1. Roger E. Backhouse: The Ordinary Business of Life Chapter 2 The Middle Ages Udayan Roy Lecture Notes 2008

2. THE MIDDLE AGES2 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

3. THE MIDDLE AGES3 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 each slave should be freed after six years –Debts would have to be cancelled after seven years –Land would return to original owners after fifty years

4. THE MIDDLE AGES4 Quotations: Old Testament Wealth gotten by vanity shall be diminished: but he that gathereth by labor shall increase. –Proverbs 13:11

5. THE MIDDLE AGES5 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

6. THE MIDDLE AGES6 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

7. THE MIDDLE AGES7 Islam 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 Averroes (Ibn Rushd, 1126 – 98) –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 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.

8. THE MIDDLE AGES8 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

9. THE MIDDLE AGES9 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?

10. THE MIDDLE AGES10 The Twelfth-Century Renaissance William of Auxerre (c. 1140 – 1231) –Based ethics on natural law, the 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

11. THE MIDDLE AGES11 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

12. THE MIDDLE AGES12 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

13. THE MIDDLE AGES13 Nicole Oresme and the Theory of Money In the 14 th 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.

14. THE MIDDLE AGES14 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.