. 268 00:30:22.720 --> 00:30:27.800 It should be noted that this splendid and concise analysis of the determinants of the 269 00:30:27.800 --> 00:30:34.620 purchasing power of money does not make the mistake of later quantity theorists in stressing 270 00:30:34.620 --> 00:30:40.680 the quantity or supply of money while ignoring the demand. 271 00:30:40.680 --> 00:30:49.520 On the contrary, demand and supply analysis was applied correctly to the monetary sphere. 272 00:30:49.520 --> 00:30:55.580 Gold and silver flooded into Spain and then the rest of Europe in the 16th century, driving 273 00:30:55.580 --> 00:31:02.240 up prices first in Spain and then in the other countries. Prices doubled by the middle of 274 00:31:02.240 --> 00:31:08.720 the century. Historians of economic thought have held the first quantity theorist, the 275 00:31:08.720 --> 00:31:14.920 first thinker to attribute the price rise to the influx of specie, to be the French 276 00:31:14.920 --> 00:31:22.680 by the absolutist political theorist Jean Baudin. But Baudin's famous Reply to the Paradoxes 277 00:31:22.680 --> 00:31:32.340 of Monsieur Malastrois, 1568, was anticipated by 12 years by Azpilcueta's work. And since 278 00:31:32.340 --> 00:31:39.200 the erudite Baudin probably had read the Spanish Dominican, his announced claim to originality 279 00:31:39.200 --> 00:31:42.760 seems in unusually bad taste. 280 00:31:42.760 --> 00:31:48.240 And since Spain was the first recipient of the flow of specie from the new world, it 281 00:31:48.240 --> 00:31:53.500 is certainly not surprising that a Spaniard should be the first person to decipher the 282 00:31:53.500 --> 00:31:54.500 new phenomenon. 283 00:31:54.500 --> 00:32:01.520 Thus, as Pilqueta wrote, other things being equal, in countries where there is a great 284 00:32:01.520 --> 00:32:08.720 scarcity of money, all other saleable goods, and even the hands and labor of men, are given 285 00:32:08.720 --> 00:32:15.680 for Less Money than Where it is Abundant Thus we see by experience that in France, 286 00:32:15.680 --> 00:32:23.600 where money is scarcer than in Spain, bread, wine, cloth and labor are worth much less. 287 00:32:23.600 --> 00:32:29.880 And even in Spain, in times when money was scarcer, saleable goods and labor were given 288 00:32:29.880 --> 00:32:35.800 for very much less than after the discovery of the Indies, which flooded the country with 289 00:32:35.800 --> 00:32:42.400 with Gold and Silver. The reason for this is that money is worth more where and when 290 00:32:42.400 --> 00:32:51.400 it is scarce than where and when it is abundant. Martin de Azpilcueta, in this case influenced 291 00:32:51.400 --> 00:32:58.120 by his colleague de Soto, also developed the latter's purchasing power parity theory of 292 00:32:58.120 --> 00:33:05.240 exchange rates at the same time that he worked out the quantity theory, supply and demand 293 00:33:05.240 --> 00:33:12.800 Analysis of the Value of Money. The two, of course, go hand in hand. 294 00:33:12.800 --> 00:33:20.120 One of Azpilcueta's most important contributions was to revive the vital concept of time preference, 295 00:33:20.120 --> 00:33:26.960 perhaps under the influence of the works of its discoverer, San Bernardino of Siena. 296 00:33:26.960 --> 00:33:34.080 Azpilcueta pointed out, more clearly than Bernardino, that a present good, such as money, 297 00:33:34.080 --> 00:33:39.960 will naturally be worth more on the market than future goods, that is, goods that are 298 00:33:39.960 --> 00:33:43.840 now claims to money in the future. 299 00:33:43.840 --> 00:33:50.380 As Aspil Queta put it, a claim on something is worth less than the thing itself, and it 300 00:33:50.380 --> 00:33:56.380 is plain that that which is not usable for a year is less valuable than something of 301 00:33:56.380 --> 00:34:00.980 the same quality which is usable at once. 302 00:34:00.980 --> 00:34:07.660 And if a future good is naturally less valuable than a present good on the market, then this 303 00:34:07.660 --> 00:34:15.080 insight should automatically justify usury as the charging of interest not on time, but 304 00:34:15.080 --> 00:34:24.140 on the exchange of present goods, money, for a future claim on that money, an IOU. 305 00:34:24.140 --> 00:34:30.380 And yet, this seemingly simple deduction, simple to us who come after, was not made 306 00:34:30.380 --> 00:34:34.120 by Azpilcueta Navaras. 307 00:34:34.120 --> 00:34:40.280 On the foreign exchange market, Azpilcueta struck a blow for economic liberalism by reviving 308 00:34:40.280 --> 00:34:47.200 the Cajetan line and repudiating the statist fulminations of his colleague De Soto, who 309 00:34:47.200 --> 00:34:54.160 had called for the prohibition of all foreign exchange transactions as usurias. 310 00:34:54.160 --> 00:35:00.280 In addition to repeating Cajetanian arguments, the Spanish Dominican and trusted advisor 311 00:35:00.280 --> 00:35:05.160 to three popes injected practical considerations. 312 00:35:05.160 --> 00:35:11.280 Azpilcueta pointed out that an infinite number of decent Christian merchants, aristocrats, 313 00:35:11.280 --> 00:35:17.340 widows and even churchmen commonly invest in foreign exchange. 314 00:35:17.340 --> 00:35:25.340 Aspil Queta insisted that he refuses to damn the whole world by imposing overly rigorous standards. 315 00:35:25.340 --> 00:35:32.340 Furthermore, he warned, to abolish foreign exchange markets would be to plunge the realm into poverty, 316 00:35:32.340 --> 00:35:37.340 a step he was clearly not willing to take. 317 00:35:37.340 --> 00:35:44.340 On most other aspects of the usury question, however, Aspil Queta Navaras was surprisingly conservative 318 00:35:44.340 --> 00:35:50.340 and a big step backward from the advanced free market position of Konrad Zumenhardt. 319 00:35:50.340 --> 00:35:58.340 On the census or annuity contract, Aspil Queta Navaras was far harsher than De Soto, 320 00:35:58.340 --> 00:36:02.340 who was liberal on this particular aspect of usury. 321 00:36:02.340 --> 00:36:13.340 Instead, Aspil Queta was the main influence on Pope Pius V's issue in 1569 of the Bull Cum Onus, 322 00:36:13.340 --> 00:36:24.340 In which all census is declared illegal, except on a fruitful immobile good, for which status money, of course, cannot qualify. 323 00:36:24.340 --> 00:36:39.340 The Pope had been goaded into issuing the bull by Cardinal San Carlo Borromeo, who, as newly appointed Archbishop of Milan, professed to find usury everywhere in that sinful city. 324 00:36:39.340 --> 00:36:47.340 Borromeo was one of the leaders of the Catholic Counter-Reformation, and his prodding led to Cum Onus. 325 00:36:47.340 --> 00:36:54.340 But it was too late. The census contract was too ingrained in European practice, 326 00:36:54.340 --> 00:36:58.340 and too many theologians had adopted the liberal approach. 327 00:36:58.340 --> 00:37:04.340 The majority of Catholic theologians rejected this new attempt, and simply stated 328 00:37:04.340 --> 00:37:21.340 The Pope's arguments were matters of positive rather than natural law, and therefore that the papal bull had to be accepted by the government or be the common practice of a particular country for it to carry the force of law in that country. 329 00:37:21.340 --> 00:37:35.340 Interestingly enough, not a single country in Europe accepted Cum Onus. Not Spain, not France, nor Germany, not southern Italy, nor even Rome itself. 330 00:37:35.340 --> 00:37:46.340 The contempt with which Cum Onus was received throughout Europe is strikingly revealed in its treatment by the recently founded Jesuit order. 331 00:37:46.340 --> 00:37:58.340 The Society of Jesus was founded in 1537 by an invalided Spanish ex-army officer, Ignatius Loyola, born in the Basque country. 332 00:37:58.340 --> 00:38:06.340 The rapidly expanding society was installed on rigorous discipline along consciously military lines. 333 00:38:06.340 --> 00:38:12.340 Loyola's original title for the society was The Company of Jesus. 334 00:38:12.340 --> 00:38:23.340 Under vow of absolute obedience to the Pope and to the General of the Order, the Jesuits became the shock troops of the Catholic Counter-Reformation. 335 00:38:23.340 --> 00:38:37.340 Despite their vow to the Pope, the Jesuit General Congregation of 1573, only four years after Cum Onus, validated the mutually redeemable census contract. 336 00:38:37.340 --> 00:38:47.340 And in 1581, the Jesuit congregation went the whole way and validated every type of census contract. 337 00:38:47.340 --> 00:38:57.340 When some German Jesuits became restive at this liberality, the general of the Jesuit order, Claude Aquaviva, in 1589, 338 00:38:57.340 --> 00:39:05.340 ordered that the validity of the census contract be upheld by German Jesuits with no further dissent. 339 00:39:05.340 --> 00:39:09.340 So much for the Pope's census prohibition. 340 00:39:09.340 --> 00:39:19.340 In the following century, the census loophole was widely used to camouflage interest on loan contracts, particularly in Germany. 341 00:39:19.340 --> 00:39:31.340 As Noonan points out, it is certainly significant that the German word for interest on a loan is ziens, derived from the Latin, census. 342 00:39:31.340 --> 00:39:48.340 The Zumanhart-Kajetan doctrine of implicit intention that if someone did not intend a contract to be a loan, then it was licit, was carried even further by the remarkable Jesuit congregation of 1581. 343 00:39:48.340 --> 00:39:53.340 The congregation justified virtually every contract. 344 00:39:53.340 --> 00:40:14.340 As Noonan concludes, in practice it meant that only loans to aged or infirm persons without property or loans bearing a rate of interest beyond that obtainable in a guaranteed investment contract or census were to be regarded as true usurious loans. 345 00:40:14.340 --> 00:40:41.340 If Azpilcueta Navaras was conservative on most aspects of usury, he did, however, become the first writer to justify interest charged on Lucrum cessens, investment profit foregone, for all loans, not just ad hoc loans made out of charity, previous writers, or even only for loans to business, cajetan. 346 00:40:41.340 --> 00:40:50.120 Now, any profit foregone could be charged as interest, even by professional moneylenders. 347 00:40:50.120 --> 00:40:55.940 The only restriction remaining, a feeble one in practice, is that the lender would actually 348 00:40:55.940 --> 00:41:01.100 have used his money to make the foregone investment. 349 00:41:01.100 --> 00:41:08.340 Of this first generation of late Spanish scholastics, approximately those who were born in the 1480s 350 00:41:08.340 --> 00:41:19.740 1490s. The final noteworthy writer was Juan de Medina, 1490-1546. Medina, a Franciscan, 351 00:41:19.740 --> 00:41:27.940 did not, however, teach theology at Salamanca, but at the collegium at Alcala. Medina's distinction 352 00:41:27.940 --> 00:41:33.840 comes from being the first writer in history to advance the view clearly that charging 353 00:41:33.840 --> 00:41:39.640 Exposing interest on a loan is legitimate if in compensation to the lender for risk 354 00:41:39.640 --> 00:41:47.640 of non-payment. Medina's reasoning was impeccable. Exposing one's property to the risk of being 355 00:41:47.640 --> 00:41:54.160 lost is sellable and purchasable at a price, nor is it among those things which are to 356 00:41:54.160 --> 00:42:01.460 be done gratuitously. Furthermore, Medina pointed out, theologians now admit that someone 357 00:42:01.460 --> 00:42:07.660 One who guarantees a debtor's loan can licitly charge for that service. 358 00:42:07.660 --> 00:42:13.800 But in that case, if the borrower cannot find a guarantor, why cannot the lender charge 359 00:42:13.800 --> 00:42:18.660 the borrower for assuming the risk of non-repayment? 360 00:42:18.660 --> 00:42:23.560 Isn't his charge similar to the charge of the guarantor? 361 00:42:23.560 --> 00:42:30.180 The argument was sound, but the shock to the scholastics was severe, no less so because 362 00:42:30.180 --> 00:42:37.060 Because Medina weakened his risk justification by banning interest on riskless loans and 363 00:42:37.060 --> 00:42:43.980 restricting the charge to cases where the borrower could not find a guarantor. 364 00:42:43.980 --> 00:42:51.160 Domingo de Soto, in horror, correctly pointed out that to admit a charge for risk of non-payment 365 00:42:51.160 --> 00:42:57.740 would destroy the entire usury prohibition, since a charge could be made for a loan above 366 00:42:57.740 --> 00:42:59.880 the principal. 367 00:42:59.880 --> 00:43:06.920 The usually more liberal Aspil Queta gave Medina even shorter shrift, objecting correctly 368 00:43:06.920 --> 00:43:14.360 if insufficiently that every theologian, canon lawyer and natural lawyer disagreed with Medina's 369 00:43:14.360 --> 00:43:19.880 innovation, and that was supposed to be the end of the matter. 370 00:43:19.880 --> 00:43:25.400 Medina's discussion of value theory, however, was not nearly so cogent. 371 00:43:25.400 --> 00:43:32.000 In discussing the just market price, Medina throws in, higgledy-piggledy, a host of factors 372 00:43:32.000 --> 00:43:41.080 – costs, labor, industry and risk for suppliers, need or utility for buyers, and scarcity or 373 00:43:41.080 --> 00:43:43.880 abundance of the good. 374 00:43:43.880 --> 00:43:49.400 Clearly there was much less of a coherent analysis of supply than in the hands of San 375 00:43:49.400 --> 00:43:52.000 Bernardino of Siena. 376 00:43:52.000 --> 00:43:56.940 On the other hand, whereas the scholastic tradition held that the legal price would 377 00:43:56.940 --> 00:44:03.560 have to take precedence over the market price, Medina cited two cases where the market price 378 00:44:03.560 --> 00:44:09.640 should be followed, where the market price is lower, and where the authorities were too 379 00:44:09.640 --> 00:44:16.000 slow in adjusting the legal edict to a higher market price. 380 00:44:16.000 --> 00:44:23.440 5. THE SCHOOL OF SALAMANCA, THE MIDDLE YEARS 381 00:44:23.440 --> 00:44:28.640 The institution and the structure of thought of the School of Salamanca was established 382 00:44:28.640 --> 00:44:36.080 then in the first half of the 16th century by three great Dominicans, Francisco de Vitoria 383 00:44:36.080 --> 00:44:44.920 and his followers, Domingo de Soto and Martin de Azpilcueta Navaras. The latter two theologians 384 00:44:44.920 --> 00:44:50.280 Salamanians were the founders of the economic aspect of the systematic theology and philosophy 385 00:44:50.280 --> 00:44:53.320 of the Salamanca School. 386 00:44:53.320 --> 00:44:58.120 The middle generation of Salamanquans were those men born in the first decades of the 387 00:44:58.120 --> 00:45:03.120 16th century and writing near and after mid-century. 388 00:45:03.120 --> 00:45:09.400 The oldest of these second generation members was the eminent Diego de Covarrubias y Leva 389 00:45:09.400 --> 00:45:17.880 1512-1577, whose handsome and distinguished features grace a stunning portrait by the 390 00:45:17.880 --> 00:45:25.080 great Spanish painter El Greco, now hanging in the Greco Museum in Toledo. 391 00:45:25.080 --> 00:45:30.640 Acknowledged as the greatest jurist since Vitoria, Covarrubias was the most prominent 392 00:45:30.640 --> 00:45:33.800 student of Azpilcueta. 393 00:45:33.800 --> 00:45:39.840 After 10 years as Professor of Canon Law at the University of Salamanca, Covarrubias was 394 00:45:39.840 --> 00:45:46.400 made Auditor of the Chancellor of Castile by the Emperor, after which he became Bishop 395 00:45:46.400 --> 00:45:50.880 of Ciudad Rodrigo and Bishop of Segovia. 396 00:45:50.880 --> 00:45:57.360 In 1572 Covarrubias became President of the Council of Castile. 397 00:45:57.360 --> 00:46:03.760 As did so many other scholastics of the time, Covarrubias' writings ranged over theology, 398 00:46:03.760 --> 00:46:10.720 History, Numismatics and Other Disciplines of Human Action as well as the Law. 399 00:46:10.720 --> 00:46:16.580 The Theory of Value had lain in the doldrums ever since San Bernardino and Johannes Nieder 400 00:46:16.580 --> 00:46:24.240 in the 15th century, and now, a century later, it was revived by Covarrubias. 401 00:46:24.240 --> 00:46:32.160 In his Variarum, 1554, Covarrubias gets value theory back on the right track. 402 00:46:32.160 --> 00:46:39.640 The value of goods on the market is determined by utility and by the scarcity of the product. 403 00:46:39.640 --> 00:46:46.720 The value of goods, then, depends not on matters intrinsic to the good or to its production, 404 00:46:46.720 --> 00:46:49.680 but on the estimations of consumers. 405 00:46:49.680 --> 00:46:53.040 Thus, Covarrubias. 406 00:46:53.040 --> 00:46:58.680 The value of an article does not depend on its essential nature, but on the estimation 407 00:46:58.680 --> 00:47:05.920 of Men, even if that estimation is foolish. Thus, in the Indies, wheat is dearer than 408 00:47:05.920 --> 00:47:11.920 in Spain, because men esteem it more highly, though the nature of the wheat is the same 409 00:47:11.920 --> 00:47:20.200 in both places. In considering the just price of a good, Covarrubias added, we must consider 410 00:47:20.200 --> 00:47:28.240 Consider not its original cost, nor its cost in labor, but only its common market value. 411 00:47:28.240 --> 00:47:35.260 Prices fall when buyers are few and goods are abundant, and vice versa. 412 00:47:35.260 --> 00:47:40.800 It should be noted, as will be mentioned further below, that Covarrubius, considered one of 413 00:47:40.800 --> 00:47:47.520 the greatest experts on Roman law in his day, exerted considerable influence on the great 414 00:47:47.520 --> 00:47:52.840 17th Century Dutch Protestant jurist Hugo Grotius. 415 00:47:52.840 --> 00:47:58.720 Covarrubias economic writings were particularly influential in Italy, where they continued 416 00:47:58.720 --> 00:48:07.280 to be cited down through the work of the eminent Abbé Ferdinando Galliani in 1750. 417 00:48:07.280 --> 00:48:12.920 Another important contribution to utility theory was made by a lesser contemporary of 418 00:48:12.920 --> 00:48:22.460 of Covarrubias, Luis Saravia de la Calle Veronese. Saravia was one of several influential writers 419 00:48:22.460 --> 00:48:28.300 of handbooks on moral theology, which took the teachings of the great theologians and 420 00:48:28.300 --> 00:48:36.880 boiled them down for confessors and their penitents. In his Instrucción de Mercades, 421 00:48:36.880 --> 00:48:44.960 Medina del Campo, 1554, Saravia lashed out at all manner of cost of production theories 422 00:48:44.960 --> 00:48:52.100 of value, insisting that utility and market demand alone interacting with scarcity of 423 00:48:52.100 --> 00:48:58.320 supply determine the common market price and hence the just price. 424 00:48:58.320 --> 00:49:05.580 Saravia's attack on cost of production notions was trenchant and hard-hitting. 425 00:49:05.580 --> 00:49:12.420 The just price arises from the abundance or scarcity of goods, merchants and money, as 426 00:49:12.420 --> 00:49:17.900 has been said, and not from costs, labor and risk. 427 00:49:17.900 --> 00:49:24.220 If we had to consider labor and risk in order to assess the just price, no merchant would 428 00:49:24.220 --> 00:49:31.780 ever suffer loss, nor would abundance or scarcity of goods and money enter into the question. 429 00:49:31.780 --> 00:49:38.660 Saravia's work, in addition to being cited many times by later Spanish writers, was also 430 00:49:38.660 --> 00:49:44.340 influential in Italy, where it was translated in 1561. 431 00:49:44.340 --> 00:49:53.360 The Italian A. M. Venusti became a disciple of Saravia and published a similar treatise. 432 00:49:53.360 --> 00:49:59.940 The next important Salamancon economist was the colorful Dominican Tomás de Maracado, 433 00:49:59.940 --> 00:50:09.340 died 1585. Mercado's was the next important handbook on moral theology after Saravia. 434 00:50:09.340 --> 00:50:19.540 Tratos y Contratos de Mercaderes, Salamanca 1569. Born in Seville, Mercado was raised 435 00:50:19.540 --> 00:50:24.900 in Mexico, where he entered the Dominican order, from which he returned to Salamanca 436 00:50:24.900 --> 00:50:32.280 and Seville. Mercado's handbook drew on his extensive knowledge of business practice picked 437 00:50:32.280 --> 00:50:39.380 up on his travels and it was written in a concise and even sardonic style. Mercado was 438 00:50:39.380 --> 00:50:47.540 a perceptive if sometimes confused monetary theorist. Applying utility analysis to money, 439 00:50:47.540 --> 00:50:53.020 Mercado went right up to the edge of marginal analysis by pointing out that the purchasing 440 00:50:53.020 --> 00:51:00.460 Purchasing power is the highest where money is most scarce, and therefore highly esteemed. 441 00:51:00.460 --> 00:51:07.500 In short, Mercado dimly realized that the demand for money is a schedule, falling as 442 00:51:07.500 --> 00:51:14.380 the supply of money increases, and that the value or purchasing power of money is determined 443 00:51:14.380 --> 00:51:18.260 by the interaction of its supply and demand. 444 00:51:18.260 --> 00:51:20.260 Thus Mercado 445 00:51:48.260 --> 00:51:53.820 Attraction and appreciation are brought about in the first place by the abundance or scarcity 446 00:51:53.820 --> 00:51:55.580 of these metals. 447 00:51:55.580 --> 00:52:02.900 Since they are found and mined in America, they are there held in little esteem. 448 00:52:02.900 --> 00:52:09.660 It is not surprising that Mercado, in contrast to De Soto, opposed the outlawing of internal 449 00:52:09.660 --> 00:52:13.020 currency exchange in Spain. 450 00:52:13.020 --> 00:52:18.980 On the other hand, he was confused enough, in contrast to his keen analysis of the value 451 00:52:18.980 --> 00:52:24.780 of money, to favor the outlawing of the export of metals. 452 00:52:24.780 --> 00:52:30.580 But wouldn't the esteem for the remaining metals be higher, and wouldn't this check 453 00:52:30.580 --> 00:52:35.180 and offset the outward flow of metals? 454 00:52:35.180 --> 00:52:42.620 During the 1570s, a satellite group of theologian economists arose at Valencia, grounding themselves 455 00:52:42.620 --> 00:52:45.740 on their Studies at Salamanca. 456 00:52:45.740 --> 00:52:55.420 The most important was Francisco Garcia, who in his Trattato Utilismo, Valencia 1583, expanded 457 00:52:55.420 --> 00:53:00.080 and developed the subjective utility theory of value. 458 00:53:00.080 --> 00:53:06.260 In a notable advance in discussions of utility, Garcia pointed out that the utility or value 459 00:53:06.260 --> 00:53:13.140 The value of a thing may vary because one good may have many uses and serve more purposes 460 00:53:13.140 --> 00:53:20.720 than another, may serve a more important service than another, and or may perform a given service 461 00:53:20.720 --> 00:53:24.420 more efficiently than another. 462 00:53:24.420 --> 00:53:31.440 In addition to utility determining value and price, Garcia noted also its relative abundance 463 00:53:31.440 --> 00:53:39.000 Preference or Scarcity, and here Garcia, too, came just to the edge, although not over, 464 00:53:39.000 --> 00:53:45.880 of discovering the final missing marginal element in utility theory. 465 00:53:45.880 --> 00:53:51.880 For example, we have said that bread is more valuable than meat because it is more necessary 466 00:53:51.880 --> 00:53:54.880 for the preservation of human life. 467 00:53:54.880 --> 00:54:01.220 But there may come a time when bread is so abundant and meat so scarce that bread is 468 00:54:01.220 --> 00:54:04.940 Is Cheaper Than Meat 469 00:54:04.940 --> 00:54:10.620 Garcia went on to detail other determinants of value, including the number of buyers and 470 00:54:10.620 --> 00:54:17.740 sellers and the eagerness to buy and sell, that is, intensity of demand in buying or 471 00:54:17.740 --> 00:54:24.580 holding on to a product, whether vendors are eager to sell their goods and buyers much 472 00:54:24.580 --> 00:54:27.940 sought after and importuned. 473 00:54:27.940 --> 00:54:34.260 He then went on to integrate monetary into value theory, another determinant of prices 474 00:54:34.260 --> 00:54:39.340 being whether money is scarce or plentiful. 475 00:54:39.340 --> 00:54:47.420 In monetary theory, Garcia continued and developed the Aspilcueta Covarrubius Mercado line. 476 00:54:47.420 --> 00:54:54.880 In the Indies, where gold and silver are plentiful, specie is not as highly esteemed as in Spain, 477 00:54:54.880 --> 00:54:57.860 where there is less gold and silver. 478 00:54:57.860 --> 00:55:03.520 He similarly pointed out in his comprehensive discussion that when money is abundant in 479 00:55:03.520 --> 00:55:10.960 any given country, its esteem or value will be low, whereas when money is scarce it is 480 00:55:10.960 --> 00:55:13.860 far more highly valued. 481 00:55:13.860 --> 00:55:20.860 In other words, as Garcia pointed out, these differences in degrees of esteem or demand 482 00:55:20.860 --> 00:55:25.500 may occur either over place or over time. 483 00:55:25.500 --> 00:55:32.640 This comparative analysis of changes in the value of money over time or place was an important 484 00:55:32.640 --> 00:55:35.380 advance in monetary theory. 485 00:55:35.380 --> 00:55:44.720 But not only that, Garcia for the first time rested his macro-analysis on a micro-insight, 486 00:55:44.720 --> 00:55:51.840 that a very rich man, a man with an abundant personal supply of money, will tend to evaluate 487 00:55:51.840 --> 00:56:06.680 Here, Garcia actually grasped, though sketchily, the concept of the diminishing marginal utility 488 00:56:06.680 --> 00:56:16.040 of money. Marginalism, in this area at least, was actually reached rather than simply approached. 489 00:56:16.040 --> 00:56:23.920 Finally, Garcia arrived at the most integrated utility theory of the value of money to date. 490 00:56:23.920 --> 00:56:30.440 The value of money on the market is determined by the supply of money available, the intensity 491 00:56:30.440 --> 00:56:37.200 of the demand for money, and the safety of the money itself, called by later economists 492 00:56:37.200 --> 00:56:43.040 the quality of the money in the minds of people in the market. 493 00:56:43.040 --> 00:56:48.540 6. The Late Salamanquans 494 00:56:48.540 --> 00:56:56.040 The school of Salamanca, begun by Francisco Vitoria in the 1520s, reached its final flowering 495 00:56:56.040 --> 00:57:02.320 at the end of the 16th century. One of the leading lights of that era was the Dominican 496 00:57:02.320 --> 00:57:11.520 Domingo de Báñez de Mondragón, 1527-1604, professor of theology at the University of 497 00:57:11.520 --> 00:57:19.160 of Salamanca, and friend and confessor of the famous mystic St. Teresa of Avila. 498 00:57:19.160 --> 00:57:25.700 de Báñez was renowned for the great controversy with his eminent Jesuit colleague Luis de 499 00:57:25.700 --> 00:57:31.440 Molina on the crucial question of determinism versus free will. 500 00:57:31.440 --> 00:57:38.220 de Báñez took the Dominican position, which leaned toward the Calvinist-determinist stand 501 00:57:38.220 --> 00:57:44.420 that salvation is solely a product of God's grace, ordered from the beginning of time 502 00:57:44.420 --> 00:57:48.560 for God's own inscrutable reasons. 503 00:57:48.560 --> 00:57:54.840 Molina championed the Jesuit view, which upheld the freedom of will of each individual in 504 00:57:54.840 --> 00:57:57.460 achieving salvation. 505 00:57:57.460 --> 00:58:03.680 In the latter view, the free will choice of the individual is necessary to effectuate God's 506 00:58:03.680 --> 00:58:07.820 grace, which is there for him to accept. 507 00:58:07.820 --> 00:58:13.820 A historian sums up Molina's view of free will with these inspiring words. 508 00:58:13.820 --> 00:58:22.200 Liberty is ours, so indisputably ours, that with the help of God's gifts it lies in our 509 00:58:22.200 --> 00:58:28.680 power to avoid all mortal sin and to attain eternal life. 510 00:58:28.680 --> 00:58:33.020 Freedom belongs to the sons of God. 511 00:58:33.020 --> 00:58:40.420 In a systematic discussion of money, its value, and foreign exchange, de Báñez, in De 512 00:58:40.420 --> 00:58:48.560 Justicia et Jure, 1594, provided a cogent discussion of the purchasing power parity 513 00:58:48.560 --> 00:58:56.000 theory of exchanges, a theory which had formed the scholastic main line since de Soto and 514 00:58:56.000 --> 00:58:58.260 Azpilcueta. 515 00:58:58.260 --> 00:59:08.380 The last notable Salamancon economic thinker was the great theologian Luis de Molina, 1535-1601. 516 00:59:08.380 --> 00:59:14.260 The ascendancy of Molina in Spanish scholastic thought was a fitting embodiment of the passing 517 00:59:14.260 --> 00:59:20.460 of the theological and the natural law torch from the Dominicans to the aggressive new 518 00:59:20.460 --> 00:59:22.740 Jesuit order. 519 00:59:22.740 --> 00:59:29.380 By the late 16th century, the influence of the order permeated all of Spain. 520 00:59:29.380 --> 00:59:36.220 Though a Salamancan through and through, Molina only briefly studied and never actually taught 521 00:59:36.220 --> 00:59:38.900 at that university. 522 00:59:38.900 --> 00:59:44.860 Born in Cuença of a noble family, Molina went briefly to Salamanca and then to the 523 00:59:44.860 --> 00:59:47.260 University of Alcala. 524 00:59:47.260 --> 00:59:53.620 Following the new Jesuit order, Molina was sent to the University of Coimbra in Portugal, 525 00:59:53.620 --> 00:59:59.180 since the Jesuit order was not yet fully organized in Castile. 526 00:59:59.180 --> 01:00:05.540 Molina was to remain 29 years as a student and teacher in Portugal. 527 01:00:05.540 --> 01:00:12.580 After Coimbra, the habitually shabbily dressed Molina taught theology and civil law for 20 528 01:00:12.580 --> 01:00:15.640 years at the University of Evora. 529 01:00:15.640 --> 01:00:22.200 In retirement back in Quensa, the learned and worldly Molina published his massive six-volume 530 01:00:22.200 --> 01:00:27.160 magnum opus, De Justicia et Jure. 531 01:00:27.160 --> 01:00:34.980 The first three volumes were published in 1593, 1597, and 1600, and the other volumes 532 01:00:34.980 --> 01:00:37.960 followed posthumously. 533 01:00:37.960 --> 01:00:44.480 Luis de Molina was a solid economic liberal, and he provided a comprehensive analysis in 534 01:00:44.480 --> 01:00:51.480 in the Salamancon vein of supply and demand and their determination of price. 535 01:00:51.480 --> 01:00:56.240 The just price is, of course, the common market price. 536 01:00:56.240 --> 01:01:01.400 One important addition that Molina made to his forerunners was to point out that goods 537 01:01:01.400 --> 01:01:09.020 supplied at retail in small quantities will sell at a higher unit price than at bulk sales 538 01:01:09.020 --> 01:01:12.640 before the goods get to the retailer. 539 01:01:12.640 --> 01:01:20.760 This argument also served as an added justification for the existence of the much abused retailer. 540 01:01:20.760 --> 01:01:28.200 But Molina in economics was primarily a monetary theorist. Here he endorsed and carried forward 541 01:01:28.200 --> 01:01:34.960 the purchasing power parity theory of exchange rates and the Salamakan analysis of the value 542 01:01:34.960 --> 01:01:44.080 of Money, even explicitly endorsing the work of his theological opponent, Domingo de Báñez. 543 01:01:44.080 --> 01:01:49.480 Molina's analysis of the determination of the value of money and its changes was the 544 01:01:49.480 --> 01:01:57.560 most subtle to date, using explicit, other things being equal, Ceteris Paribus clauses, 545 01:01:57.560 --> 01:02:03.480 and developing the analysis of the determinants of the demand for money. 546 01:02:03.480 --> 01:02:09.200 Based on the causes of changes in price, and particularly of the Spanish inflation 547 01:02:09.200 --> 01:02:17.760 of the 16th century, Molina wrote, Just as an abundance of goods causes prices to fall, 548 01:02:17.760 --> 01:02:24.160 the quantity of money and number of merchants being equal, so does an abundance of money 549 01:02:24.160 --> 01:02:30.880 cause them to rise, the quantity of goods and number of merchants being equal. 550 01:02:30.880 --> 01:02:37.380 The reason is that the money by itself becomes less valuable for the purpose of buying and 551 01:02:37.380 --> 01:02:39.020 comparing goods. 552 01:02:39.020 --> 01:02:46.620 Thus we see that in Spain the purchasing power of money is far lower on account of its abundance 553 01:02:46.620 --> 01:02:49.460 than it was 80 years ago. 554 01:02:49.460 --> 01:02:55.660 A thing that could be bought for two ducats at that time is nowadays worth five, six or 555 01:02:55.660 --> 01:02:58.020 even more. 556 01:02:58.020 --> 01:03:03.860 have risen in the same proportion, and so have dowries, the price of estates, the income 557 01:03:03.860 --> 01:03:08.420 from benefices, and other things. 558 01:03:08.420 --> 01:03:14.220 After going through the standard Spanish scholastic analysis of how abundance of money causes 559 01:03:14.220 --> 01:03:21.780 a fall in its value, first and foremost in the New World, then in Seville and Spain, 560 01:03:21.780 --> 01:03:26.380 Molina noted the importance of the demand for money. 561 01:03:26.380 --> 01:03:32.660 Wherever the demand for money is greatest, whether for buying or carrying goods, conducting 562 01:03:32.660 --> 01:03:39.060 other business, waging war, holding the royal court, or for any other reason, there will 563 01:03:39.060 --> 01:03:41.840 its value be highest. 564 01:03:41.840 --> 01:03:48.380 It is not surprising that the economic liberal Molina strongly attacked any government fixing 565 01:03:48.380 --> 01:03:50.540 of exchange rates. 566 01:03:50.540 --> 01:03:56.980 The value of one currency in terms of another is always changing in response to supply and 567 01:03:56.980 --> 01:04:05.480 demand forces, and therefore it is meet and just that exchange rates fluctuate accordingly. 568 01:04:05.480 --> 01:04:11.440 Molina then pointed out that fixed exchange rates would create a shortage of money. 569 01:04:11.440 --> 01:04:16.180 He did not, however, go into detail. 570 01:04:16.180 --> 01:04:22.180 Molina also invade against most governmental price controls, particularly the imposing 571 01:04:22.180 --> 01:04:26.700 of ceiling prices on farm commodities. 572 01:04:26.700 --> 01:04:32.680 On usury, Molina, while still not going as far as the radical acceptance of interest 573 01:04:32.680 --> 01:04:39.800 by Konrad Zumenhardt a century earlier, took important steps in widening the accepted bounds 574 01:04:39.800 --> 01:04:42.440 of the charging of interest. 575 01:04:42.440 --> 01:04:49.040 He put his immense prestige behind Juan de Medina's entirely new defense of charging 576 01:04:49.040 --> 01:04:56.640 payment for the lender's assumption of risk. Indeed, he widened Medina's permitted bounds 577 01:04:56.640 --> 01:05:04.120 of using the risk defense. Not only that, Molina greatly widened the scope of lucrum 578 01:05:04.120 --> 01:05:11.740 cessens and solidly entrenched that permissible title to interest as a broad principle permeating 579 01:05:11.740 --> 01:05:18.500 During the Market Economy, one of the few remaining restrictions is intention. 580 01:05:18.500 --> 01:05:26.820 The loan is not permissible if the lender had not intended to invest the loaned funds. 581 01:05:26.820 --> 01:05:33.820 Luis de Molina also played an important role in reviving active natural rights and private 582 01:05:33.820 --> 01:05:40.620 property rights theory, which had fallen into a decline since the early part of the 16th 583 01:05:40.620 --> 01:05:41.620 century. 584 01:05:41.620 --> 01:05:47.340 Theists and Protestants, as we shall see below, had little use for the concept of natural 585 01:05:47.340 --> 01:05:54.900 rights, while Victoria and the Dominicans slipped into a determinist, passive or attenuated 586 01:05:54.900 --> 01:05:57.320 view of rights. 587 01:05:57.320 --> 01:06:03.900 Only the University of Louvain, in Belgium, began to serve as a center of free will thought, 588 01:06:03.900 --> 01:06:10.460 along with the idea of absolute natural rights of person and property. 589 01:06:10.460 --> 01:06:26.300 The Louvain theologian Johannes Dridot stressed freedom of the will in De Concordia 1537 and active natural rights De Libertate Christiana 1548. 590 01:06:26.300 --> 01:06:32.460 By the 1580s, the New Jesuit Order began to launch its assault on the Dominicans, whom 591 01:06:32.460 --> 01:06:39.380 they suspected of crypto-Calvinism, a suspicion not allayed by the fact that many Dominicans 592 01:06:39.380 --> 01:06:44.300 Malina's had converted to Calvinism during the 16th century. 593 01:06:44.300 --> 01:06:49.900 In the course of his championing free will against de Bagnès and the Dominicans, Malina 594 01:06:49.900 --> 01:06:56.700 also returned to the active natural rights view which had for long only continued to 595 01:06:56.700 --> 01:06:59.980 be upheld at Louvain. 596 01:06:59.980 --> 01:07:06.880 Attacking the passive claim theory of rights, Malina put the distinction very clearly. 597 01:07:06.880 --> 01:07:14.600 When we say that someone has a use to something, we do not mean that anything is owed to him, 598 01:07:14.600 --> 01:07:20.720 but that he has a faculty to it, whose contravention would cause him injury. 599 01:07:20.720 --> 01:07:27.480 In this way we say that someone has a use to use his own things, such as consuming his 600 01:07:27.480 --> 01:07:29.180 own food. 601 01:07:29.180 --> 01:07:35.620 That is, if he is impeded, injury and injustice will be done to him. 602 01:07:35.620 --> 01:07:53.340 Note that the astute Molina did not say that the pauper had the right to be given alms. 603 01:07:53.340 --> 01:08:00.620 For Molina, as for all active property rights theorists, a right was not a claim to someone 604 01:08:00.620 --> 01:08:19.900 It was Molina's achievement to link this active natural rights theory with his libertarian 605 01:08:19.900 --> 01:08:27.860 commitment to freedom and the free will of each individual, both theologically and philosophically. 606 01:08:27.860 --> 01:08:33.180 Dr. Tuck sums up this linkage with these stirring words. 607 01:08:33.180 --> 01:08:39.800 Molinas was a theory which involved a picture of man as a free and independent being, making 608 01:08:39.800 --> 01:08:46.260 his own decisions and being held to them on matters to do with both his physical and his 609 01:08:46.260 --> 01:08:49.940 spiritual welfare. 610 01:08:49.940 --> 01:08:56.260 The school of Salamanca had begun with the distinguished jurist Davidoria, and so it 611 01:08:56.260 --> 01:09:02.900 It is fitting that the last major Salamancon should be another renowned jurist, and perhaps 612 01:09:02.900 --> 01:09:13.280 the most illustrious thinker in the history of the Jesuit order, Francisco Suarez, 1548-1617. 613 01:09:13.280 --> 01:09:19.860 The last of the great Thomists, this celebrated theologian was born in Granada into an ancient 614 01:09:19.860 --> 01:09:22.020 noble family. 615 01:09:22.020 --> 01:09:29.020 During the University of Salamanca, Suarez applied to the Jesuit order in 1564, and was 616 01:09:29.020 --> 01:09:36.100 the only applicant among 50 candidates that year to be rejected, as mentally and physically 617 01:09:36.100 --> 01:09:39.000 below standard. 618 01:09:39.000 --> 01:09:45.020 Admitted finally with an inferior rank, Suarez could hardly keep up with his studies, and 619 01:09:45.020 --> 01:09:53.220 was known, ironically like St. Thomas Aquinas before him, as the dumb ox. Soon, however, 620 01:09:53.220 --> 01:09:59.780 the humble and modest Suarez became the star pupil, and it was not long before his theology 621 01:09:59.780 --> 01:10:04.500 professors were asking him for advice. 622 01:10:04.500 --> 01:10:12.180 In 1571, Suarez became professor of philosophy at Segovia, then taught theology at Avila 623 01:10:12.180 --> 01:10:19.740 and Valladolid. Suarez soon attained to the famous Chair of Theology at the Jesuit College 624 01:10:19.740 --> 01:10:27.860 in Rome. From there, due to ill health, Suarez returned to Spain, teaching at Alcala, where 625 01:10:27.860 --> 01:10:35.860 he was virtually ignored, and then to Salamanca, where, as in Alcala, he lost academic disputes 626 01:10:35.860 --> 01:10:38.340 to Inferior Rivals. 627 01:10:38.340 --> 01:10:46.500 In 1593, the emperor insisted on Suarez's accepting the main chair of theology at Coimbra, 628 01:10:46.500 --> 01:10:55.620 where in 1612 he published his masterwork, De Legibus Ac De Deo Legislatore. 629 01:10:55.620 --> 01:11:00.100 Francisco Suarez never achieved his due in life. 630 01:11:00.100 --> 01:11:06.180 His quiet, plodding lecture style made him lose academic influence to flashier though 631 01:11:06.180 --> 01:11:09.140 inferior rivals. 632 01:11:09.140 --> 01:11:16.460 Perhaps the crowning indignity heaped upon him is that in 1597, at the age of 49, this 633 01:11:16.460 --> 01:11:22.460 brilliant and learned jurist and theologian, perhaps the greatest mind in the history of 634 01:11:22.460 --> 01:11:28.660 the Jesuit order, was forced to leave the University of Coimbra for a year to obtain 635 01:11:28.660 --> 01:11:36.740 a Doctorate in Theology at Evora, Ph.D. Itis in the 16th Century 636 01:11:36.740 --> 01:11:42.820 While Suarez contributed little on strictly economic matters, he added greatly to the 637 01:11:42.820 --> 01:11:49.060 weight of the Louvain-Molina rediscovery of the active natural rights view of private 638 01:11:49.060 --> 01:11:56.360 property, and he reinforced the great impact of Molinist free will theory. 639 01:11:56.360 --> 01:12:02.960 In addition, Suarez had a much more restricted view of the just power of the king than did 640 01:12:02.960 --> 01:12:06.680 Molina or his other predecessors. 641 01:12:06.680 --> 01:12:13.820 To Suarez, the power of the ruler is in no sense a divinely created institution, since 642 01:12:13.820 --> 01:12:21.820 political power, by natural and divine law, devolves solely on the people as a whole. 643 01:12:21.820 --> 01:12:29.140 The community as a whole confers political power on the king or other set of rulers, 644 01:12:29.140 --> 01:12:35.940 and while Suarez believed that natural law requires some form of state, the sovereign 645 01:12:35.940 --> 01:12:42.780 power of any particular state must necessarily be bestowed upon him by the consent of the 646 01:12:42.780 --> 01:12:45.780 community. 647 01:12:45.780 --> 01:12:50.620 Suarez's theory, of course, held radical implications indeed. 648 01:12:50.620 --> 01:12:56.840 For if the people or the community confer state power on a king or set of rulers, may 649 01:12:56.840 --> 01:13:00.300 they not then take it away? 650 01:13:00.300 --> 01:13:02.300 Here Suarez fumbled. 651 01:13:02.300 --> 01:13:09.700 He was certainly not prepared to go all the way to a truly radical or revolutionary position. 652 01:13:09.700 --> 01:13:17.400 No, he declared inconsistently, once the sovereign power is conferred by the people on a king, 653 01:13:17.400 --> 01:13:19.120 it is his forever. 654 01:13:19.120 --> 01:13:22.280 The people cannot take it back. 655 01:13:22.280 --> 01:13:28.480 But then Suarez shifts once more, adopting the traditional Thomist doctrine of the right 656 01:13:28.480 --> 01:13:31.660 of the people to resist tyrants. 657 01:13:31.660 --> 01:13:37.960 If a king lapses into tyranny, then the people may rise up and resist and even assassinate 658 01:13:37.960 --> 01:13:39.960 the King. 659 01:13:39.960 --> 01:13:46.680 But Suarez, like his forebears, hedged this powerful right of tyrannicide with a thicket 660 01:13:46.680 --> 01:13:48.520 of restrictions. 661 01:13:48.520 --> 01:13:55.380 In particular, tyranny must be manifest, and a private person cannot rise up himself and 662 01:13:55.380 --> 01:13:57.260 kill the king. 663 01:13:57.260 --> 01:14:03.940 The act must in some way be mandated by the people or community, acting as a whole.