Roger E. Backhouse: The Ordinary Business of Life Chapter 2 The Middle Ages

1. Roger E. Backhouse: The Ordinary Business of LifeChapter 2 The Middle Ages Udayan Roy ECO54 History of Economic Thought

2. The Middle Ages (476 – 1453) • Judaism • Early Christianity • Islam • From Charles Martel to the Black Death • The Twelfth-Century Renaissance • Nicole Oresme and the Theory of Money • Conclusions THE MIDDLE AGES

3. Judaism • Bible, Old Testament • One should restrict one’s wants to cope with scarcity. • The cynics in ancient Rome had similar ideas • Wealth was the reward for a hard worker • But the pursuit of wealth was bad • It leads people away from God • It leads to dishonesty and exploitation • Opposed to commerce and usury • Slavery was okay, but slaves should be freed after six years • Debts would have to be cancelled after seven years • Land would return to original owners after fifty years THE MIDDLE AGES

4. Quotations: Old Testament • Wealth gotten by vanity shall be diminished: but he that gathereth by labor shall increase. • Proverbs 13:11 THE MIDDLE AGES

5. Early Christianity • Bible, New Testament • Jesus • wanted his followers to give up their possessions and warned that the rich may not receive salvation • Reward for good work would be found in heaven, and not here on earth • St. Paul • Believed in the second coming of Christ and the end of the world. So, economic development was a non-issue • St. Augustine • Wealth, property, and commerce were not inherently good or bad. What matters is how these things are used and for what purpose THE MIDDLE AGES

6. Quotations: New Testament • The love of money is the root of all evil. • Timothy 6:10 • It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God. • Matthew 19:24 THE MIDDLE AGES

7. The Islamic World • Koran • Income and property should be taxed to help the poor • Interest on loans prohibited • Inherited wealth could not go to a single beneficiary, but had to be shared THE MIDDLE AGES

8. The Islamic World • Averroes (Ibn Rushd, 1126 – 1198) • Added liquidity to Aristotle’s list of the functions of money • Unlike Aristotle, he considered a ruler’s profits from debasement of money to be unjustifiable • Wanted the value of money to be kept constant THE MIDDLE AGES

9. The Islamic World • Ibn Khaldun (1332 – 1406) • Outlined a dynamic theory of empire. • Initially, expansion enables greater division of labor and strengthens the empire. • But the greater wealth makes people soft and weak. • This eventually weakens the empire. THE MIDDLE AGES

10. The Twelfth-Century Renaissance • Increasing prosperity, demand for education, and recovery of some European territory from the Moors, led to the rediscovery of Aristotle • The first universities were set up at Bologna, Paris, and Oxford, and then elsewhere • Scholastic School emerged • Interests were still ethical, • but economic analysis was often necessary THE MIDDLE AGES

11. The Twelfth-Century Renaissance • Thomas of Chobham (c. 1163 – 1235) • Commerce could be beneficial. • It could relieve acute scarcity in some regions. • But merchants should not charge anything more than their costs. • There are reasons why usury is a sin. • Loaned money becomes the borrower’s property; all gains from the money should therefore go to the borrower • Time belongs to God, not to the lender • The lender does not share in the borrower’s costs and losses; so why should he take part of the borrower’s profits? THE MIDDLE AGES

12. The Twelfth-Century Renaissance • William of Auxerre (c. 1140 – 1231) • He based his ethics on natural law, a set of self-evident rational ideas • Private property was okay, as long as those who had it shared it with those who had none • Interest could not be justified on the ground that voluntary exchanges are necessarily just; one is under duress when one asks for a loan THE MIDDLE AGES

13. The Twelfth-Century Renaissance • Albert the Great (Albertus Magnus, c. 1200 – 1280) • The price of Good A relative to the price of Good B depends on both people’s relative needs for the two goods and the relative costs of producing the two goods. • This reflects an early theory of supply and demand • The ethical issue of what price should be paid for a good is related to the analytical idea about the practical matter that unless production costs are paid the good would not get made THE MIDDLE AGES

14. The Twelfth-Century Renaissance • Thomas Aquinas (c. 1225 – 74) • Competition between sellers, as occurs in public markets, protects buyers from exploitation • The questions are about ethics; the answers use economic analysis THE MIDDLE AGES

15. Nicole Oresme and the Theory of Money • In the 14th century, rulers often debased the currencies in use by reducing the metal content • Oresme opposed debasement. • Money is a standard of measurement and should be kept constant so as to not create confusion • The ruler manages money as a public trust. Debasement may be done only if it is in the public interest. THE MIDDLE AGES

16. Conclusions • The questions remained ethical • But the Scholastics tried to find rational arguments for their moral arguments • To do this they had to develop and analyze economic concepts such as value, competition in markets, money, profit and loss, opportunity cost, and interest. THE MIDDLE AGES