🏧History of Economic Ideas Unit 3 – Medieval Economic Thought

Key Thinkers and Texts

• Thomas Aquinas (1225-1274) influential theologian and philosopher who integrated Aristotelian thought with Christian theology in his work "Summa Theologica"
  • Argued that private property is necessary for human life and that it is not inherently evil
  • Believed that trade is moral as long as it is conducted fairly and honestly
• Ibn Khaldun (1332-1406) Arab historian and economist known for his work "Muqaddimah" which analyzed the rise and fall of civilizations
  • Introduced the concept of division of labor and its impact on economic growth
  • Recognized the importance of trade and commerce in creating wealth
• Nicole Oresme (1320-1382) French philosopher and economist who wrote extensively on money and monetary policy
  • Argued against the debasement of currency by governments
  • Developed the concept of purchasing power and its relation to the quantity of money in circulation
• Scholasticism dominant school of thought in medieval Europe that sought to reconcile Christian theology with classical philosophy
  • Emphasized the use of reason and logic in understanding the world
  • Applied Aristotelian concepts such as just price and usury to economic issues
• "Summa Theologica" (1265-1274) comprehensive work by Thomas Aquinas that addressed a wide range of theological and philosophical topics, including economic issues
• "Muqaddimah" (1377) introduction to Ibn Khaldun's larger work on world history that included economic analysis and theory
• "De Moneta" (1355) treatise by Nicole Oresme on money and monetary policy that influenced later economic thought

Economic Concepts in Medieval Times

• Just price theory held that there is a fair and just price for goods and services based on the cost of production and the common good
  • Opposed to the idea of prices being determined solely by supply and demand
  • Influenced by Aristotelian concept of commutative justice
• Usury the practice of charging interest on loans, which was considered sinful by the Catholic Church
  • Debated by theologians and philosophers who sought to distinguish between legitimate and illegitimate forms of interest
  • Led to the development of alternative financial instruments such as bills of exchange and partnerships
• Labor theory of value idea that the value of a good or service is determined by the amount of labor required to produce it
  • Influenced by the Christian belief in the dignity of work and the idea that labor is the source of all wealth
  • Contrasted with the later subjective theory of value that emphasized the role of individual preferences in determining value
• Scholastic economics application of Scholastic methodology to economic issues, seeking to reconcile Christian theology with classical philosophy
  • Emphasized the use of reason and logic in understanding economic phenomena
  • Influenced by Aristotelian concepts such as natural law and the common good
• Guilds associations of craftsmen and merchants that regulated production and trade in medieval Europe
  • Provided a means of quality control and protection for members
  • Criticized by some as monopolistic and restrictive of competition
• Mercantilism economic theory that emphasized the importance of trade and the accumulation of wealth in the form of precious metals
  • Influenced by the growth of international trade and the rise of nation-states in the late Middle Ages
  • Contrasted with the later theory of free trade and the benefits of specialization and comparative advantage

The Role of Religion in Economic Thought

• Catholic Church dominant religious institution in medieval Europe that had a significant influence on economic thought and practice
  • Emphasized the importance of charity and the common good
  • Opposed usury and other practices seen as exploitative or sinful
• Scholasticism sought to reconcile Christian theology with classical philosophy, including economic ideas
  • Applied concepts such as natural law and the common good to economic issues
  • Influenced by the works of Aristotle and other ancient philosophers
• Islamic economic thought developed by Muslim scholars and jurists based on the principles of the Quran and the teachings of the Prophet Muhammad
  • Emphasized the importance of social justice and the equitable distribution of wealth
  • Permitted certain forms of interest and profit-sharing arrangements
• Monasteries played a significant role in the medieval economy as centers of production and trade
  • Operated as self-sufficient communities that produced goods for their own use and for sale
  • Contributed to the development of agricultural techniques and the preservation of knowledge
• Tithing the practice of giving a portion of one's income to the Church, which was seen as a religious obligation
  • Provided a significant source of revenue for the Church and its charitable activities
  • Criticized by some as a burden on the poor and a means of enriching the clergy
• Sumptuary laws regulations that restricted the consumption of certain goods based on social class and religious beliefs
  • Intended to maintain social hierarchy and prevent excessive luxury
  • Reflected the influence of religious ideas about modesty and simplicity

Feudalism and Its Economic Impact

• Manorialism economic system based on the manor, a self-sufficient agricultural estate owned by a lord and worked by serfs
  • Provided a stable source of labor and income for the lord
  • Limited the mobility and economic opportunities of serfs
• Serfdom system of forced labor in which peasants were bound to the land and required to work for the lord
  • Provided a reliable source of labor for the manor
  • Restricted the freedom and economic autonomy of serfs
• Open-field system agricultural method in which land was divided into strips and farmed collectively by the community
  • Allowed for efficient use of resources and shared risk
  • Limited individual initiative and innovation
• Corvée labor unpaid labor required of serfs as part of their obligations to the lord
  • Included work on the lord's demesne (land) and other tasks such as building roads and bridges
  • Represented a significant burden on serfs and limited their ability to engage in other economic activities
• Tithe a portion of agricultural produce that was required to be given to the Church as a religious obligation
  • Provided a significant source of revenue for the Church
  • Added to the economic burden on peasants and serfs
• Feudal contract agreement between a lord and a vassal that exchanged land and protection for military service and loyalty
  • Provided a means of organizing political and military power in the absence of a strong central government
  • Created a hierarchical social structure that limited social mobility and economic opportunity
• Chivalry code of conduct for knights that emphasized loyalty, courage, and honor
  • Reflected the values and ideals of the feudal aristocracy
  • Had little direct impact on the economic lives of peasants and serfs

Trade and Commerce in the Middle Ages

• Hanseatic League confederation of merchant guilds and towns in northern Europe that dominated trade in the Baltic Sea region from the 13th to the 15th centuries
  • Established trading posts and factories in key cities such as London, Bruges, and Novgorod
  • Used its economic power to negotiate favorable trade agreements and protect its members' interests
• Champagne fairs series of trade fairs held in the Champagne region of France that attracted merchants from across Europe
  • Served as a major center for the exchange of goods and ideas
  • Contributed to the growth of international trade and the development of new financial instruments such as bills of exchange
• Silk Roads network of trade routes that connected Europe and Asia, facilitating the exchange of goods, ideas, and cultures
  • Enabled the trade of luxury goods such as silk, spices, and precious stones
  • Contributed to the spread of technologies such as paper-making and gunpowder
• Maritime trade expansion of seaborne trade in the Mediterranean and Atlantic regions, facilitated by advances in navigation and shipbuilding
  • Enabled the growth of port cities such as Venice, Genoa, and Lisbon
  • Contributed to the development of new trade routes and the discovery of new lands
• Guilds associations of craftsmen and merchants that regulated production and trade in medieval cities
  • Provided a means of quality control and protection for members
  • Contributed to the growth of urban economies and the development of specialized industries
• Mercantilism economic theory that emphasized the importance of trade and the accumulation of wealth in the form of precious metals
  • Influenced the policies of European states in the late Middle Ages and early modern period
  • Led to the growth of colonial empires and the expansion of international trade

Money, Banking, and Usury

• Usury the practice of charging interest on loans, which was considered sinful by the Catholic Church
  • Debated by theologians and philosophers who sought to distinguish between legitimate and illegitimate forms of interest
  • Led to the development of alternative financial instruments such as bills of exchange and partnerships
• Bills of exchange financial instruments used to facilitate long-distance trade by allowing merchants to exchange currency without physically transporting it
  • Enabled merchants to avoid the risks and costs of carrying large amounts of cash
  • Contributed to the growth of international trade and the development of modern banking practices
• Montes pietatis charitable institutions that provided low-interest loans to the poor, often using funds donated by wealthy patrons
  • Established in Italy in the 15th century and spread throughout Europe
  • Represented an attempt to provide an alternative to usurious moneylending
• Debasement the practice of reducing the precious metal content of coins in order to increase the money supply
  • Used by governments to finance wars and other expenses
  • Led to inflation and economic instability
• Gresham's Law economic principle that states that "bad money drives out good," meaning that people will hoard valuable currency and spend less valuable currency
  • Observed by Sir Thomas Gresham in the 16th century
  • Reflects the impact of debasement and other monetary policies on economic behavior
• Scholastic debates over usury and just price theory among theologians and philosophers who sought to reconcile Christian teachings with economic realities
  • Influenced by the works of Aristotle and other ancient philosophers
  • Contributed to the development of modern economic thought and the concept of the "moral economy"

Transition to Early Modern Economic Ideas

• Renaissance cultural and intellectual movement that began in Italy in the 14th century and spread throughout Europe
  • Emphasized the rediscovery of classical learning and the importance of individual achievement
  • Contributed to the growth of humanism and the secularization of economic thought
• Mercantilism economic theory that emphasized the importance of trade and the accumulation of wealth in the form of precious metals
  • Influenced the policies of European states in the 16th and 17th centuries
  • Led to the growth of colonial empires and the expansion of international trade
• Reformation religious movement that began with Martin Luther's critique of the Catholic Church in the 16th century
  • Challenged the authority of the Church and emphasized the importance of individual faith and scripture
  • Had significant economic consequences, including the secularization of church property and the growth of Protestantism
• Scientific Revolution intellectual movement that began in the 16th century and emphasized the use of observation and experimentation to understand the natural world
  • Contributed to the development of new technologies and industries
  • Influenced the growth of empiricism and the application of scientific methods to economic analysis
• Colonialism the practice of establishing colonies in other parts of the world for economic and political gain
  • Driven by the desire for new sources of wealth and the expansion of European power
  • Had significant consequences for the economies and societies of colonized regions
• Putting-out system early form of industrial organization in which merchants provided raw materials to rural workers who produced finished goods in their homes
  • Allowed for the expansion of production without the need for large centralized factories
  • Contributed to the growth of rural industries and the development of early capitalism

Legacy and Influence on Later Economic Thought

• Classical economics school of economic thought that emerged in the late 18th century, associated with thinkers such as Adam Smith and David Ricardo
  • Emphasized the importance of free markets and the division of labor
  • Built on earlier ideas about trade and the role of the state in the economy
• Marxism economic and political theory developed by Karl Marx in the 19th century that critiqued capitalism and advocated for a socialist system
  • Drew on earlier ideas about labor and the exploitation of workers
  • Influenced the development of socialist and communist movements in the 20th century
• Austrian School school of economic thought that emerged in the late 19th century, associated with thinkers such as Carl Menger and Ludwig von Mises
  • Emphasized the importance of individual choice and the subjective theory of value
  • Built on earlier ideas about the role of prices and the market in coordinating economic activity
• Institutionalism school of economic thought that emerged in the early 20th century, associated with thinkers such as Thorstein Veblen and John R. Commons
  • Emphasized the importance of social and cultural factors in shaping economic behavior
  • Drew on earlier ideas about the role of institutions and the state in the economy
• Keynesian economics school of economic thought that emerged in the mid-20th century, associated with the British economist John Maynard Keynes
  • Emphasized the importance of government intervention in the economy to promote full employment and economic growth
  • Built on earlier ideas about the role of aggregate demand and the business cycle
• Development economics subfield of economics that emerged in the mid-20th century, focused on the economic development of low- and middle-income countries
  • Drew on earlier ideas about trade, colonialism, and the role of the state in promoting economic growth
  • Influenced the policies of international organizations such as the World Bank and the United Nations