The History of Economic Thought: A Reader

From the ancients to the moderns, questions of economic theory and policy have been an important part of intellectual and public debate, engaging the attention of some of historys greatest minds. This collection of readings covers the major themes that have preoccupied economic thinkers throughout the ages, including price determination and the underpinnings of the market system, monetary theory and policy, international trade and finance, income distribution, and the appropriate role for government within the economic system. These ideas unfold, develop, and change course over time at the hands of scholars such as Aristotle, Franois Quesnay, David Hume, Adam Smith, David Ricardo, Karl Marx, Alfred Marshall, and John Maynard Keynes. Each reading has been selected with a view to both enlightening the reader as to the major contributions of the author in question and to giving the reader a broad view of the development of economic thought and analysis over time. The History of Economic Thought: A Reader can be used as a core textbook or as a supplementary text on courses in economic thought and philosophy. It will provide readers with a good foundation in the different schools of thought that run through economics. Steven G. Medema is Professor of Economics at the University of Colorado at Denver, USA. He also serves as editor of the Journal of the History of Economic Thought. Warren J. Samuels is Professor Emeritus of Economics at Michigan State University. He is co-editor of the annual Research in the History of Economic Thought and Methodology.

The History of Economic Thought: A Reader

Edited by Steven G. Medema and Warren J. Samuels

First published 2003 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2004. 2003 Selection and editorial matter, Steven G. Medema and Warren J. Samuels; individual chapters, the authors All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0-203-38029-0 Master e-book ISBN

ISBN 0-203-38646-9 (Adobe eReader Format) ISBN 0415205514 (hbk) ISBN 0415205506 (pbk)

For Alex and Christopher, and for Michelle, in the hope that they, too, will come to love the world of ideas

Contents

Preface AcknowledgmentsPART 1

x

xii

Pre-Classical ThoughtAristotle (384322 BC) Politics 5 Nichomachean Ethics (350 BC) 14 St Thomas Aquinas (12251274) Summa Theologica (12671273) 18 Thomas Mun (15711641) Englands Treasure by Forraign Trade or the Ballance of our Forraign Trade is the Rule of our Treasure (1664) 32 William Petty (16231687) A Treatise of Taxes and Contributions (1662) 47 John Locke (16321704) Of Civil Government (1690) 59 Some Considerations of the Consequences of the Lowering of Interest, and Raising the Value of Money (1691) 63 Richard Cantillon (1680?1734) Essay on the Nature of Commerce in General (1755) 79 Franois Quesnay (16941774) Tableau conomique 97 Anne Robert Jacques Turgot (17271781) Reflections on the Formation and Distribution of Wealth (1770) 104 Bernard Mandeville (16701733) The Grumbling Hive: or, Knaves Turnd Honest 120

13

16 30

45 57

78 95 103 119

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Contents

PART 2

The Classical SchoolDavid Hume (17111776) Political Discources (1752) 135 Adam Smith (17231790) An Inquiry into the Nature and Causes of the Wealth of Nations (1776) 156 Jeremy Bentham (17481832) An Introduction to the Principles of Morals and Legislation (1789) 183 A Manual of Political Economy (1795) 186 Anarchical Fallacies (1795) 188 Principles of the Civil Code (1802) 192 Thomas Robert Malthus (17661834) An Essay on the Principle of Population (1798) 196 William Godwin (17561836) Of Population (1820) 210 Henry Thornton (17601815) An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802) 222 David Ricardo (17721823) The High Price of Bullion (1810) 237 Jean-Baptiste Say (17671832) A Treatise on Political Economy 248 David Ricardo (17721823) On the Principles of Political Economy and Taxation (1817) 259 Thomas Robert Malthus (17661834) Principles of Political Economy (1820) 293 James Mill (17731836) Elements of Political Economy (1821) 313 Nassau W. Senior (17901864) An Outline of the Science of Political Economy (1836) 319 John Stuart Mill (18061873) Principles of Political Economy (1848) 335PART 3

131133 153 180

193 208 220

235 245 256 291 312 317 333

The Marxian ChallengeKarl Marx A Contribution to the Critique of Political Economy (1859) 375 Das Kapital (1867) 378

369375

ContentsPART 4

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The Marginal RevolutionWilliam Stanley Jevons (18351882) The Theory of Political Economy (1871) 415 Carl Menger (18401921) Principles of Economics (1871) 445 Leon Walras (18341910) Elements of Pure Economics (1874) 464 Francis Ysidro Edgeworth (18451926) Mathematical Psychics (1881) 479 Alfred Marshall (18421924) Principles of Economics (1890) 504 Eugen von Bhm-Bawerk (18511914) The Positive Theory of Capital (1888) 524PART 5

409413 443 462 477 501 522

The Development of MacroeconomicsKnut Wicksell (18511926) The Influence of the Rate of Interest on Prices (1907) 557 Irving Fisher (18671947) The Purchasing Power of Money and Its Determination and Relation to Credit Interest and Crises (1911) 564 John Maynard Keynes (18831946) The End of Laissez-Faire (1926) 592 The General Theory of Employment (1937) 596 The General Theory of Employment, Interest and Money (1936) 603PART 6

553555 562

588

Institutional EconomicsThorstein B. Veblen (18571929) The Theory of the Leisure Class (1899) 613 John R. Commons (18621945) Institutional Economics (1931) 648 Index

609611 646

655

Preface

The following pages contain some of the great literature in the history of economic ideas. The task of putting together a reader such as this is like confronting an endless smorgasbord of delights when on a highly restrictive diet so many good things to sample and so little room to actually indulge. It should be obvious that reading the selections contained herein is no substitute for reading the original works in their entirety. However, we hope that the reader will find our selections sufficient to provide a useful overview of some of the major themes in the history of economic thought as they were developed in the hands of the giants in the field. No reader can pretend to be comprehensive in its coverage. The scholars chosen for inclusion, and the passages excerpted from their works, will no doubt please some greatly and disappoint others. For the latter, we apologize. In putting together this reader, we have relied on a broad survey of course reading lists in the field, conversations with various colleagues, and our own instincts and intuition regarding topics usually covered in courses on history of economic thought. We have tried both to present the central ideas of each epoch within economic thought and to avoid overlap across writers. In doing so, we have also paid attention to the fact that certain of these classic works (e.g. Adam Smiths The Wealth of Nations) are readily available in inexpensive paperback editions should the reader wish to examine them further. Thus, the length of the excerpts from, for example, Smith and Keynes reprinted here are perhaps rather more brief than what their stature in the history of economic ideas would suggest. We have also endeavored to provide sufficient introductory material1 for each section and each entry to provide a bit of background and plenty of suggestions for additional reading. There are many ways of doing history, and many ways of teaching the history of economic thought. We have tried to be sensitive to this in the preparation of this volume, and we are hopeful that all readers/students/scholars with interest in the history of economic ideas will find useful things to take from this volume. While we anticipate that the primary market for this book will be students in history of economic thought courses, some of you may be reading this book simply because you have an interest in the history of ideas economic or otherwise. For those who are new to the history of economic thought and wish to supplement their reading with secondary analysis, we refer you to Roger Backhouses The Ordinary Business of Life (The Penguin History of Economics in the UK), Robert Heilbroners The Worldly Philosophers, or the excellent textbooks in the field by Mark Blaug, Robert Ekelund and Robert Hbert, Harry Landreth and David Colander, Henry Spiegel, and Ingrid Rima. If you would like to sit a course of lectures in the field from your easy chair, you may consult Lionel Robbins A History of Economic Thought: The LSE Lectures.

1 We would like to acknowledge the fact that we have drawn heavily on Mark Blaugs Great Economists Before Keynes for the biographical information contained in these introductory materials.

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For various reasons, this project has had a rather long gestation process. We are most grateful to Alan Jarvis, Allison Kirk, and, especially, Robert Langham of Routledge for their strong interest in this project and their patience in seeing it through to completion. We would also like to thank all those who gave us advice along the way, including Roger Backhouse, Bill Barber, and several anonymous reviewers of this proposal, as well as Matt Powers, who provided invaluable research assistance, and Brian Duncan for technical assistance. Finally, we would like to thank the various publishers who have graciously allowed us to reprint the works included in this volume. Steven G. Medema Warren J. Samuels

Acknowledgments

The authors and publishers would like to thank the following for granting permission to reproduce material in this work. The National Portrait Gallery, London for permission to reproduce images of Sir William Petty, John Locke, John Maynard Keynes, William Godwin, Henry Thornton, Jeremy Bentham, Alfred Marshall, and Francis Ysidro Edgeworth. Corbis for permission to reproduce images of Aristotle and Plato, St Thomas Aquinas, and Thorstein Veblen. Manuscripts and Archives, Yale University Library for permission to reproduce the image of Irving Fisher. Every effort has been made to contact copyright holders for their permission to reprint material in this book. The publishers would be grateful to hear from any copyright holder who is not here acknowledged and will undertake to rectify any errors or omissions in future editions of this book.

Part 1

Pre-Classical Thought

IntroductionIt is a widely held, and probably substantially correct, view that the emergence and development of modern economic thought was correlative with the emergence of a commercial, eventually industrial, capitalist market economy. It is this economic system, especially as it arose in Western Europe in the eighteenth century, that economics attempts to describe, interpret, and explain, as well as to justify. This economic thought was both positive and normative, that is, it combined efforts to objectively describe and explain with those to justify and/or to prescribe (such as policy). As a positive, scientific discipline, it combined two modes of thought: (1) empirical observation, dependent upon some more or less implicit theoretical or interpretive schema, and (2) logical analysis of the relationships between variables, dependent upon some more or less conscious generalization of interpreted observations. Prior to this time, speaking generally, there were markets and market relationships but not market economies as the latter came to be understood after roughly the eighteenth century. While modern economic theory did not exist, thinkers of various types did speculate about a set of more or less clearly identified economic topics, such as trade, value, money, production, and so on. These speculations are found in documents emanating from the ancient civilizations, such as Sumeria, Babylonia, Assyria, Egypt, Persia, Israel, and the Hittite empire. Some of these documents are literary or historical; others are legal; still others arose out of business and family matters; and others involved speculation about current and/ or perennial events and problems. It is clear that economic activity, especially that having to do with trade, both local and between distant lands, was engaged in by households and specialized enterprises, and gave rise to various forms of economic analysis. These documents seem not to have contained anything like what we now recognize as theoretical or empirical economics. But they do indicate several important concerns, centering on the general problem of the organization and control of economic activity: problems of class and of hierarchy versus equality, problems of continuity versus change of existing arrangements, problems of reconciling interpersonal conflicts of interest, problems of the nature and place of the institution of private property in the social structure, problems of the distributions of income and taxes, and so on, all interrelated. Much of the speculation related to current issues rather than to abstract generalizations, but the latter are not absent. Early economic thought had two other characteristics: One was the mythopoeic nature of description and explanation: explication through the creation of stories involving either the gods or, eventually, God, or an anthropomorphic characterization of nature as involving spirits and transcendental forces. The other was the subordination of economic thinking to theology and organized religion and, especially, the superimposition of a system of morals upon economic (and other forms of ) activity. The former remains in the form of the concept of the invisible hand; the latter, in the felt need for the social control of both individual economic activity and the organization of markets. Modern philosophy in the West traces back to the Greeks during the fifth and fourth centuries BC. Mythopoetry does not disappear but, one might sense, reaches its highest levels of sophistication, and, especially, existing alongside of self-conscious and self-reflective philosophical

inquiry, the latter becoming increasingly independent though not without tension and conflict. The development of philosophy is facilitated and motivated by (1) the postulation of the existence of principles of an intellectual order in the universe (in nature and in society), (2) the growing belief in the opportunity accorded by God to study the nature of things without such activity being deemed an intrusion upon the domain of God, and inter alia (3) the development of principles of observation, logic, and epistemology. In the eighth century BC, Hesiod wrote several works, one of which, Ode to Work (or Works and Days), identified the role of hard, honest labor in production and the studied approach to husbandry and farming, the latter couched in terms of proceeding in the manner desired by deified forces of nature, including the seasons. This work was cited three centuries later by Plato and Aristotle. One of their contemporaries was Xenophon (430355 BC), whose Oeconomicus dealt with household management (most production was undertaken by households) and with analyses of the division of labor, money, and the responsibilities of the wealthy. Xenophons Revenue of Athens was a brilliant analysis of the means that could be employed by the organized city-state to increase both the prosperity of the people and the revenues of their government, an analysis combined with the injunction, once the program of measures of economic development had been worked out, to consult the oracles of Dodona and Delphi if such a program was indeed going to be advantageous. But it is with Plato (427347 BC), notably in his Republic and The Laws, and with Aristotle (384 322 BC), in his Politics and Nichomachean Ethics, that more elaborate and more sophisticated economic analysis takes place. Both Plato and Aristotle were concerned with (1) aspects of the relation of knowledge to social action; (2) topics of political economy, such as the nature and implications of justice for the organization and control of the economy, including issues of private property versus communism and/or its social control; and (3) more technical topics of economics, such as self-sufficiency versus trade, the consequences of specialization and division of labor (including their relation to trade), the desirable-necessary location of the city-state, the nature and role of exchange, the roles of money and money demand, interest on loans, the question of population, prices and price levels, and the meaning and source of value. Their discussions of these topics reflect the social (read: class) organization of Athens, the deep philosophical positions they held on a variety of topics, the economic development of Athens and its trading partners, and how they worked out solutions to serious, perennial problems of social order. In terms of the canon of Western economic thinking, economic analysis largely disappeared for roughly a millenium-and-a-half subsequent to the death of Aristotle, not to reappear in a significant way until the scholastic writers beginning in the thirteenth century AD. The readings that follow in this part trace the development of economic thought from the Greeks through the late eighteenth century. Along the way, the reader will be introduced to classic writings in scholasticism, mercantilism, and physiocracy, as well as works that mark a turn in economic thinking toward a more systematic, and some would say scientific, method of analysis. While economics, throughout this period, was primarily considered to be, and analyzed from the perspective of, larger systems of social and philosophical thought, the economic system increasingly came to be recognized as a sphere that embodied its own particular set of laws, worthy of analysis in its own right. The reader will also notice an increasing recognition over this period of the interdependent nature of economic phenomena and thus the tendency of the authors to increasingly treat the economic system as an interrelated whole as opposed to engaging in piecemeal analysis of particular aspects of economic activity.

References and further readingBlaug, Mark, ed. (1991) Preclassical Economists, Aldershot: Edward Elgar Publishing. Hutchison, Terence (1988) Before Adam Smith: The Emergence of Political Economy, 16621776, Oxford: Basil Blackwell. Letwin, William (1964) The Origins of Scientific Economics, Garden City, NY: Doubleday & Co. Lowry, S. Todd, ed. (1987) Pre-Classical Economic Thought: From the Greeks to the Scottish Enlightenment, Boston: Kluwer. Rothbard, Murray (1995) Economic Thought Before Adam Smith, Aldershot: Edward Elgar Publishing. Spengler, Joseph J. (1980) Origins of Economic Thought and Justice, Carbondale: Southern Illinois University Press.

ARISTOTLE (384322 BC)

Aristotle was born in Stagira and spent some twenty years studying under the tutelage of Plato in Athens. After a number of years of travel and serving as tutor to the young man who would later become Alexander the Great, Aristotle returned to Athens and established his own school, the Lyceum, in 335 BC. The works of Aristotle span virtually the entire breadth of human knowledge logic, epistemology, metaphysics, ethics, the natural sciences, rhetoric, politics, and aesthetics. While only a small fraction of his writings deal with economics, he did see matters economic as an important aspect of the social fabric and thus as necessary elements of a larger social-philosophical system of thought. Aristotles writings had a profound influence on Aquinas and, through Aquinas, on subsequent scholastic thinking. Indeed, Aristotles influence continues to be present in modern economic theory. Aristotle with Plato, by courtesy of Corbis, www.corbis.com. In the excerpts from Aristotles Politics and Nichomachean Ethics provided next, we are introduced to his theories of the natural division of labor within society, household management (conomicus) and wealth acquisition (chrematistics), private property versus communal property, and of the exchange process. The reader may wish to take particular note of the reciprocal needs basis of Aristotles division of labor, his view that wealth acquisition is unnatural because it knows no natural limits, his strong defense of private property (as against his teacher, Plato), and his theory of reciprocity in exchange.

References and further readingFinley, M.I. (1970) Aristotle and Economic Analysis, Past and Present 47 (May): 325. (1973) The Ancient Economy, Berkeley: University of California Press. (1987) Aristotle, in John Eatwell, Murray Milgate, and Peter Newman (eds), The New Palgrave: A Dictionary of Economics, Vol. 1, London: Macmillan, 11213.

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Gordon, Barry (1975) Economic Analysis Before Adam Smith: Hesiod to Lessius, New York: Barnes and Noble. Laistner, M.L.W. (1923) Greek Economics: Introduction and Translation, New York: E.P. Dutton & Co. Langholm, Odd (1979) Price and Value Theory in the Aristotelian Tradition, Bergen: Universitetsforlaget. (1983) Wealth and Money in the Aristotelian Tradition, Bergen: Universitetsforlaget. (1984) The Aristotelian Analysis of Usury, Bergen: Universitetsforlaget. Lowry, S. Todd (1969) Aristotles Mathematical Analysis of Exchange, History of Political Economy 1 (Spring): 4466. (1979) Recent Literature on Ancient Greek Economic Thought, Journal of Economic Literature 17: 6586. (1987) The Archaeology of Economic Ideas: The Greek Classical Tradition, Durham, NC: Duke University Press. Soudek, Josef (1952) Aristotles Theory of Exchange: An Enquiry into the Origin of Economic Analysis, Proceedings of the American Philosophical Society 96: 4575. Spengler, Joseph J. (1955) Aristotle on Economic Imputation and Related Matters, Southern Economic Journal 21 (April): 37189. (1980) Origins of Economic Thought and Justice, Carbondale, IL: Southern Illinois University Press. Worland, Stephen T. (1984) Aristotle and the Neoclassical Tradition: The Shifting Ground of Complementarity, History of Political Economy 16: 10734.

Politics*

Book IPart I Every state is a community of some kind, and every community is established with a view to some good; for mankind always act in order to obtain that which they think good. But, if all communities aim at some good, the state or political community, which is the highest of all, and which embraces all the rest, aims at good in a greater degree than any other, and at the highest good. Some people think that the qualifications of a statesman, king, householder, and master are the same, and that they differ, not in kind, but only in the number of their subjects. For example, the ruler over a few is called a master; over more, the manager of a household; over a still larger number, a statesman or king, as if there were no difference between a great household and a small state. The distinction which is made between the king and the statesman is as follows: When the government is personal, the ruler is a king; when, according to the rules of the political science, the citizens rule and are ruled in turn, then he is called a statesman. But all this is a mistake; for governments differ in kind, as will be evident to any one who considers the matter according to the method which has hitherto guided us. As in other departments of science, so in politics, the compound should always be resolved into the simple elements or least parts of the whole. We must, therefore, look at the elements of which the state is composed, in order that we may see in what the different kinds of rule differ from one another, and whether any scientific result can be attained about each one of them. Part II He who thus considers things in their first growth and origin, whether a state or anything else, will obtain the clearest view of them. In the first place there must be a union of those who cannot exist without each other; namely of male and female, that the race may continue (and this is a union which is formed, not of deliberate purpose, but because, in common with other animals and with plants, mankind have a natural desire to leave behind them an image of themselves), and of natural ruler and subject, that both may be preserved. For that which can foresee by the exercise of mind is by nature intended to be lord and master, and that which can with its body give effect to such foresight is a subject, and by nature a slave; hence master and slave have the same interest. Now nature has distinguished between the female and the slave. For she is not niggardly, like the smith who fashions the Delphian knife for many uses; she makes each thing for a single use, and every instrument is best made when intended for one and not for many uses.

* Translated by Benjamin Jowett.

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But among barbarians no distinction is made between women and slaves, because there is no natural ruler among them: they are a community of slaves, male and female. Wherefore the poets say, It is meet that Hellenes should rule over barbarians; as if they thought that the barbarian and the slave were by nature one. Out of these two relationships between man and woman, master and slave, the first thing to arise is the family, and Hesiod is right when he says, First house and wife and an ox for the plow for the ox is the poor mans slave. The family is the association established by nature for the supply of mens everyday wants, and the members of it are called by Charondas companions of the cupboard, and by Epimenides the Cretan, companions of the manger. But when several families are united, and the association aims at something more than the supply of daily needs, the first society to be formed is the village. And the most natural form of the village appears to be that of a colony from the family, composed of the children and grandchildren, who are said to be suckled with the same milk. And this is the reason why Hellenic states were originally governed by kings; because the Hellenes were under royal rule before they came together, as the barbarians still are. Every family is ruled by the eldest, and therefore in the colonies of the family the kingly form of government prevailed because they were of the same blood. As Homer says: Each one gives law to his children and to his wives. For they lived dispersedly, as was the manner in ancient times. Wherefore men say that the Gods have a king, because they themselves either are or were in ancient times under the rule of a king. For they imagine, not only the forms of the Gods, but their ways of life to be like their own. When several villages are united in a single complete community, large enough to be nearly or quite self-sufficing, the state comes into existence, originating in the bare needs of life, and continuing in existence for the sake of a good life. And therefore, if the earlier forms of society are natural, so is the state, for it is the end of them, and the nature of a thing is its end. For what each thing is when fully developed, we call its nature, whether we are speaking of a man, a horse, or a family. Besides, the final cause and end of a thing is the best, and to be self-sufficing is the end and the best. Further, the state is by nature clearly prior to the family and to the individual, since the whole is of necessity prior to the part; for example, if the whole body be destroyed, there will be no foot or hand, except in an equivocal sense, as we might speak of a stone hand; for when destroyed the hand will be no better than that. But things are defined by their working and power; and we ought not to say that they are the same when they no longer have their proper quality, but only that they have the same name. The proof that the state is a creation of nature and prior to the individual is that the individual, when isolated, is not self-sufficing; and therefore he is like a part in relation to the whole. But he who is unable to live in society, or who has no need because he is sufficient for himself, must be either a beast or a God: he is no part of a state. A social instinct is implanted in all men by nature, and yet he who first founded the state was the greatest of benefactors. For man, when perfected, is the best of animals, but, when separated from law and justice, he is the worst of all; since armed injustice is more dangerous, and he is equipped at birth with arms, meant to be used by intelligence and virtue, which he may use for the worst ends. Wherefore, if he have not virtue, he is the most unholy and the most savage of animals, and the most full of lust and gluttony. But justice is the bond of men in states, for the administration of justice, which is the determination of what is just, is the principle of order in political society. Part III Seeing then that the state is made up of households, before speaking of the state we must speak of the management of the household. The parts of household management correspond to the

Aristotle: Politics

7

persons who compose the household, and a complete household consists of slaves and freemen. Now we should begin by examining everything in its fewest possible elements; and the first and fewest possible parts of a family are master and slave, husband and wife, father and children. We have, therefore, to consider what each of these three relations is and ought to be: I mean the relation of master and servant, the marriage relation (the conjunction of man and wife has no name of its own), and third, the procreative relation (this also has no proper name). And there is another element of a household, the so-called art of getting wealth, which, according to some, is identical with household management, according to others, a principal part of it; the nature of this art will also have to be considered by us. Let us first speak of master and slave, looking to the needs of practical life and also seeking to attain some better theory of their relation than exists at present. For some are of the opinion that the rule of a master is a science, and that the management of a household, and the mastership of slaves, and the political and royal rule, as I was saying at the outset, are all the same. Others affirm that the rule of a master over slaves is contrary to nature, and that the distinction between slave and freeman exists by law only, and not by nature; and being an interference with nature is, therefore, unjust. Part IV Property is a part of the household, and the art of acquiring property is a part of the art of managing the household; for no man can live well, or indeed live at all, unless he be provided with necessaries. And as in the arts which have a definite sphere the workers must have their own proper instruments for the accomplishment of their work, so it is in the management of a household. Now instruments are of various sorts; some are living, others lifeless; in the rudder the pilot of a ship has a lifeless instrument, in the look-out man, a living instrument; for in the arts the servant is a kind of instrument. Thus, too, a possession is an instrument for maintaining life. And so, in the arrangement of the family, a slave is a living possession, and property a number of such instruments; and the servant is himself an instrument which takes precedence of all other instruments. For if every instrument could accomplish its own work, obeying or anticipating the will of others, like the statues of Daedalus, or the tripods of Hephaestus, which, says the poet, of their own accord entered the assembly of the Gods; if, in like manner, the shuttle would weave and the plectrum touch the lyre without a hand to guide them, chief workmen would not want servants, nor masters slaves. Here, however, another distinction must be drawn; the instruments, commonly so called, are instruments of production, whilst a possession is an instrument of action. The shuttle, for example, is not only of use; but something else is made by it, whereas of a garment or of a bed there is only the use. Further, as production and action are different in kind, and both require instruments, the instruments which they employ must likewise differ in kind. But life is action and not production, and therefore the slave is the minister of action. Again, a possession is spoken of as a part is spoken of; for the part is not only a part of something else, but wholly belongs to it; and this is also true of a possession. The master is only the master of the slave; he does not belong to him, whereas the slave is not only the slave of his master, but wholly belongs to him. Hence, we see what is the nature and office of a slave; he who is by nature not his own but anothers man, is by nature a slave; and he may be said to be anothers man who, being a human being, is also a possession. And a possession may be defined as an instrument of action, separable from the possessor. Part VIII Let us now inquire into property generally, and into the art of getting wealth, in accordance with our usual method, for a slave has been shown to be a part of property. The first question is

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whether the art of getting wealth is the same with the art of managing a household or a part of it, or instrumental to it; and if the last, whether in the way that the art of making shuttles is instrumental to the art of weaving, or in the way that the casting of bronze is instrumental to the art of the statuary, for they are not instrumental in the same way, but the one provides tools and the other material; and by material I mean the substratum out of which any work is made; thus, wool is the material of the weaver, bronze of the statuary. Now it is easy to see that the art of household management is not identical with the art of getting wealth, for the one uses the material which the other provides. For the art which uses household stores can be no other than the art of household management. There is, however, a doubt whether the art of getting wealth is a part of household management or a distinct art. If the getter of wealth has to consider whence wealth and property can be procured, but there are many sorts of property and riches, then are husbandry, and the care and provision of food in general, parts of the wealth-getting art or distinct arts? Again, there are many sorts of food, and therefore there are many kinds of lives both of animals and men; they must all have food, and the differences in their food have made differences in their ways of life. For of beasts, some are gregarious, others are solitary; they live in the way which is best adapted to sustain them, accordingly as they are carnivorous or herbivorous or omnivorous: and their habits are determined for them by nature in such a manner that they may obtain with greater facility the food of their choice. But, as different species have different tastes, the same things are not naturally pleasant to all of them; and therefore the lives of carnivorous or herbivorous animals further differ among themselves. In the lives of men too there is a great difference. The laziest are shepherds, who lead an idle life, and get their subsistence without trouble from tame animals; their flocks having to wander from place to place in search of pasture, they are compelled to follow them, cultivating a sort of living farm. Others support themselves by hunting, which is of different kinds. Some, for example, are brigands, others, who dwell near lakes or marshes or rivers or a sea in which there are fish, are fishermen, and others live by the pursuit of birds or wild beasts. The greater number obtain a living from the cultivated fruits of the soil. Such are the modes of subsistence which prevail among those whose industry springs up of itself, and whose food is not acquired by exchange and retail trade there is the shepherd, the husbandman, the brigand, the fisherman, the hunter. Some gain a comfortable maintenance out of two employments, eking out the deficiencies of one of them by another: thus, the life of a shepherd may be combined with that of a brigand, the life of a farmer with that of a hunter. Other modes of life are similarly combined in any way which the needs of men may require. Property, in the sense of a bare livelihood, seems to be given by nature herself to all, both when they are first born, and when they are grown up. For some animals bring forth, together with their offspring, so much food as will last until they are able to supply themselves; of this the vermiparous or oviparous animals are an instance; and the viviparous animals have up to a certain time a supply of food for their young in themselves, which is called milk. In like manner we may infer that, after the birth of animals, plants exist for their sake, and that the other animals exist for the sake of man, the tame for use and food, the wild, if not all at least the greater part of them, for food, and for the provision of clothing and various instruments. Now if nature makes nothing incomplete, and nothing in vain, the inference must be that she has made all animals for the sake of man. And so, in one point of view, the art of war is a natural art of acquisition, for the art of acquisition includes hunting, an art which we ought to practice against wild beasts, and against men who, though intended by nature to be governed, will not submit; for war of such a kind is naturally just. Of the art of acquisition then there is one kind which by nature is a part of the management of a household, in so far as the art of household management must either find ready to hand, or itself provide, such things necessary to life, and useful for the community of the family or state, as can be stored. They are the elements of true riches; for the amount of property which is needed

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for a good life is not unlimited, although Solon in one of his poems says that No bound to riches has been fixed for man. But there is a boundary fixed, just as there is in the other arts; for the instruments of any art are never unlimited, either in number or size, and riches may be defined as a number of instruments to be used in a household or in a state. And so we see that there is a natural art of acquisition which is practiced by managers of households and by statesmen, and what is the reason of this. Part IX There is another variety of the art of acquisition which is commonly and rightly called an art of wealth-getting, and has in fact suggested the notion that riches and property have no limit. Being nearly connected with the preceding, it is often identified with it. But though they are not very different, neither are they the same. The kind already described is given by nature, the other is gained by experience and art. Let us begin our discussion of the question with the following considerations: Of everything which we possess there are two uses: both belong to the thing as such, but not in the same manner, for one is the proper, and the other the improper or secondary use of it. For example, a shoe is used for wear, and is used for exchange; both are uses of the shoe. He who gives a shoe in exchange for money or food to him who wants one, does indeed use the shoe as a shoe, but this is not its proper or primary purpose, for a shoe is not made to be an object of barter. The same may be said of all possessions, for the art of exchange extends to all of them, and it arises at first from what is natural, from the circumstance that some have too little, others too much. Hence, we may infer that retail trade is not a natural part of the art of getting wealth; had it been so, men would have ceased to exchange when they had enough. In the first community, indeed, which is the family, this art is obviously of no use, but it begins to be useful when the society increases. For the members of the family originally had all things in common; later, when the family divided into parts, the parts shared in many things, and different parts in different things, which they had to give in exchange for what they wanted, a kind of barter which is still practiced among barbarous nations who exchange with one another the necessaries of life and nothing more; giving and receiving wine, for example, in exchange for coin, and the like. This sort of barter is not part of the wealth-getting art and is not contrary to nature, but is needed for the satisfaction of mens natural wants. The other or more complex form of exchange grew, as might have been inferred, out of the simpler. When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use. For the various necessaries of life are not easily carried about, and hence men agreed to employ in their dealings with each other something which was intrinsically useful and easily applicable to the purposes of life, for example, iron, silver, and the like. Of this the value was at first measured simply by size and weight, but in process of time they put a stamp upon it, to save the trouble of weighing and to mark the value. When the use of coin had once been discovered, out of the barter of necessary articles arose the other art of wealth-getting, namely retail trade; which was at first probably a simple matter, but became more complicated as soon as men learned by experience whence and by what exchanges the greatest profit might be made. Originating in the use of coin, the art of getting wealth is generally thought to be chiefly concerned with it, and to be the art which produces riches and wealth; having to consider how they may be accumulated. Indeed, riches is assumed by many to be only a quantity of coin, because the arts of getting wealth and retail trade are concerned with coin. Others maintain that coined money is a mere sham, a thing not natural, but conventional only, because, if the users substitute another commodity for it, it is worthless, and because it is not useful as a means to any of the necessities of life, and, indeed, he who is rich in

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coin may often be in want of necessary food. But how can that be wealth of which a man may have a great abundance and yet perish with hunger, like Midas in the fable, whose insatiable prayer turned everything that was set before him into gold? Hence, men seek after a better notion of riches and of the art of getting wealth than the mere acquisition of coin, and they are right. For natural riches and the natural art of wealth-getting are a different thing; in their true form they are part of the management of a household; whereas retail trade is the art of producing wealth, not in every way, but by exchange. And it is thought to be concerned with coin; for coin is the unit of exchange and the measure or limit of it. And there is no bound to the riches which spring from this art of wealth-getting. As in the art of medicine there is no limit to the pursuit of health, and as in the other arts there is no limit to the pursuit of their several ends, for they aim at accomplishing their ends to the uttermost (but of the means there is a limit, for the end is always the limit), so, too, in this art of wealth-getting there is no limit of the end, which is riches of the spurious kind, and the acquisition of wealth. But the art of wealth-getting which consists in household management, on the other hand, has a limit; the unlimited acquisition of wealth is not its business. And, therefore, in one point of view, all riches must have a limit; nevertheless, as a matter of fact, we find the opposite to be the case; for all getters of wealth increase their hoard of coin without limit. The source of the confusion is the near connection between the two kinds of wealth-getting; in either, the instrument is the same, although the use is different, and so they pass into one another; for each is a use of the same property, but with a difference: accumulation is the end in one case, but there is a further end in the other. Hence, some persons are led to believe that getting wealth is the object of household management, and the whole idea of their lives is that they ought either to increase their money without limit, or at any rate not to lose it. The origin of this disposition in men is that they are intent upon living only, and not upon living well; and as their desires are unlimited they also desire that the means of gratifying them should be without limit. Those who do aim at a good life seek the means of obtaining bodily pleasures; and, since the enjoyment of these appears to depend on property, they are absorbed in getting wealth: and so there arises the second species of wealth-getting. For, as their enjoyment is in excess, they seek an art which produces the excess of enjoyment; and, if they are not able to supply their pleasures by the art of getting wealth, they try other arts, using in turn every faculty in a manner contrary to nature. The quality of courage, for example, is not intended to make wealth, but to inspire confidence; neither is this the aim of the generals or of the physicians art; but the one aims at victory and the other at health. Nevertheless, some men turn every quality or art into a means of getting wealth; this they conceive to be the end, and to the promotion of the end they think all things must contribute. Thus, then, we have considered the art of wealth-getting which is unnecessary, and why men want it; and also the necessary art of wealth-getting, which we have seen to be different from the other, and to be a natural part of the art of managing a household, concerned with the provision of food, not, however, like the former kind, unlimited, but having a limit. Part X And we have found the answer to our original question, whether the art of getting wealth is the business of the manager of a household and of the statesman or not their business? Namely that wealth is presupposed by them. For as political science does not make men, but takes them from nature and uses them, so too nature provides them with earth or sea, or the like as a source of food. At this stage begins the duty of the manager of a household, who has to order the things which nature supplies; he may be compared to the weaver who has not to make but to use wool, and to know, too, what sort of wool is good and serviceable or bad and unserviceable. Were this otherwise, it would be difficult to see why the art of getting wealth is a part of the management

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of a household and the art of medicine not; for surely the members of a household must have health just as they must have life or any other necessary. The answer is that as from one point of view the master of the house and the ruler of the state have to consider about health, from another point of view not they but the physician; so in one way the art of household management, in another way the subordinate art, has to consider about wealth. But, strictly speaking, as I have already said, the means of life must be provided beforehand by nature; for the business of nature is to furnish food to that which is born, and the food of the offspring is always what remains over of that from which it is produced. Wherefore the art of getting wealth out of fruits and animals is always natural. There are two sorts of wealth-getting, as I have said; one is a part of household management, the other is retail trade: the former necessary and honorable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another. The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth this is the most unnatural. Part XI Enough has been said about the theory of wealth-getting; we will now proceed to the practical part. The discussion of such matters is not unworthy of philosophy, but to be engaged in them practically is illiberal and irksome. The useful parts of wealth-getting are, first, the knowledge of livestock which are most profitable, and where, and how as, for example, what sort of horses or sheep or oxen or any other animals are most likely to give a return. A man ought to know which of these pay better than others, and which pay best in particular places, for some do better in one place and some in another. Second, husbandry, which may be either tillage or planting, and the keeping of bees and of fish, or fowl, or of any animal which may be useful to man. These are the divisions of the true or proper art of wealth-getting and come first. Of the other, which consists in exchange, the first and most important division is commerce (of which there are three kinds the provision of a ship, the conveyance of goods, exposure for sale these again differing as they are safer or more profitable), the second is usury, the third, service for hire of this, one kind is employed in the mechanical arts, the other in unskilled and bodily labor. There is still a third sort of wealth-getting, intermediate between this and the first or natural mode which is partly natural, but is also concerned with exchange, namely the industries that make their profit from the earth, and from things growing from the earth which, although they bear no fruit, are nevertheless profitable; for example, the cutting of timber and all mining. The art of mining, by which minerals are obtained, itself has many branches, for there are various kinds of things dug out of the earth. Of the several divisions of wealth-getting I now speak generally; a minute consideration of them might be useful in practice, but it would be tiresome to dwell upon them at greater length now. Those occupations are most truly arts in which there is the least element of chance; they are the meanest in which the body is most deteriorated, the most servile in which there is the greatest use of the body, and the most illiberal in which there is the least need of excellence. Works have been written upon these subjects by various persons; for example, by Chares the Parian, and Apollodorus the Lemnian, who have treated of Tillage and Planting, while others have treated of other branches; any one who cares for such matters may refer to their writings. It would be well also to collect the scattered stories of the ways in which individuals have succeeded in amassing a fortune; for all this is useful to persons who value the art of getting wealth. There is

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the anecdote of Thales the Milesian and his financial device, which involves a principle of universal application, but is attributed to him on account of his reputation for wisdom. He was reproached for his poverty, which was supposed to show that philosophy was of no use. According to the story, he knew by his skill in the stars while it was yet winter that there would be a great harvest of olives in the coming year; so, having a little money, he gave deposits for the use of all the olive-presses in Chios and Miletus, which he hired at a low price because no one bid against him. When the harvest-time came, and many were wanted all at once and of a sudden, he let them out at any rate which he pleased, and made a quantity of money. Thus, he showed the world that philosophers can easily be rich if they like, but that their ambition is of another sort. He is supposed to have given a striking proof of his wisdom, but, as I was saying, his device for getting wealth is of universal application, and is nothing but the creation of a monopoly. It is an art often practiced by cities when they are want of money; they make a monopoly of provisions. There was a man of Sicily, who, having money deposited with him, bought up an the iron from the iron mines; afterwards, when the merchants from their various markets came to buy, he was the only seller, and without much increasing the price he gained 200 per cent. Which when Dionysius heard, he told him that he might take away his money, but that he must not remain at Syracuse, for he thought that the man had discovered a way of making money which was injurious to his own interests. He made the same discovery as Thales; they both contrived to create a monopoly for themselves. And statesmen as well ought to know these things; for a state is often as much in want of money and of such devices for obtaining it as a household, or even more so; hence some public men devote themselves entirely to finance.

Book IIPart V Next let us consider what should be our arrangements about property: should the citizens of the perfect state have their possessions in common or not? This question may be discussed separately from the enactments about women and children. Even supposing that the women and children belong to individuals, according to the custom which is at present universal, may there not be an advantage in having and using possessions in common? Three cases are possible: (1) the soil may be appropriated, but the produce may be thrown for consumption into the common stock; and this is the practice of some nations. Or (2), the soil may be common, and may be cultivated in common, but the produce divided among individuals for their private use; this is a form of common property which is said to exist among certain barbarians. Or (3), the soil and the produce may be alike common. When the husbandmen are not the owners, the case will be different and easier to deal with; but when they till the ground for themselves the question of ownership will give a world of trouble. If they do not share equally enjoyments and toils, those who labor much and get little will necessarily complain of those who labor little and receive or consume much. But indeed there is always a difficulty in men living together and having all human relations in common, but especially in their having common property. The partnerships of fellow-travelers are an example to the point; for they generally fall out over everyday matters and quarrel about any trifle which turns up. So with servants: we are most able to take offense at those with whom we most frequently come into contact in daily life. These are only some of the disadvantages which attend the community of property; the present arrangement, if improved as it might be by good customs and laws, would be far better, and would have the advantages of both systems. Property should be in a certain sense common,

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but, as a general rule, private; for, when everyone has a distinct interest, men will not complain of one another, and they will make more progress, because every one will be attending to his own business. And yet by reason of goodness, and in respect of use, Friends, as the proverb says, will have all things common. Even now there are traces of such a principle, showing that it is not impracticable, but, in well-ordered states, exists already to a certain extent and may be carried further. For, although every man has his own property, some things he will place at the disposal of his friends, while of others he shares the use with them. The Lacedaemonians, for example, use one anothers slaves, and horses, and dogs, as if they were their own; and when they lack provisions on a journey, they appropriate what they find in the fields throughout the country. It is clearly better that property should be private, but the use of it common; and the special business of the legislator is to create in men this benevolent disposition. Again, how immeasurably greater is the pleasure, when a man feels a thing to be his own; for surely the love of self is a feeling implanted by nature and not given in vain, although selfishness is rightly censured; this, however, is not the mere love of self, but the love of self in excess, like the misers love of money; for all, or almost all, men love money and other such objects in a measure. And further, there is the greatest pleasure in doing a kindness or service to friends or guests or companions, which can only be rendered when a man has private property. These advantages are lost by excessive unification of the state. The exhibition of two virtues, besides, is visibly annihilated in such a state: first, temperance towards women (for it is an honorable action to abstain from anothers wife for temperance sake); second, liberality in the matter of property. No one, when men have all things in common, will any longer set an example of liberality or do any liberal action; for liberality consists in the use which is made of property. Such legislation may have a specious appearance of benevolence; men readily listen to it, and are easily induced to believe that in some wonderful manner everybody will become everybodys friend, especially when some one is heard denouncing the evils now existing in states, suits about contracts, convictions for perjury, flatteries of rich men and the like, which are said to arise out of the possession of private property. These evils, however, are due to a very different cause the wickedness of human nature. Indeed, we see that there is much more quarreling among those who have all things in common, though there are not many of them when compared with the vast numbers who have private property.

Nichomachean Ethics (350 BC)*

Book VPart 5 Some think that reciprocity is without qualification just, as the Pythagoreans said; for they defined justice without qualification as reciprocity. Now reciprocity fits neither distributive nor rectificatory justice yet people want even the justice of Rhadamanthus to mean this: Should a man suffer what he did, right justice would be done for in many cases reciprocity and rectificatory justice are not in accord; for example, (1) if an official has inflicted a wound, he should not be wounded in return, and if some one has wounded an official, he ought not to be wounded only but punished in addition. Further (2) there is a great difference between a voluntary and an involuntary act. But in associations for exchange this sort of justice does hold men together reciprocity in accordance with a proportion and not on the basis of precisely equal return. For it is by proportionate requital that the city holds together. Men seek to return either evil for evil and if they cannot do so, think their position mere slavery or good for good and if they cannot do so there is no exchange, but it is by exchange that they hold together. This is why they give a prominent place to the temple of the Graces to promote the requital of services; for this is characteristic of grace we should serve in return one who has shown grace to us, and should another time take the initiative in showing it. Now proportionate return is secured by cross-conjunction. Let A be a builder, B a shoemaker, C a house, D a shoe. The builder, then, must get from the shoemaker the latters work, and must himself give him in return his own. If, then, first there is proportionate equality of goods, and then reciprocal action takes place, the result we mention will be effected. If not, the bargain is not equal, and does not hold; for there is nothing to prevent the work of the one being better than that of the other; they must therefore be equated. (And this is true of the other arts also; for they would have been destroyed if what the patient suffered had not been just what the agent did, and of the same amount and kind.) For it is not two doctors that associate for exchange, but a doctor and a farmer, or in general people who are different and unequal; but these must be equated. This is why all things that are exchanged must be somehow comparable. It is for this end that money has been introduced, and it becomes in a sense an intermediate; for it measures all things, and therefore the excess and the defect how many shoes are equal to a house or to a given amount of food. The number of shoes exchanged for a house (or for a given amount of food) must therefore correspond to the ratio of builder to shoemaker. For if this be not so, there will be no exchange and no intercourse. And this proportion will not be effected unless the goods are

* Translated by W.D. Ross.

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somehow equal. All goods must therefore be measured by some one thing, as we said before. Now this unit is in truth demand, which holds all things together (for if men did not need one anothers goods at all, or did not need them equally, there would be either no exchange or not the same exchange); but money has become by convention a sort of representative of demand; and this is why it has the name money (nomisma) because it exists not by nature but by law (nomos) and it is in our power to change it and make it useless. There will, then, be reciprocity when the terms have been equated so that as farmer is to shoemaker, the amount of the shoemakers work is to that of the farmers work for which it exchanges. But we must not bring them into a figure of proportion when they have already exchanged (otherwise one extreme will have both excesses), but when they still have their own goods. Thus, they are equals and associates just because this equality can be effected in their case. Let A be a farmer, C food, B a shoemaker, D his product equated to C. If it had not been possible for reciprocity to be thus effected, there would have been no association of the parties. That demand holds things together as a single unit is shown by the fact that when men do not need one another, that is, when neither needs the other or one does not need the other, they do not exchange, as we do when some one wants what one has oneself, for example, when people permit the exportation of corn in exchange for wine. This equation therefore must be established. And for the future exchange that if we do not need a thing now we shall have it if ever we do need it money is as it were our surety; for it must be possible for us to get what we want by bringing the money. Now the same thing happens to money itself as to goods it is not always worth the same; yet it tends to be steadier. This is why all goods must have a price set on them; for then there will always be exchange, and if so, association of man with man. Money, then, acting as a measure, makes goods commensurate and equates them; for neither would there have been association if there were not exchange, nor exchange if there were not equality, nor equality if there were not commensurability. Now in truth it is impossible that things differing so much should become commensurate, but with reference to demand they may become so sufficiently. There must, then, be a unit, and that fixed by agreement (for which reason it is called money); for it is this that makes all things commensurate, since all things are measured by money. Let A be a house, B ten minae, C a bed. A is half of B, if the house is worth five minae or equal to them; the bed, C, is a tenth of B; it is plain, then, how many beds are equal to a house, namely five. That exchange took place thus before there was money is plain; for it makes no difference whether it is five beds that exchange for a house, or the money value of five beds.

ST THOMAS AQUINAS (12251274)

By the thirteenth century, the Roman Catholic church for our purposes the Scholastic writers had achieved considerable if not essentially complete hegemony in Western Europe. The fundamental premises of Catholic socio-economic thought were the necessity of superimposing a system of values deemed more or less final upon economic life and the subordination of economic activity to the domain deemed more important by the Church, namely salvation of souls. The practical effect of this intellectual activity was to construct the framework of a system of thought within which economic concepts, relations, issues and problems might be discussed and worked out. This system of thought has persisted to the present day. Although it often postulated a stable social order, and the maintenance of stable social structures as a Christian duty, the structure of both mediaeval organized life and that St Thomas Aquinas, by courtesy of Corbis, www.corbis.com. system of thought, we now know in abundance, exhibited then and now considerable diversity, conflict and change. The leading figure of the scholastic period was St Thomas Aquinas (12251274). Aquinas was a member of the Dominican order, studied under Albertus Magnus, and spent much of his life teaching and writing at various institutions of higher learning. His writings are incredibly extensive, and attempt to integrate and reconcile the teachings of the Scriptures, the church fathers, and the recently rediscovered Aristotle. Aquinas, like the Greeks before him, did not construct a cohesive body of economic theory. Rather, his economics was just one facet of his larger moral philosophy. As relations between man and man (including those economic), and the justice thereof, are an aspect of the relationship between man and God, economic matters naturally enter into Aquinass theology. His major work, Summa Theologica, is a comprehensive exposition of Christian theology and philosophy, and this, along with Aquinass various other writings, set the tone of discussion and debate for subsequent centuries of scholastic thought and analysis.

St Thomas Aquinas 17Aquinas and the Scholastics were overwhelmingly concerned with questions of the organization and control of economic life in regard to which they adopted laws and principles which severely restricted entrepreneurial activity. They were also necessarily concerned with two great issues: the just price and interest on loans, the two topics of analysis in the excerpts from Aquinass Summa Theologica are reprinted here. The approaches taken to the just price by civil and, especially, canonical courts included emphases, respectively, on the intrinsic nature or quality of a good, its scarcity, its cost of production, subjective tastes and protection of social structure. Inasmuch as litigation involves disputed transactions in particular social contexts, it is likely that the price in dispute would be compared by a court with prevalent prices for the good in the area. It is also likely that over the centuries, with the further extension of markets and of trade, that the price in question increasingly became that of the competitive market, whatever that might have meant in practice. Still, while some modern historians of thought have emphasized the increasing secularization of Church doctrinal practice, others have argued that Church figures had no meaningful idea of a self-regulating market system and were deeply influenced by then-traditional modes of theological reasoning. The charging of interest on loans usury per se was conspicuously forbidden by the Church, which was driven by such ideas as the importance, indeed the obligation, of Christian charity and the sterility of money. In time, however, distinctions were effectively made between loans for consumption and loans for business purposes and between consumption loans due to necessity and consumption loans for conveniences and luxuries. And in time, it was held not only that some justification for the charging and paying of interest likely existed in the case of typical loans, but that administrators of Church monies were obligated to invest them (at interest). But how interest, and prices, were treated during the mediaeval period by local canonical and other tribunals remains unknown.

References and further readingBaldwin, John W. (1959) The Medieval Theories of Just Price, Transactions of the American Philosophical Society NS 49(4): 1592. De Roover, Raymond (1955) Scholastic Economics: Survival and Lasting Influence from the Sixteenth Century to Adam Smith, Quarterly Journal of Economics 69 (May): 16190. (1958) The Concept of the Just Price: Theory and Economic Policy, Journal of Economic History 18 (December): 41834. (1967) San Bernardino of Siena and Sant Antonino of Florence: The Two Great Economic Thinkers of the Middle Ages, Boston: Baker Library, Harvard Graduate School of Business Administration. Gordon, Barry (1975) Economic Analysis Before Adam Smith: Hesiod to Lessius, New York: Barnes and Noble. (1987) Aquinas, St. Thomas, in John Eatwell, Murray Milgate, and Peter Newman (eds), The New Palgrave: A Dictionary of Economics, Vol. 1, London: Macmillan, 99100. Grice-Hutchison, M. (1978) Early Economic Thought in Spain, 11771740, London: Allen & Unwin. Hollander, Samuel (1965) On the Interpretation of the Just Price, Kyklos 18(4): 61534. Langholm, Odd (1979) Price and Value Theory in the Aristotelian Tradition, Bergen: Universitetsforlaget. (1983) Wealth and Money in the Aristotelian Tradition, Bergen: Universitetsforlaget. (1984) The Aristotelian Analysis of Usury, Bergen: Universitetsforlaget. (1998) The Legacy of Scholasticism in Economic Thought: Antecedents of Choice and Power, Cambridge: Cambridge University Press. Lapidus, Andr (1997) Metal, Money, and the Prince: John Buridan and Nicholas Oresme after Thomas Aquinas, History of Political Economy 29 (Spring): 2153. Noonan, J.T. (1957) The Scholastic Analysis of Usury, Cambridge, MA: Harvard University Press. Spiegel, Henry W. (1987) Scholastic Economic Thought, in John Eatwell, Murray Milgate and Peter Newman (eds), The New Palgrave: A Dictionary of Economics, Vol. 4, London: Macmillan, 25961. Viner, Jacob (1978) Religious Thought and Economic Society, Durham, NC: Duke University Press. Worland, Stephen T. (1967) Scholasticism and Welfare Economics, Notre Dame, IN: University of Notre Dame Press.

Summa Theologica (12671273)*

Second part of the second part(D) By sins committed in buying and selling (Question [77]) Of cheating, which is committed in buying and selling ( four articles) We must now consider those sins which relate to voluntary commutations. First, we shall consider cheating, which is committed in buying and selling: second, we shall consider usury, which occurs in loans. In connection with the other voluntary commutations no special kind of sin is to be found distinct from rapine and theft. Under the first head there are four points of inquiry: 1 2 3 4 Of unjust sales as regards the price; namely whether it is lawful to sell a thing for more than its worth? Of unjust sales on the part of the thing sold; Whether the seller is bound to reveal a fault in the thing sold? Whether it is lawful in trading to sell a thing at a higher price than was paid for it?

Article 1: Whether it is lawful to sell a thing for more than its worth? Objection 1: It would seem that it is lawful to sell a thing for more than its worth. In the commutations of human life, civil laws determine that which is just. Now according to these laws it is just for buyer and seller to deceive one another (Cod. IV, xliv, De Rescind. Vend. 8,15): and this occurs by the seller selling a thing for more than its worth, and the buyer buying a thing for less than its worth. Therefore, it is lawful to sell a thing for more than its worth. Objection 2: Further, that which is common to all would seem to be natural and not sinful. Now Augustine relates that the saying of a certain jester was accepted by all, You wish to buy for a song and to sell at a premium, which agrees with the saying of Prov. 20:14, It is naught, it is naught, saith every buyer: and when he is gone away, then he will boast. Therefore, it is lawful to sell a thing for more than its worth. Objection 3: Further, it does not seem unlawful if that which honesty demands be done by mutual agreement. Now, according to the Philosopher (Ethic. viii, 13), in the friendship which is based on utility, the amount of the recompense for a favor received should depend on the utility accruing to the receiver: and this utility sometimes is worth more than the thing given, for instance if the receiver be in great need of that thing, whether for the purpose of avoiding a danger, or of deriving some particular benefit. Therefore, in contracts of buying and selling, it is lawful to give a thing in return for more than its worth.

* Benziger Bros. edition, 1947. Translated by Fathers of the English Dominican Province.

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On the contrary, it is written (Mt. 7:12): All things whatsoever you would that men should do to you, do you also to them. But no man wishes to buy a thing for more than its worth. Therefore, no man should sell a thing to another man for more than its worth. I answer that, It is altogether sinful to have recourse to deceit in order to sell a thing for more than its just price, because this is to deceive ones neighbor so as to injure him. Hence, Tully says (De Offic. iii, 15): Contracts should be entirely free from double-dealing: the seller must not impose upon the bidder, nor the buyer upon one that bids against him. But, apart from fraud, we may speak of buying and selling in two ways. First, as considered in themselves, and from this point of view, buying and selling seem to be established for the common advantage of both parties, one of whom requires that which belongs to the other, and vice versa, as the Philosopher states (Polit. i, 3). Now whatever is established for the common advantage, should not be more of a burden to one party than to another, and consequently all contracts between them should observe equality of thing and thing. Again, the quality of a thing that comes into human use is measured by the price given for it, for which purpose money was invented, as stated in Ethic. v, 5. Therefore if either the price exceed the quantity of the things worth, or, conversely, the thing exceed the price, there is no longer the equality of justice: and consequently, to sell a thing for more than its worth, or to buy it for less than its worth, is in itself unjust and unlawful. Second we may speak of buying and selling, considered as accidentally tending to the advantage of one party, and to the disadvantage of the other: for instance, when a man has great need of a certain thing, while another man will suffer if he be without it. In such a case the just price will depend not only on the thing sold, but on the loss which the sale brings on the seller. And thus it will be lawful to sell a thing for more than it is worth in itself, though the price paid be not more than it is worth to the owner. Yet, if the one man derive a great advantage by becoming possessed of the other mans property, and the seller be not at a loss through being without that thing, the latter ought not to raise the price, because the advantage accruing to the buyer, is not due to the seller, but to a circumstance affecting the buyer. Now no man should sell what is not his, though he may charge for the loss he suffers. On the other hand, if a man find that he derives great advantage from something he has bought, he may, of his own accord, pay the seller something over and above: and this pertains to his honesty. Reply to Objection 1: As stated above (FS, Question [96], Article [2]) human law is given to the people among whom there are many lacking virtue, and it is not given to the virtuous alone. Hence, human law was unable to forbid all that is contrary to virtue; and it suffices for it to prohibit whatever is destructive of human intercourse, while it treats other matters as though they were lawful, not by approving of them, but by not punishing them. Accordingly, if without employing deceit the seller disposes of his goods for more than their worth, or the buyer obtain them for less than their worth, the law looks upon this as licit, and provides no punishment for so doing, unless the excess be too great, because then even human law demands restitution to be made, for instance if a man be deceived in regard to more than half the amount of the just price of a thing [*Cod. IV, xliv, De Rescind. Vend. 2,8]. On the other hand, the Divine law leaves nothing unpunished that is contrary to virtue. Hence, according to the Divine law, it is reckoned unlawful if the equality of justice be not observed in buying and selling: and he who has received more than he ought must make compensation to him that has suffered loss, if the loss be considerable. I add this condition, because the just price of things is not fixed with mathematical precision, but depends on a kind of estimate, so that a slight addition or subtraction would not seem to destroy the equality of justice. Reply to Objection 2: As Augustine says this jester, either by looking into himself or by his experience of others, thought that all men are inclined to wish to buy for a song and sell at a premium. But since in reality this is wicked, it is in every mans power to acquire that justice whereby he may resist and overcome this inclination. And then he gives the example of a man

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who gave the just price for a book to a man who through ignorance asked a low price for it. Hence, it is evident that this common desire is not from nature but from vice, wherefore it is common to many who walk along the broad road of sin. Reply to Objection 3: In commutative justice we consider chiefly real equality. On the other hand, in friendship based on utility we consider equality of usefulness, so that the recompense should depend on the usefulness accruing, whereas in buying it should be equal to the thing bought. Article 2: Whether a sale is rendered unlawful through a fault in the thing sold? Objection 1: It would seem that a sale is not rendered unjust and unlawful through a fault in the thing sold. For less account should be taken of the other parts of a thing than of what belongs to its substance. Yet, the sale of a thing does not seem to be rendered unlawful through a fault in its substance: for instance, if a man sell instead of the real metal, silver or gold produced by some chemical process, which is adapted to all the human uses for which silver and gold are necessary, for instance in the making of vessels and the like. Much less therefore will it be an unlawful sale if the thing be defective in other ways. Objection 2: Further, any fault in the thing, affecting the quantity, would seem chiefly to be opposed to justice which consists in equality. Now quantity is known by being measured: and the measures of things that come into human use are not fixed, but in some places are greater, in others less, as the Philosopher states (Ethic. v, 7). Therefore just as it is impossible to avoid defects on the part of the thing sold, it seems that a sale is not rendered unlawful through the thing sold being defective. Objection 3: Further, the thing sold is rendered defective by lacking a fitting quality. But in order to know the quality of a thing, much knowledge is required that is lacking in most buyers. Therefore, a sale is not rendered unlawful by a fault (in the thing sold). On the contrary, Ambrose says (De Offic. iii, 11): It is manifestly a rule of justice that a good man should not depart from the truth, nor inflict an unjust injury on anyone, nor have any connection with fraud. I answer that, a threefold fault may be found pertaining to the thing which is sold. One, in respect of the things substance: and if the seller be aware of a fault in the thing he is selling, he is guilty of a fraudulent sale, so that the sale is rendered unlawful. Hence, we find it written against certain people (Is. 1:22), Thy silver is turned into dross, thy wine is mingled with water: because that which is mixed is defective in its substance. Another defect is in respect of quantity which is known by being measured: wherefore if anyone knowingly make use of a faulty measure in selling, he is guilty of fraud, and the sale is illicit. Hence, it is written (Dt. 25:13,14): Thou shalt not have divers weights in thy bag, a greater and a less: neither shall there be in thy house a greater bushel and a less, and further on (Dt. 25:16): For the Lord abhorreth him that doth these things, and He hateth all injustice. A third defect is on the part of the quality, for instance, if a man sell an unhealthy animal as being a healthy one: and if anyone do this knowingly he is guilty of a fraudulent sale, and the sale, in consequence, is illicit. In all these cases not only is the man guilty of a fraudulent sale, but he is also bound to restitution. But if any of the foregoing defects be in the thing sold, and he knows nothing about this, the seller does not sin, because he does that which is unjust materially, nor is his deed unjust, as shown above (Question [59], Article [2]). Nevertheless, he is bound to compensate the buyer, when the defect comes to his knowledge. Moreover what has been said of the seller applies equally to the buyer. For sometimes it happens that the seller thinks his goods to be specifically of lower value, as when a man sells gold instead of copper, and then if the buyer be aware of this, he buys it unjustly and is bound to restitution: and the same applies to a defect in quantity as to a defect in quality.

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Reply to Objection 1: Gold and silver are costly not only on account of the usefulness of the vessels and other like things made from them, but also on account of the excellence and purity of their substance. Hence, if the gold or silver produced by alchemists has not the true specific nature of gold and silver, the sale thereof is fraudulent and unjust, especially as real gold and silver can produce certain results by their natural action, which the counterfeit gold and silver of alchemists cannot produce. Thus, the true metal has the property of making people joyful, and is helpful medicinally against certain maladies. Moreover, real gold can be employed more frequently, and lasts longer in its condition of purity than counterfeit gold. If, however, real gold were to be produced by alchemy, it would not be unlawful to sell it for the genuine article, for nothing prevents art from employing certain natural causes for the production of natural and true effects, as Augustine says (De Trin. iii, 8) of things produced by the art of the demons. Reply to Objection 2: The measures of salable commodities must needs be different in different places, on account of the difference of supply: because where there is greater abundance, the measures are wont to be larger. However, in each place those who govern the state must determine the just measures of things salable, with due consideration for the conditions of place and time. Hence, it is not lawful to disregard such measures as are established by public authority or custom. Reply to Objection 3: As Augustine says (De Civ. Dei xi, 16) the price of things salable does not depend on their degree of nature, since at times a horse fetches a higher price than a slave; but it depends on their usefulness to man. Hence, it is not necessary for the seller or buyer to be cognizant of the hidden qualities of the thing sold, but only of such as render the thing adapted to mans use, for instance, that the horse be strong, run well and so forth. Such qualities the seller and buyer can easily discover. Article 3: Whether the seller is bound to state the defects of the thing sold? Objection 1: It would seem that the seller is not bound to state the defects of the thing sold. Since the seller does not bind the buyer to buy, he would seem to leave it to him to judge of the goods offered for sale. Now judgment about a thing and knowledge of that thing belong to the same person. Therefore, it does not seem imputable to the seller if the buyer be deceived in his judgment, and be hurried into buying a thing without carefully inquiring into its condition. Objection 2: Further, it seems foolish for anyone to do what prevents him carrying out his work. But if a man states the defects of the goods he has for sale, he prevents their sale: wherefore Tully (De Offic. iii, 13) pictures a man as saying: Could anything be more absurd than for a public crier, instructed by the owner, to cry: I offer this unhealthy horse for sale? Therefore, the seller is not bound to state the defects of the thing sold. Objection 3: Further, man needs more to know the road of virtue than to know the faults of things offered for sale. Now one is not bound to offer advice to all or to tell them the truth about matters pertaining to virtue, though one should not tell anyone what is false. Much less therefore is a seller bound to tell the faults of what he offers for sale, as though he were counseling the buyer. Objection 4: Further, if one were bound to tell the faults of what one offers for sale, this would only be in order to lower the price. Now sometimes the price would be lowered for some other reason, without any defect in the thing sold: for instance, if the seller carry wheat to a place where wheat fetches a high price, knowing that many will come after him carrying wheat; because if the buyers knew this they would give a lower price. But apparently the seller need not give the buyer this information. Therefore, in like manner, neither need he tell him the faults of the goods he is selling. On the contrary, Ambrose says (De Offic. iii, 10): In all contracts the defects of the salable commodity must be stated; and unless the seller make them known, although the buyer has already acquired a right to them, the contract is voided on account of the fraudulent action.

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I answer that, It is always unlawful to give anyone an occasion of danger or loss, although a man need not always give another the help or counsel which would be for his advantage in any way; but only in certain fixed cases, for instance, when someone is subject to him, or when he is the only one who can assist him. Now the seller who offers goods for sale, gives the buyer an occasion of loss or danger, by the very fact that he offers him defective goods, if such defect may occasion loss or danger to the buyer loss, if, by reason of this defect, the goods are of less value, and he takes nothing off the price on that account danger, if this defect either hinder the use of the goods or render it hurtful, for instance, if a man sells a lame for a fleet horse, a tottering house for a safe one, rotten or poisonous food for wholesome. Wherefore if such like defects be hidden, and the seller does not make them known, the sale will be illicit and fraudulent, and the seller will be bound to compensation for the loss incurred. On the other hand, if the defect be manifest, for instance if a horse have but one eye, or if the goods though useless to the buyer, be useful to someone else, provided the seller take as much as he ought from the price, he is not bound to state the defect of the goods, since perhaps on account of that defect the buyer might want him to allow a greater rebate than he need. Wherefore the seller may look to his own indemnity, by withholding the defect of the goods. Reply to Objection 1: Judgment cannot be pronounced save on what is manifest: for a man judges of what he knows (Ethic. i, 3). Hence, if the defects of the goods offered for sale be hidden, judgment of them is not sufficiently left with the buyer unless such defects be made known to him. The case would be different if the defects were manifest. Reply to Objection 2: There is no need to publish beforehand by the public crier the defects of the goods one is offering for sale, because if he were to begin by announcing its defects, the bidders would be frightened to buy, through ignorance of other qualities that might render the thing good and serviceable. Such defect ought to be stated to each individual that offers to buy: and then he will be able to compare the various points, one with the other, the good with the bad: for nothing prevents that which is defective in one respect being useful in many others. Reply to Objection 3: Although a man is not bound strictly speaking to tell everyone the truth about matters pertaining to virtue, yet he is so bound in a case when, unless he tells the truth, his conduct would endanger another man in detriment to virtue: and so it is in this case. Reply to Objection 4: The defect in a thing makes it of less value now than it seems to be: but in the case cited, the goods are expected to be of less value at a future time, on account of the arrival of other merchants, which was not foreseen by the buyers. Wh