Diana Wood’s Medieval Economic Thought is a helpful and informative journey through medieval economic thinking across time and subjects.
During the medieval period, what we now call economic commentary was dominated by churchmen, with church courts having jurisdiction over a great deal of economic activity. Such commentary’s prime concern was with sin and the state of people’s souls. But that involved attention to how things worked and what folk did. The general tendency was, as Latin Christendom became a more commercialised society, for church commentary to become more commerce-friendly and for lay commentators and courts to have increasing roles. Scripture, Aristotle and Roman law were the prisms through which economic life was examined.
Wood’s chapter headings delineate her coverage of the subject matter well. Her Introduction sets the scene, pointing out the level and extent of Church authority. Chapter 1, Private property versus communal rights: the conflict of two laws covers responses to the problem that God gave the world to people collectively, yet society divides it up into personal property: divine law contradicting human law. Commentators responded in various ways to the problem, with Wood noting an increasing tendency to accept personal dominion over property. (Which the Catholic Church still does not accept over one’s own body.)
Chapter 2, Wealth, beggars and sufficiency, charts the increasing respect for wealth and the decreasing tendency to accept poverty as an ideal along with the increasing laicisation of charity. Yet this shift over time continued to be organised around an underlying principle of balance. So the poor became the “security guards of Heaven” as folk made bequests to charity to put their moral balance into the positive and so enter Heaven.
Chapter 3, What is Money? covers the wrestling with the nature of money (a subject that economists still struggle with). Money was an authorised store of value (‘ghost money’ in books of account), a medium of exchange and, more controversially, an imperishable store of value permitting anticipation of future purchases. Which required money to have certain properties. One of Wood’s themes is how much medieval commentary on money in particular (and economics more generally) anticipates later thought on the subject.*
Chapter 4, Sovereign Concerns: Weights, Measures and Coinage covers the interaction between belief, practicality and the role of rulership in matters basic to, what we would now call, transaction costs. Where standards came from, attempts to prescribe and police them, practical problems, history of coinage, problems of debasement.
Chapter 5, The Mercantile System, deals with attitudes to merchants (very condemnatory to start with, but more accepting over time), trade policy and anticipations of Mercantilism. Woods suggests that, on the evidence, economic practice tends to anticipate economic theory (p.131).
Chapter 6, The Just Price and the Just Wage covers the wrestling with fundamental issues of economic life. Wood doesn’t cover the Salamanca School, since they are a C16th phenomenon. Prices and wages could be something set by the ruler, they could be the “going rate” or they could come from free negotiation. The Parable of the Vineyard, where the righteous landowner pays various labourers the same amount regardless of how long they had worked, was a bit of a difficulty. Wood covers such things as notions of demand and supply, attitudes to monopoly, the growth of guilds, evidence of collective bargaining and the development of the notion of unequal bargaining power. There was a shift over time from a notion of appropriate balance between buyers and seller requiring absolute equality to one of appropriate proportionality.
Chapters 7, The Nature of Usury: the Usurer as Winner and Chapter 8, The Theory of Interest: the Usurer as Loser cover the wrestling with the conundrum of usury being a mortal sin yet loans (with interest) being increasingly important to commercial activity (including the Church, especially the Papacy).
The attack on usury was based on biblical texts such as Leviticus25:36 (or Exodus 22:25, Deutoronomy 23:19, various passage in Ezekiel 18 and Ezekiel 22:13) and the Sermon on the Mount, particularly Luke 6:35.
Apart from references to Leviticus 25:36 and Luke 6:35 as examples, Wood does not go into the Scriptural basis. (The Parable of the Talents, or the version in Luke, suggested that interest itself was fine while the above passages have been variously translated as being against any charging of interest or only excessive charging of interest.)
Usury was a mortal sin—depriving the sinner of salvation—and was a form of theft (it stole God’s time and took from the borrower, via the charging of interest, what was not the lender’s). Money, scholastic doctrine held, was sterile so the notion of it being fruitful was unnatural. The overall presumption was that the usurer gained, illegitimately, from the borrower.
Natural law theory
Indeed, the scholastic attack on usury provides an excellent example of problems with natural law theory. Take a reductionist view of something’s form (money is round metal objects with no inherent generative power), and therefore its use (purely for exchange for goods), ignoring wider context (money is a store of value: while one has money, one has use of it; in loaning it, one is depriving oneself of alternative uses: use of it includes investing in productive assets). Declare use (earning interest) outside that reduction to be against the nature of something (money-as-sterile) and therefore illegitimate (in this case, thieving usury).
Unlike another set of victims of natural law theory, bankers and money-lenders had powerful claims on the attention of the Church: not least because the Popes were both lenders and borrowers. So commentators began to feel the story was more complicated than charging-interest-is-the-thieving-sin-of-usury.
Hence the development of the theory of interest, the subject of Chapter 8, as commentators wrestled with commercial reality and issues such as risk, loss of use, delay and so forth. Which culminated in Pope Leo X, at the Lateran Council, ruling it was legitimate to take interest from the beginning of a loan and that Usury means nothing else than gain or profit drawn from the use of a thing that is by its nature sterile, a profit that is acquired without labour, cost or risk (p.204). As Wood notes, this undermined most of the basics of the theory of usury. Loans were no longer free, time could (by implication) by sold. By implication, labour, cost or risk could make money fruitful. Use implied that ownership did not pass to the borrower, separating ownership from use (as with leasing a house or other asset). All that was left was a totally idle lender making an effortless profit with usurious intent. But, by that stage, the Reformation was underway and the biblically-minded Protestants were to keep the usury debate alive.
As an aside, one can see some of the same pattern of retreat in face of reality over sex. St Thomas Aquinas clearly felt that all sexual acts had to be potentially procreative to be legitimate (there is the "vice against nature," which attaches to every venereal act from which generation cannot follow). Which would bar sterile husbands or post-menopausal women from having sex. A strong interest group, so, according to the Catholic Church, it is fine if the procreative form is followed, even if procreation is not possible. (Any sex that does not involve a penis ejaculating into a vagina is out, however, since folk do not own their own bodies and human intentions and aspirations are entirely subordinate to the form of what we do sexually.) This is not only form and purpose trumping consent, it is form trumping purpose trumping consent. Hence Aquinas defines sex “against nature” as being worse than rape and medieval punishments for “sodomy” were typically more severe than those for rape.
Yes, insisting on the absolute primacy of procreative possibility—or at least procreative form—also runs into the small problem that Jesus did not think barrenness was grounds for divorce: thereby failing to define marriage by procreative purpose. Indeed, the Christian insistence on consent for lawful marriage was very appealing to women in pagan society as it was a barrier to them being forced into unwanted marriages (religious celibacy also provided refuges against unwanted marriages), treated them as something other than brood-mares (also true of barrenness not being grounds for divorce) while, at the same time, Christian ethics protected children.
In her brief Conclusion, Wood summarises her informative survey of medieval economic thought. The book also has a helpful glossary of the various commentators cited in the text.
Medieval Economic Thought is a very readable and informative study clearly based on wide and thoughtful reading. The author’s self-confessed lack of acquaintance with economic theory did not seem to be a notable handicap, since she keeps so close to the texts and practices. In particular, one gets a very good sense of the development of thinking on economic subjects over time.
* Update: this paragraph has been amended to make its points clearer. There has also been some grammatical and other minor editing elsewhere.