The Middle Ages - History of Economic Thought - Lecture Slides, Slides of Economics

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The Middle Ages

The Middle Ages (476 – 1453)

• Judaism

• Early Christianity

• Islam

• From Charles Martel to the Black Death

• The Twelfth-Century Renaissance

• Nicole Oresme and the Theory of Money

• Conclusions

Quotations: Old Testament

• Wealth gotten by vanity shall be

diminished: but he that gathereth by labor

shall increase.

• Proverbs 13:

Early Christianity

• Bible , New Testament
• Jesus
  • wanted his followers to give up their possessions and warned that the rich may not receive salvation
  • Reward for good work would be found in heaven, and not here on earth
• St. Paul
  • Believed in the second coming of Christ and the end of the world. So, economic development was a non-issue
• St. Augustine
  • Wealth, property, and commerce were not inherently good or bad. What matters is how these things are used and for what purpose

Islam

• Koran
  • Income and property should be taxed to help the poor
  • Interest on loans prohibited
  • Inherited wealth could not go to a single beneficiary, but had to be shared
• Averroes (Ibn Rushd, 1126 – 98)
  • Added liquidity to Aristotle’s list of the functions of money
  • Unlike Aristotle, he considered a ruler’s profits from debasement of money to be unjustifiable
  • Wanted the value of money to be kept constant
• Ibn Khaldun (1332 – 1406)
  • Outlined a dynamic theory of empire. Initially, expansion enables greater division of labor and strengthens the empire. But the greater wealth makes people soft and weak. This eventually weakens the empire.

The Twelfth-Century Renaissance

• Increasing prosperity, demand for education,

and recovery of some European territory from

the Moors, led to the rediscovery of Aristotle

• The first universities were set up at Bologna,

Paris, and Oxford, and then elsewhere

• Scholastic School emerged
  • Interests were still ethical,
  • but economic analysis was often necessary

The Twelfth-Century Renaissance

• William of Auxerre (c. 1140 – 1231)
  • Based ethics on natural law, the set of self-

evident rational ideas

• Private property was okay, as long as those

who had it shared it with those who had none

• Interest could not be justified on the ground

that voluntary exchanges are necessarily just;

one is under duress when one asks for a loan

The Twelfth-Century Renaissance

• Albert the Great (Albertus Magnus, c. 1200 –

• The price of Good A relative to the price of Good B depends on both people’s relative needs for the two goods and the relative costs of producing the two goods. - This reflects an early theory of supply and demand
• The ethical issue of what price should be paid for a good is related to the analytical idea about the practical matter that unless production costs are paid the good would not get made

Nicole Oresme and the Theory of

Money

• In the 14th^ century, rulers often debased the

currencies in use by reducing the metal content

• Oresme opposed debasement.
  • Money is a standard of measurement and should be kept constant so as to not create confusion
  • The ruler manages money as a public trust. Debasement may be done only if it is in the public interest.

Conclusions

• The questions remained ethical

• But the Scholastics tried to find rational

arguments for their moral arguments

• To do this they had to develop and

analyze economic concepts such as value,

competition in markets, money, profit and

loss, opportunity cost, and interest.