1. Udayan Roy ECO54 History of Economic Thought
Roger E. Backhouse: The Ordinary Business of Life Chapter 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 St. Paul St. Augustine
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 – 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 – 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 – 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 – 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