The Christian Middle Ages

1. The Christian Middle Ages Rothbard I: 2, 3, 5

2. The Roman Law • Two influential laws • Theodosian Code, by Theodosius, 438 AD • Corpus JurisCivilis, by Justinian, 535 • “just price”: any price arrived at by free and voluntary bargaining between buyer and seller. The only exception being a contract made by children. • Force or fraud, as infringements on property rights, were considered illegal.

3. The Roman Law • Ignorance of the value of a good by either buyer and seller was insufficient ground for authorities to step in and rescind the voluntarily agreed contract. • Bavarian Law, in 18th century: a buyer may not rescind a sale because he later decides that the agreed price was too high. • A merchant is carrying grain to a famine-stricken area. He knows that soon other merchants are following him with many more supplies of grain. Is the merchant obliged to tell the starving citizenry of the supplies coming soon, or is it all right for him to keep silent and reap the rewards of a high price? • Cicero: yes. Tell and sell at lower price. • St. Thomas Aquinas: no. The arrival of later merchants was a future event, and therefore uncertain.

4. Discussion: housing contract, “Fang Nao”. For example, the developer has decided to decrease the price next week. Should he tell?

5. The Roman Law • A drawback in Corpus: if a seller has sold his property for less than half “the just price”, then he suffers “great loss”, and the seller is then entitled either get back the difference between the original price and the just price from the buyer, or else get this property back at the original price.

6. Early Christian attitudes towards merchants • St. Paul: the love of money is the root of all evil. • St. Jerome (340 – 420): all riches come from iniquity, and unless one has lost, another cannot gain… the rich man is unjust, or the heir of an unjust one.

7. St. Augustine (354 – 430): • People’s payments for goods, the valuation they placed on them, was determined by their own needs rather than any more objective criterion or by their rank in the order of nature. • It was the common desire of all men to buy cheap and to sell dear. • Merchants perform a beneficial service by transporting goods over great distances and delivering them to the consumer. Since, according to Christian principle, “the labourer is worthy of his hire”, then the merchant too deserved compensation for his activities and labor. • Lies were the fault of trader himself, not of the trade, the occupation.

8. On usury • Classically, “usury” means ANY rate charged on a loan, no matter how low. • Psalm 14, Old Testament, “Lord, who shall dwell in they tabernacle ? He that hath not put out his money to usury”.

9. Medieval scholastics understood the economic and moral justifications for interest charges: as an implicit profit on risk, as an opportunity foregone for making profits on investments. • But why is there still interest on a simple, riskless, non-opportunity-foregone loan? • Austrian view on a riskless loan: “time preference”, a present good in exchange for a future good. Interest is the price of time-preference.

10. St Thomas Aquinas • 1225- 1274, born in Italy, doctorate in U of Paris. • Summa Theologica, establish Thomism as the mainstream of Catholic scholastic theology. • An Aristotelian: • introduced and established in the Christian world a philosophy of natural law, a philosophy in which human reason is able to master the basic truths of the universe. • God created the natural laws of the universe, but the apprehension of these laws was possible whether or not one believed in God. • Determinants of exchange value: needs or utility (Austrian), labor + expenses (Marxism). Also “equal value” exchange.

11. St Thomas Aquinas • The right: • An active property rights theory, with the property of each individual a dominion which must be defended against all others. • Passive ones: claim right, “The right to a job”, “ The right to three meals a day” • A genuine natural rights theory: private property is natural and not a convention created by government. • The right of original acquisition of property: • labor and occupation. • Ownership over his own self. • Cultivation and use of previously unused land.

12. The darkest of Middle Ages • 14th – mid of 15th century: Late Middle Ages or the Early Renaissance. • The great depression: population, 54 m in 1340, 37 m in 1450, 30% of decline. • Due to the Black Death? Their outbreaks were themselves partly caused by an economic breakdown and fall in living standards which began earlier in the century.

13. The cause • The newly imposed domination of the state! • During Middle Ages, there was a balance between the power of Church and state, tilting toward Church. • In 14th century, the balance was broken. Pope Joh XXII: individual property rights were officially established as natural, stemming from God’s granting man dominion over the earth. • Taxing, regulating, and wreaking devastation through continuous war for over a century.

14. Story of Champagne • Free zones, untaxed or unregulated by the French kings and nobles. • Justice was efficiently carried out by competing private and merchants’ courts. • Hub of local and international commerce.

15. Story of Champagne • Philip IV (1285 – 1314) levied a stiff sales tax. • Levies and confiscations on Jews and northern Italians (discrimination I) • Excluded the Flemings (discrimination II, broke the long-time custom that all merchants were welcome) • Inaugurated the system of regular taxation (before then, the king derived revenues only from royal lands, feudal tolls) • In an emergency, the king might “ask” for a subsidy, rather than “order”. And that would be limited in duration to the emergency period.

16. Story of Champagne • Taxing the Church, turning the Pope an abject tool of the French king. • Debasement of the coinage and generated inflation. • Monopoly salt sales.

17. In Britain • Taxing the Church: on a large monastic farm, they absorbed over 40% of the net profits. • A uniform poll tax of one shilling, in 1380, amounting to one month’s wages for agriculture workers and one week’s wages for urban laborers.

18. After Black Death, there was shortage of labor. • Response: imposing permanent maximum wage control and compulsory labor rationing. • Labor mobility of any sort was prohibited. • Compulsory child labor in agriculture. • Two approaches to social and economic problems: easing the existing restrictions or imposing some others? • Discussion: why is there China’s economic success in the past 30 years?

19. Buridan (1300- 1358) • Buridan’s donkey: free will’s paradox • Choice of money: Some qualities lead the market to choose it as money, portability, high value per unit weight, divisibility and durability. • Therefore, he found the theory of money as a market phenomenon and took money out of the mystique of being solely a creation of the state, and put it on a par with other goods as a product of the marketplace.

20. Oresme (1325 -1382) • The pound sterling, got its name by originally being defined as simply one pound of silver. • The king was able to use his compulsory monopoly of the coinage to manipulate repeated debasements for his own gain at the expense of the rest of the public. • “Gresham’s Law”: if two or more moneys are legally fixed in relative value by the government, then the money overvalued by the government will drive the undervalued money out of circulation.

21. Oresme • “Bad money drives out good money”. Is it a market failure? • No. Gresham’s law is the product not of the free market but of government monetary control. Its fixing of relative money value is a special case of the general consequence of any price control, i.e. shortage of a good in which maximum prices are imposed, and a surplus where a minimum price is enforced.

22. Oresme • “If the king “should tell the tyrant’s usual lie that he applies the profit from debasement to the public advantage, he must not be believed, because he might as well take my coat and say he needed it for the public service.”

23. Langenstein (1325 – 1397) • The just price as the price which maintained everyone’s position in the style to which he had become accustomed – no more and no less. If a seller tried to charge a higher price, he was guilty of the sin of greed. • Therefore, the authorities should fix the price so that each seller could maintain his status in the society.

24. Protestants and Catholics • Martin Luther (1483 – 1546) and John Calvin (1509 – 1564). • Basic proposition: man is steeped in sin. Man could scarcely achieve salvation even partially though his own efforts; therefore, salvation comes, not from man’s non-existent free will, but as an arbitrary gift of unearned grace from God. • Difference between Christian and Catholics

25. If reason can’t be used to frame an ethic, Luther and Calvin had to throw out natural law. • They relied on isolated Biblical passages rather than an integrated philosophic tradition. • Powers are ordained of God, and therefore, the king is divinely appointed and must be obeyed.

26. Kings being Protestant: • Confiscation of often wealthy monasteries • Converted Lutheran Church into a state-run Church • Anglican Church in England

27. Differences among Scholastics, Arestotelian and Calvinism • The Scholastics: focus on consumption, as the goal of labor and production. Labor was just a means toward consumption. • The Arestotelian: balanced life emphasized the joys of consumption, in addition to the importance of productive effort. • The Calvinism: emphasis on work and saving. Condemnation of the enjoyment of religious holidays by the Catholic. • East Asian and South American?

28. Aristotelian: if pleasure in a moderate form is the purpose of economics, then valuation must be derived from this goal. Valuation has the function of showing how much pleasure can be derived from economic goods. • England, influenced by Calvinism and its glorification of labor, came to develop a labor theory of value • France and Italy, influenced by Aristotelian and Thomist concepts, continued the scholastic emphasis on the consumer and his subjective valuation as the source of economic value.

29. Weber Thesis • Attributed the rise of capitalism and the Industrial Revolution to the Calvinism and the resulting “capitalist spirit”. • Protestant work ethic was an important force behind the unplanned and uncoordinated mass action that influenced the development of capitalism. • Difference between precapitalist and aftercapitalist workers. • Desire for profit with minimum effort and seeing work as a burden to be avoided, and doing no more than what was enough for modest life

30. Reformation • Max Weber first suggested that cultural values could affect economic success, arguing that the Protestant Reformation led to values that drove people toward worldly achievements, a hard work ethic, and saving to accumulate wealth for investment. • The new religions (in particular, Calvinism and other more austere Protestant groups) effectively forbade wastefully using hard earned money and identified the purchase of luxuries a sin.

31. Criticism • Protestantism and economic growth • Rothbard: Not necessarily. • Modern capitalism started in Middle Ages and in Italian city-states.

32. Communist Zealot: Muntzer • Followed Luther in 1520. • Converted by Storch • A continuing mystical revelation and the necessity for the elect to seize power and impose a society of theocratic communism by brutal force of arms. • Emphasized a war of blood and extermination by the elect against the sinners.

33. Communist Zealot: Muntzer • On Saxon princes: take their stand, either as servants of God or of the Devil • The sword is necessary to exterminate priests, monks and godless rulers. • If Saxon princes failed, the sword shall be taken from them, and be slaughtered without mercy. • Failed.

34. Communist Zealot: Muntzer • On the poor: the poor were the elect, and would establish a rule of compulsory egalitarian communism, a world where all things would be owned in common by all, where everyone would be equal in everything and each person would receive according to his needs. • But they must recognize the leadership of a “servant of God” • Peasants’ war

35. Totalitarian Communism in Munster • To purge the New Jerusalem of the ungodly, execution of all remaining Catholics and Lutherans. They were driven into the snowstorm. • Confiscate the property of the expelled. The poor were encouraged to take “according to their needs”, the “needs” interpreted by seven appointed “deacons” chosen by Matthys.

36. Totalitarian Communism in Munster • Abolition of the private ownership of money • Food was confiscated and rationed according to the will of the government deacons. • Death was the punishment for every independent act, even quarrelling. • Burning all the books and manuscripts in cathedral library.

37. Totalitarian Communism in Munster • While the king lived in extreme luxury. Explanation: he was already completely dead to the world and the flesh. Since he was dead to the world, in a deep sense his luxury didn’t count.

38. The roots of messianic communism • Three successive ages, each of them ruled by one of the Holy Trinity: first, the age of Old Testament, the era of the Father, the age of fear and servitude; second the age of New Testament, the era of the Son, the age of faith and submission; third, the age of Holy Spirit, the era of perfect joy, love and freedom. • Assault on private property: the free spirit regarded all property of non-elect as rightfully his own.

39. Theory of Sovereignty • Luther and Calvin: absolute obedience and non-resistance to government, regardless of how evil it is. • Hotman (1924 – 1590): a people’s transference of their right to rule to the king can in no way permanent or irrevocable. They can take it back. • Beza (1519 – 1605): the people logically and temporally preceded their rulers, so that political power originated in the body of the people. • People don’t come from rulers and are not created by them.

40. Theory of Sovereignty • Monrnay (1549 – 1623): No one is by nature a king. A king can’t rule without people, while people can rule themselves without a king. • Man’s natural condition must be liberty. We are all free by nature, born to hate servitude. • People set up government to protect their individual natural right. But government often becomes the main transgressor.

41. Theory of Sovereignty • But, he also argued that the sovereign right is only in the people as a whole, not in any individual. The people as a whole are above the king, and the king is above any single individual. So an individual can’t kill a king. • Buchanan (1506 – 1582): when a king becomes tyrannical and violates his task to safeguard individual rights, the whole body of people, even individual citizens have the authority to resist and kill the king in defense of their rights.