“San Bernardino of Siena: Economics and the Entrepreneur”


By Murray N. Rothbard

The most notable development in the historiography of the Austrian School of economics (Menger, Böhm-Bawerk, Mises,Mises Institute Hayek) in the post-World War II era has been the drastic re-evaluation of what might be called its “prehistory,” and as a corollary a fundamental reconsideration of the history of economic thought itself. This reevaluation may be summarized by briefly outlining the “orthodox,” pre-war paradigm of the development of economic thought before the advent of the “Austrian School.” The scholastic philosophers were brusquely dismissed as “medieval” thinkers who totally failed to Scholasticismunderstand the market, and who believed on religious grounds that the “just price” was one that covered either the cost of production or the quantity of labor embodied in a product. After briefly outlining the bullionist and anti-bullionist discussion among the English mercantilists, and lightly touching on a few French and Italian economists of the eighteenth century, the historian of economic thought pointed with a flourish to Adam Smith and David Ricardo as “the founders” of economic science.standing strong

After some backing and filling in the mid-nineteenth century, marginalism, including the Austrian School, arrived in another great burst in the 1870s. Apart from the occasional mention of one or two English precursors of the Austrians, such as Samuel Bailey in the early nineteenth century, this largely completed the basic picture. Typical was the encyclopedic text of Lewis Haney: the scholastics were described as “medieval” and were dismissed as hostile to trade and believers in the labor or cost of production theory of the “just price.”1 It is no wonder that in his famous phrase, R. H. Tawney could call Karl Marx “the last of the Schoolmen.”2

MThe remarkably contrasting new view of the history of economic thought burst upon the scene in 1954 in the monumental, if unfinished, work of Joseph Schumpeter.3 Far from mystical dunderheads who must be skipped over quickly to proceed to the mercantilists, the scholastic philosophers are seen to be remarkable and prescient economists, developing a system very close to the Austrian (school) and subjective utility approach. This was particularly true of the previously neglected later Spanish and Italian scholastics of the sixteenth and seventeenth centuries. Virtually the only missing ingredient in their value theory was the marginal concept.

From them, filiations proceeded to the later French and Italian economists. In this new Schumpeterian view, the English mercantilists are seen as half-baked and polemical pamphleteers rather than essential milestones on the road to Adam Smith and the founding of economic science. In fact, in a profound sense, the new view saw Smith and Ricardo, not as founders of economics, but as shunting economics onto a tragically wrong road which it took the Austrians and the other marginalists to rediscover. Until then, only the neglected anti-Ricardian writers would keep the tradition alive. As we shall see, other historians have further demonstrated the profound Aristotelian (and hence scholastic) roots of the Austrians amidst the diverse variants of the marginalist school. The picture is almost the reverse of the earlier orthodoxy.

It is not the purpose of this paper to dwell on Schumpeter’s deservedly well-known work, but rather to assess the contributions of other writers who carried the Schumpeterian vision still further, and who remain neglected by most economists, possibly from a failure to match Schumpeter in constructing a general treatise to set forth their contributions. Instead, the best development of the new history must be sought in fugitive articles and brief pamphlets and monographs.

The other relatively neglected contributions began largely contemporaneously with Schumpeter. One of the most important, and probably the most neglected, was The School of Salamanca, by Marjorie Grice-Hutchinson, who suffered in the economics profession from being a professor of Spanish literature. Moreover, the book bore the burden of a misleadingly narrow subtitle: “Readings in Spanish Monetary Theory.”4 In fact, the book was a brilliant discovery of the pre-Austrian subjective value and utility views of the late sixteenth-century Spanish scholastics.

But first, Grice-Hutchinson shows that even the earlier scholastics, and as far back as Aristotle, contained a subjective value analysis based on consumer wants, alongside the competing “objective” conception of the “just price” based on labor and costs. As far back as the early Middle Ages, St. Augustine developed the concept of the subjective value-scales of each individual. By the high Middle Ages, the scholastic philosophers had largely abandoned the cost-of-production theory to adopt the view that it is the market’s reflection of consumer demand that truly sets the “just price.” This was particularly true of John Buridan (1300–1358), Henry of Ghent (1217–1293), and Richard of Middleton (1307). As Grice-Hutchinson writes; Medieval writers viewed the poor man as consumer rather than producer. A cost-of-production theory would have given merchants an excuse for over-charging on the pretext of covering their expenses, and it was thought fairer to rely on the impersonal forces of the market which reflected the judgment of the whole community, or, to use the medieval phrase, the “common estimation.”

At any rate, it would seem that the phenomena of exchange came increasingly to be explained in psychological terms.5  Even Henry of Langenstein (1325–1383), who of all the scholastics was the most hostile to the free market and advocated government fixing of the just price on the basis of status and cost; also developed the subjective factor of utility as well as scarcity in his analysis of price. But it was the later, sixteenth-century Spanish scholastics who were to develop the purely subjective, and pro-free market, theory of value. Thus, Luis Saravía de la Calle (1544) denied any role to cost in the determination of price; instead, the market price, which is the just price, is determined by the forces of supply and demand, which in turn is the result of the common estimation of consumers on the market. Saravía wrote, “Excluding all deceit and malice, the just price of a thing is the price which it commonly fetches at the time and place of the deal….” He goes on to point out that the price of a thing will change in accordance with its abundance or scarcity. He proceeds to attack the “cost of production theory” of just price: Those who measure the just price by the labour, costs, and risk incurred by the person who deals in the merchandise or produces it, or by the cost of transport or the expense of travelling … or by what he has to pay the factors for their industry, risk, and labour, are greatly in error, and still more so are those who allow a certain profit of a fifth or a tenth. For the just price arises from the abundance or scarcity of goods, merchants, and money, … and not from costs, labour, and risk.

If we had to consider labour and risk in order to assess the just price, no merchant would ever suffer loss, nor would abundance or scarcity of goods and money enter into the question. Prices are not commonly fixed on the basis of costs. Why should a bale of linen brought overland from Brittany at great expense be worth more than one which is transported cheaply by sea? … Why should a book written out by hand be worth more than one which is printed, when the latter is better though it costs less to produce? … The just price is found not by counting the cost but by the common estimation…6

Similarly, the Spanish scholastic Diego de Covarrubias y Leiva (1554), a distinguished expert on Roman law and a theologian at the University of Salamanca, wrote that the “value of an article” depends “on the estimation of men, even if that estimation be foolish.” Wheat is more expensive in the Indies than in Spain “because men esteem it more highly, though the nature of the wheat is the same in both places.” The just price should be considered not at all with reference to its original or labor cost, but only the common market value where the good is sold; a value, Covarrubias points out, which will fall when buyers are few and goods are abundant, and will rise from the opposite conditions.7

The Spanish scholastic Francisco García (1583) engaged in a remarkably sophisticated analysis of the determinants of value and utility. The valuation of goods, García pointed out, depended on several factors. One was the abundance or scarcity of the supply of goods; the former causing a lower estimation and the latter an increase. A second was whether buyers or sellers are few or many. Another was whether “money is scarce or plentiful,” with the former causing lower estimation of goods and the latter a higher. Another is whether “vendors are eager to sell their goods.” The influence of the abundance or scarcity of a good brought García almost to the brink, but not over it, of a marginal utility analysis of valuation.

For example, we have said that bread is more valuable than meat because it is more necessary for the preservation of human life. But there may come a time when bread is so abundant and meat so scarce that bread is cheaper than meat.8  The Spanish scholastics also anticipated the Austrian School in applying value theory to money, thus beginning the integration of money into general value theory. It is generally believed, for example, that in 1568 Jean Bodin inaugurated what is unfortunately called “the quantity theory of money”—but which would more accurately be called the application of supply and demand analysis to money. Yet he was anticipated, twelve years earlier, by the Salamanca theologian, the Dominican, Martín de Azpilcueta Navarro, who was inspired to explain the inflation brought  about by the importation of gold and silver by the Spaniards from the New World. Citing previous scholastics, Azpilcueta declared that “money is worth more where it is scarce than where it is abundant.” Why? Because “all merchandise becomes dearer when it is in great demand and short supply, and that money, in so far as it may be sold, bartered, or exchanged by some other form of contract, is merchandise and therefore also becomes dearer when it is in great demand and short supply.” Azpilcueta noted that “we see by experience that in France, where money is scarcer than in Spain, bread, wine, cloth, and labour are worth much less. And even in Spain, in times when money was scarcer, saleable goods and labour were given for very much less than after the discovery of the Indies, which flooded the country with gold and silver. The reason for this is that money is worth more where and when it is scarce than where and when it is abundant.”9

Furthermore, the Spanish scholastics went on to anticipate the classical-Mises-Cassel purchasing-power parity theory of exchange rates, by proceeding logically to apply the supply-and-demand theory to foreign exchanges, an institution which was highly developed by the early modern period. The influx of specie into Spain had depreciated the Spanish escudo in foreign exchange, as well as raised prices within Spain, and the scholastics had to deal with this startling phenomenon. It was the eminent Salamanca theologian, the Dominican Domingo de Soto, who, in 1553, first fully applied the supply and demand analysis to foreign exchange rates. De Soto noted that “the more plentiful money is in Medina the more unfavorable are the terms of exchange, and the higher the price that must be paid by whoever wishes to send money from Spain to Flanders, since the demand for money is smaller in Spain than in Flanders. And the scarcer money is in Medina the less he need pay there, because more people want money in Medina than are sending it to Flanders.”10  What de Soto is saying is that as the stock of money increases, the utility of each unit of money to the population will decline, and vice versa; in short, only the great stumbling block of failing to specify the concept of the marginal unit prevents him from arriving at the doctrine of the diminishing marginal utility of money. Azpilcueta, in the passage noted above, is applying the de Soto analysis of the influence of the supply of money on exchange rates, at the same time as he is setting forth a theory of supply and demand in determining the purchasing power of money within a country.

The de Soto-Azpilcueta analysis was spread to the merchants of Spain by the Dominican friar Tomás de Mercado, who, in 1569, wrote a handbook of commercial morality in Spanish, in contrast to the scholastic theologians who invariably wrote in Latin. It was followed by Garcia, and endorsed at the end of the sixteenth century by the Sala-manca theologian, the Dominican Domingo de Bañez, and by the great Portuguese Jesuit, Luis de Molina. Writing in 1601, Molina set forth the theory in an elegant and comprehensive manner: …there is another way in which money may be worth more in one place than in another; namely, because it is scarcer there than elsewhere. Other things being equal, wherever money is most abundant, there will it be least valuable for the purpose of buying goods and comparing things other than money.

Just as an abundance of goods causes prices to fall (the quantity of money and number of merchants being equal) so does an abundance of money cause them to rise (the quantity of goods and number of merchants being equal). The reason is that the money itself becomes less valuable for the purpose of buying and comparing goods. Thus we see that in Spain the purchasing-power of money is far lower, on account of its abundance, than it was eighty years ago. A thing that could be bought for two ducats at that time is nowadays worth 5, 6, or even more. Wages have risen in the same proportion, and so have dowries, the price of estates, the income from benefices, and other things.

We likewise see that money is far less valuable in the New World (especially in Peru, where it is most plentiful), than it is in Spain. But in places where it is scarcer than in Spain, there will it be more valuable. Nor will the value of money be the same in all other places, but will vary: and this will be because of variations in its quantity, other things being equal…. Even in Spain itself, the value of money varies: it is usually lowest of all in Seville, where the ships come in from the New World and where for that reason money is most abundant. Wherever the demand for money is greatest, whether for buying or carrying goods, … or for any other reason, there its value will be highest. It is these things, too, which cause the the value of money to vary in course of time in one and the same place.11

The outstanding revisionist work on the economic thought of the medieval and later scholastics is that of the late Professor Raymond de Roover, in a series of articles and essays. Basing himself in part on the Grice-Hutchinson volume, de Roover published his first comprehensive discussion in 1955.12  For the medieval period, de Roover particularly points to the early fourteenth-century French Ockhamite scholastic, John Buridan, and to the famous early fifteenth-century Italian preacher, San Bernardino of Siena. He notes that Buridan insisted that value is measured by the human wants of the community of individuals; and that the market price is the just price. Furthermore, Buridan was perhaps the first to make it clear in a pre-Austrian manner that voluntary exchange demonstrates subjective preferences, “since he states that the person who exchanges a horse for money would not have done so, if he had not preferred money to a horse.”13  Buridan added that workers hire themselves out because they value the wages they receive higher than the labor they have to expend.14 De Roover then discussed the sixteenth-century Spanish scholastics, centered at the University of Salamanca, the queen of the Spanish universities of the period. From Salamanca, the influence of this school of scholastics spread to Portugal, Italy, and the Low Countries. In addition to summarizing Grice-Hutchinson’s contribution, and adding to her bibliography, de Roover notes that both de Soto and Molina denounced as “fallacious” the notion of the late thirteenth-century scholastic John Duns Scotus that the just price is the cost of production plus a reasonable profit; instead, that price is the common estimation, the interaction of supply and demand, on the market. Molina further introduced the concept of competition by stating that competition among buyers will drive prices up, while a scarcity of purchasers will pull them down.15

In a later article, de Roover elaborated on his researches into the scholastic theory of the just price. He found that the orthodox view of the just price as a station-in-life, cost-of-production price, was based almost solely on the views of the fourteenth-century Viennese scholastic, Henry of Langenstein. But Langenstein, de Roover points out, was a follower of the minority views of William of Ockham, and outside the dominant Thomist tradition; Langenstein was rarely cited by later scholastic writers. While some of their passages are open to a conflicting interpretation, de Roover demonstrates that Albertus Magnus and his great pupil Thomas Aquinas held the just price to be the market price. In fact, Aquinas considers the case of a merchant who brings wheat to a country where there is a great scarcity; the merchant happens to know that more wheat is on the way. May he sell his wheat at the existing price, or must he announce to everyone the imminent arrival of new supplies and suffer a fall in price? Aquinas unequivocally answers that he may justly sell the wheat at the current market price, even though he adds as an afterthought that it would be more virtuous of him to inform the buyers. Furthermore, he points to the summary of St. Thomas’s position by his most distinguished commentator, the late fifteenth-century scholastic, Thomas de Vio, Cardinal Cajetan. Cajetan concludes that for Aquinas the just price is “the one, which at a given time, can be gotten from the buyers, assuming common knowledge and in the absence of all fraud and coercion.”16

The cost-of-production theory of just price held by the Scotists was trenchantly attacked by the later scholastics. San Bernardino of Siena, de Roover points out, declared that the market price is fair regardless of whether the producer gains or loses, or whether it is above or below cost. The great early sixteenth-century jurist, Francisco de Vitoria, founder of the School of Salamanca, insisted that the just price is set by supply and demand regardless of labor costs or expenses; inefficient producers or inept speculators must bear the consequences of their incompetence and poor forecasting. His followers asserted the same position. Furthermore, de Roover makes it clear that the general scholastic emphasis on the justice of “common estimation” (communis aesti-matio) is identical to “market valuation” (aestimatio fori), since the scholastics used these two Latin expressions interchangeably.17  De Roover notes, however, that this acceptance of market price did not mean that the scholastics adopted a laissez-faire position. On the contrary, they were often willing to accept governmental price-fixing instead of market action. A few leading scholastics, however, led by Azpilcueta and including Molina, opposed all price-fixing; as Azpilcueta put it, price controls were unnecessary in times of plenty and ineffective or positively harmful in times of dearth.18

In a comment on de Roover’s paper, Professor David Herlihy pushed the argument back further, noting that in the northern Italian city-states of the twelfth and thirteenth centuries, the birthplace of modern commercial capitalism, the market price was generally considered just because “true” and “real,” if it was “established or utilized without deceit or fraud.” As Herlihy sums up, the just price of an object was its “true value as determined by one of two ways: for objects that were unique, by honest negotiation between seller and purchaser; for staple commodities by the consensus of the marketplace established in the absence of fraud or conspiracy.”19 Professor John W. Baldwin’s definitive account of the theories of just price during the high Middle Ages of the twelfth and thirteenth centuries amply confirmed de Roover’s revisionist insight.20 Baldwin pointed out that there were three important and influential groups of medieval writers: the theologians, whom we have been examining, the Roman lawyers, and the Canon lawyers. For their part, the Romanists, joined by the Canonists, held staunchly to the principle of Roman private law that the just price was whatever was arrived at by free bargaining between buyers and sellers. Baldwin demonstrates that even the theologians of the high Middle Ages before Aquinas accepted the current market price as the just price.21

Several years later, de Roover turned to the views of the scholastics on the broader issue of trade and exchange.22 De Roover conceded the partial validity of the older view that the medieval church frowned on trade as endangering personal salvation; or rather, that, while trade can be honest, it presents great temptation for sin. However, he pointed out that, as trade and commerce grew after the tenth century, the church began to adapt to the idea of the merits of trade and exchange. Thus, while it is true that the twelfth-century scholastic Peter Lombard denounced trade and soldiering as sinful occupations per se, a far more benevolent view of trade was set forth during the thirteenth century by Albertus Magnus and his student Thomas Aquinas, as well as by St. Bonaventure and Pope Innocent V. While trade presented occasions for sin, it was not sinful per se; on the contrary, exchange and the division of labor, for these scholastics, was beneficent in satisfying the wants of the citizens. Moreover, the late thirteenth-century scholastic Richard of Middleton developed the idea that both the buyer and the seller gain by exchange, since each demonstrates that he prefers what he receives in exchange to what he gives up. Middleton also applied this idea to international trade, pointing out that both countries benefit by exchanging their surplus products. Since the merchants and citizens of each country benefit, he pointed out, neither party is “exploiting” the other.

It is true that at the same time, Aquinas and other theologians denounced “covetousness” and love of profit, mercantile gain being only justifiable when directed toward the “good of others”; furthermore, Aquinas attacked “avarice” as attempting to improve one’s “station in life.” But, de Roover points out, the great early sixteenth-century Italian Thomist, Cardinal Cajetan, corrected this view, demonstrating that if this were true, every person would have to be frozen in his current occupation and income. On the contrary, asserted Cajetan, people with unusual ability should be able to rise in the world. De Roover notes that, in contrast to such northern Europeans as Aquinas, Cajetan was quite familiar with the commerce and upward social mobility in the Italian cities. Furthermore, even Aquinas explicitly rejected the idea that prices should be determined by one’s station in life, pointing out that the selling price of any good tends to be the same whether the entrepreneur is poor or wealthy. De Roover concluded the article by hailing the early fifteenth-century scholastic San Bernardino of Siena as being the only theologian who dealt in detail with the economic function of the entrepreneur.

San Bernardino wrote of the uncommon qualities and abilities of the successful entrepreneur, including effort, diligence, knowledge of the market, and calculation of risks, with profit on invested capital justifiable as compensation for the risk and effort of the entrepreneur. De Roover ended by noting the acceptance of religion and of profit in a motto written in a thirteenth-century account book: “In the name of God and of profit.”23

Professor de Roover’s final work in this area was a booklet on San Bernardino and his contemporary, Sant’ Antonio of Florence.24  Elaborating on San Bernardino’s views on trade and the entrepreneur, he shows that the saint pointed out sharply that while the occupation of trade may lead to sin, so may all other occupations, including that of bishops. As for the sins of traders, they consist of such illicit activity as fraud, misrepresentation of products, the sale of adulterated products, and the use of false weights and measures, as well as keeping creditors waiting for their money after a debt is due. As to trade, there are several kinds of useful merchants, according to San Bernardino: importers, exporters, warehousemen, retailers, and manufacturers.

On the rare qualities and virtues that go into the making of successful businessmen, the saint distinguished several qualities. One was efficiency (industria), in which he included knowledge of qualities, prices, and costs, and the ability to assess risks and estimate profit opportunities, which, declared San Bernardino, “indeed very few are capable of doing.” Entrepreneurial ability therefore included the willingness to assume risks (pericula). Thirdly, businessmen must be responsible and attentive to detail; and trouble and toil are also necessary. The rational and orderly conduct of business, also necessary to success, was another virtue lauded by San Bernardino, as was business integrity and the prompt settlement of accounts.

Turning again to the scholastic view of value and price de Roover points out that as early as Aquinas, prices were treated as determined, not by their philosophic rank in nature, but by the degree of the usefulness or utility of the respective products to man and to human wants. As de Roover says of Aquinas, “These passages are clear and unambiguous; value depends upon utility, usefulness, or human wants. There is nowhere any mention of labor as the creator or the measure of value.”25

De Roover then points out that a century before the Spanish scholastics and a century and a half before the sophisticated formulation of Francisco Garcia, San Bernardino had demonstrated that price is determined by scarcity (raritas) usefulness (virtuositas), and pleasurability or desirability (complacibilitas). Greater abundance of a good will cause a drop in its value, and greater scarcity a rise. To have value, furthermore, a good must have usefulness or what we may call “objective utility”; but within that framework, the value is determined by the complacibilitas or “subjective utility” that it has to individual consumers. Again, only the marginal element is lacking for a full-scale pre-Austrian theory of value. Coming to the brink of the later Austrian solution to the classical economists’ “paradox of value,” San Bernardino pointed out that a glass of water, to a man dying of thirst, would be so valuable as to be almost priceless; but fortunately water, though absolutely necessary to human life, is ordinarily so abundant that it commands either a low price or even no price at all. Correcting Schumpeter’s ascription of the founding of subjective utility to Sant’ Antonino, and pointing out that he had derived it from San Bernardino, de Roover shows further that recent scholarship demonstrates that Bernardino derived his own analysis almost word for word from a late thirteenth-century Provençal scholastic, Pierre de Jean Olivi. Apparently, Bernardino had not given credit to Olivi because the latter, coming from another branch of the Franciscan Order, was at that time suspected of heresy.26  Turning to the concept of the “just price,” de Roover makes it clear that San Bernardino, following Olivi, held that the price of a good or service should be “the estimation made in common by all the citizens of the community.” This the saint held explicitly to be the valuation of the market, since he defined the just price as “the one which happens to prevail at a given time according to the estimation of the market, that is, what the commodities for sale are then commonly worth in a certain place.”27

Wages were treated by the two Italian friars as equivalent to the prices of goods. As de Roover writes, for San Bernardino, “the same rules which apply to the prices of goods also apply to the price of services with the consequence that the just wage will also be determined by the forces operating in the market or, in other words, by the demand for labor and the available supply.” An architect is paid more than a ditch digger, asserted Bernardino, because “the former’s job requires more intelligence, greater ability, and longer training and that, consequently, fewer qualify…. Wage differentials are thus to be explained by scarcity because skilled workers are less numerous than unskilled and high positions require even a very unusual combination of skills and abilities.”28 And Sant’ Antonino concluded that the wage of a laborer is a price which, like any other, is properly determined by the common estimation of the market in the absence of fraud.

During and after the sixteenth century, the Catholic Church and scholastic philosophy came under increasingly virulent attack, first from Protestants and then from rationalists, but the result was not so much to eliminate any influence of scholastic philosophy and economics as to mask that influence, since their proclaimed enemies would often fail to cite their writings. Thus, the great early seventeenth-century Dutch Protestant jurist, Hugo Grotius, adopted much of scholastic doctrine, including the emphasis on want and utility as the major determinant of value, and the importance of the common estimation of the market in determining price. Grotius, in fact, explicitly cites the Spanish scholastics Azpilcueta Navarro and Covarrubias. Even more explicitly following the Spanish scholastics of the sixteenth-century were the Jesuit theologians of the following century, including the highly influential Flemish Jesuit Leonardus Lessius (1605), a friend of Luis de Molina, and the even more influential treatise by the Spanish Jesuit, Cardinal Juan de Lugo, which was originally published in 1642 and was reprinted many times in the next three centuries. Also explicitly following the scholastics and the Salamanca School in the seventeenth-century was the widely reprinted treatise of the Genoese philosopher and jurist Sigismundo Scaccia (1618), as well as the Jesuit moral manual by Antonio de Escobar (1652).

To return to what would be the dominant Protestant trend for later economic thought, Grotius’s legal and economic doctrines were followed closely in the later seventeenth century by the Swedish Lutheran jurist, Samuel Pufendorf. While Pufendorf (1672–1673) follows Grotius on utility and scarcity, and the common estimation of the market, in determining value and price, and while he certainly consulted the writings of the Spanish scholastics, it is the rationalistic Pufendorf who drops all citations to these hated scholastic influences upon his teacher. Hence, when Grotian doctrine was brought to Scotland by the early eighteenth-century professor of moral philosophy at Glasgow, Gershom Carmichael, who translated Pufendorf into English, knowledge of scholastic influences was lost. Hence, with Carmichael’s great student and successor Francis Hutcheson, utility begins to be weakened by labor and cost-of-production theories of value, until finally, by the time of Hutcheson’s student Adam Smith’s Wealth of Nations, pre-Austrian scholastic influence has unfortunately dropped out altogether. Hence the view of Schumpeter, de Roover, and others that Smith (and later Ricardo) shunted economics onto a wrong road which the later marginalists (including the Austrians) had to recapture.

In recent decades, the revisionist scholars have clearly altered our knowledge of the prehistory of the Austrian School of economics. We see emerging a long tradition of proto-Austrian scholastic economics, founded on Aristotle, and continuing through the Middle Ages and the later Italian and Spanish scholastics, and then influencing the French and Italian economists before and up till the day of Adam Smith. The achievement of Carl Menger and the Austrians (Austrian School) was not so much to found a totally new system on the framework of British classical political economy, but in reviving and elaborating upon the older tradition that had been shunted aside by the classical school.


Article from Chalcedon.edu

Journal of Christian Reconstruction, Symposium on Christian Economics; Vol. 2 Number 1, 1975.

  1. Lewis H. Haney, History of Economic Thought, 4th ed. (New York: Macmillan,1949).
  2. “The true descendant of the doctrines of Aquinas is the labor theory of value. The last of the Schoolmen was Karl Marx.” R. H. Tawney, Religion and the Rise of Capitalism (New York: New American Library, 1954), 38–39.
  3. Joseph A. Schumpeter, A History of Economic Analysis (New York: Oxford University Press, 1954).
  4. Marjorie Grice-Hutchinson, The School of Salamanca: Readings in Spanish Monetary Theory, 1544–1605 (Oxford: Clarendon Press, 1952).
  5. Ibid., 27.
  6. Luis Saravía de la Calle, Instruction de mercaderes (1544), in ibid., 79–82.
  7. Ibid., 48.
  8. Francisco Garcia, Tratado utilisimo y muy general de todos los contractos (1583), in ibid., 104-05.
  9. Martin de Azpilcueta Navarro, Comentario resolutorio de usuras (1556), in ibid., 94–95.
  10. Domingo de Soto, De Justitia et Jure (1553), in Grice-Hutchinson, op. cit., 55.
  11. Luis de Molina, Disputationes de Contractibus (1601), in ibid., 113–14. Tomás de Mercado’s work is Tratos y contratos de mercaderes (1569); de Bañez’s is De Justitia et Jure (1594). See ibid., 57–58, 96–103.
  12. Raymond de Roover, “Scholastic Economics: Survival and Lasting Influence from the Sixteenth Century to Adam Smith,” Quarterly Journal of Economics (May1955):161–190.
  13. Ibid., 164.
  14. Raymond de Roover, “Joseph A. Schumpeter and Scholastic Economics,” Kyklos (1957, 2):128. De Roover traces the concept of mutual benefit as exhibited in exchange back to Aquinas, who wrote that “buying and selling seem to have been instituted for the mutual advantage of both parties, since one needs something that belongs to the other, and conversely.”
  15. de Roover, “Scholastic Economics,” 168–69. Elsewhere, de Roover notes that the Scotists were a small minority among medieval and later scholastics, whereas the scholastics discussed here were in the mainstream Thomist tradition.
  16. Raymond de Roover, “The Concept of the Just Price: Theory and Economic Policy,” Journal of Economic History (December, 1958), 422–23.
  17. Ibid., 424.
  18. Ibid., 426.
  19. David Herlihy, “The Concept of the Just Price: Discussion,” Journal of Economic History (December 1958):437.
  20. John W. Baldwin, The Medieval Theories of the Just Price: Transactions of the American Philosophical Society (Philadelphia: July 1959). See also the review of Baldwin by A. R. Bridbury, Economic History Review (April 1960):512–14.
  21. In particular, the theologians at the great center at the University of Paris in the early thirteenth century: Alexander of Hales, and Aquinas’s teacher, Albertus Magnus. Ibid., 71. Baldwin further points out that theological treatment of such practical questions as the just price in the Middle Ages only began with the development of university centers at the end of the twelfth century. Ibid., 9.
  22. Raymond de Roover, “The Scholastic Attitude toward Trade and Entrepreneurship,” Explorations in Entrepreneurial History (Fall 1963):76–87.
  23. De Roover, here and in his other writings, pointed to the great deficiency in scholastic analysis of the market: the belief that any interest on a pure loan (a mutuum) constituted the sin of usury. The reason is, that, while the scholastics understood the economic functions of risk and opportunity cost, they never arrived at the concept of time preference. On the scholastics and usury, see the magisterial work of John T. Noonan Jr., The Scholastic Analysis of Usury (Cambridge, MA.: Harvard University Press, 1957). See also Raymond de Roover, “The Scholastics, Usury, and Foreign Exchange,” Business History Review (Autumn 1967), 257–71.
  24. Raymond de Roover, San Bernardino of Siena and SantAntonino of Florence: The Two Great Economic Thinkers of the Middle Ages (Boston: Kress Library of Business and Economics, 1967).
  25. Ibid., 17.
  26. On the originality of Olivi, see ibid., 19.
  27. Ibid., 20.
  28. Ibid., 23–24.


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