In this article we will discuss about the economic ideas of St. Thomas Aquinas and Nicole Oresme.
Economic Ideas of St. Thomas Aquinas:
(i) Just Price:
The most important contribution of Thomas Aquinas was Just price (“Justum Pretium”). This doctrine was based upon the concept of value. He recognised time and place utility. Just price was associated with utility or usefulness of the commodity. It was, however, believed that the exact determination of price was not possible.
However, just price was subject to variations due to market fluctuations. One could charge a high price either because he had improved the commodity in some way or because of the risk he took in transporting it from one place to another. Hence charging of a higher price was justified if the seller was likely to incur a loss.
The Medieval School believed that value should be equal to costs including the expenditure on labour. Selling of a defective thing was considered as fraud. In short, value was absolute and based on cost. The value thus fixed was not market price and was independent of the estimate of buyer or seller. ‘Just price’ was similar to that of the present ‘fair value’. Thus Aquinas distinguished between ‘Just price’ and ‘market price’. Just price was determined by law.
Lending money for earning more wealth was considered as the worst form of earning money. Like the Hebrews the Medieval church of fathers also prohibited the taking of interest. A high rate of interest was treated as the exploitation of the poor as there was absence of opportunities for the profitable investment of capital. But the lender was entitled for a compensation if the principal amount was not returned within the stipulated time.
Several factors were responsible for their belief against usury. Mainly Aristotle’s argument influenced Aquinas to condemn usury. Usury had been condemned by Aristotle because he regarded money as barren. Aquinas made use of the doctrine of Roman law.
According to this goods were of two kinds: Consumptibles and non-consumptible, i.e., goods which were not consumed in use. He put money in the first category and stated that “to demand interest in addition to the return of loan was to seek an unnatural and unjust gain”. The early condemnation of usury rested on the authority of the Bible and Aristotelian doctrine. In the hands of Aquinas the objection to usury became much more deep.
St. Aquinas followed Aristotle regarding private property. There are two views, firstly, the power of acquiring and secondly, the way of spending it. The power of acquiring the property gives the rights on individual. Private property leads to an increase in the production of wealth.
The method of using the property was much more important than the right of ownership. According to Aquinas the estate – private property which was legitimately acquired should be distributed among the largest possible number of people and for the support of the poor also.
Trade was considered to be unnatural and to him it meant a fall from the state of grace. But still he recognised it as a necessary evil and considered it legitimate. Acquinas argued that God himself admitted that there should be trade in the world as he had distributed resources differently among different countries.
However, trade should be carried on only for the benefit of the public. Trade guilds had framed rules to check fraudulent commercial practices. The merchants should not turn a means to an end by selling the things he purchases for an abnormal profit. Speculators and middle men were also condemned.
(v) Division of Labour:
Division of labour was accepted to be necessary condition in the efficient performance of economic activity. This school regarded every profession as necessary and noble provided it led to public service.
(vi) Economic Functions of the State:
The state was regarded as a great private economy to which the independent domestic economy idea was applied. The main source of the income of the state were the estate which included buried treasure, reversion of property to the king in the absence of the its owner, etc. Taxes in the modern sense did not exist in those days.
The state was to perform the following functions: “the maintenance of population, and provision for the poor, the establishment of safe and free roads” (Haney). A system of weights and measures and a special coinage was also emphasized.
Aquinas believed that by money the king could purchase food for his subjects, in times of war. The king possessed the entire monetary control and many laws were passed to prevent counterfeiting and clipping. The circulation of foreign coins were forbidden.
On the whole, St. Thomas Aquinas made a great impression in economic thought. He codified the ideas and made definite improvement upon them. His ideas about private property, trade, wages, division of labour, usury etc., were greatly improved from that of his predecessors and his theory of ‘just price’ was a definite contribution he made to economic thought.
Economic Ideas of Nicole Oresme:
Oresme was an important medieval thinker and his treatise “On the First Invention of Money”, contained various elements of contemporary economic thought. He was concentrating more upon the monetary aspects of the economy and it was due to the dominance of money in the exchange transactions of medieval society.
A great change of the substitution of barter with a monetary exchange took place in the middle ages. In his book, he has given a detailed description of the origin of money and enumerated the qualities of good money. He was in favour of bimetallism and hence advocated the use of both silver and gold as money material.
He emphasized that the value of money is to be derived from the value of money material or commodity. He recognised that the right of coinage should rest with the king, acting on behalf of the community and he has no right to tamper with the wealth of his subjects by altering the proportion, the weight of money (material).
The gain derived from debasement is worst than usury. Debasement is thus a concealed tax which leads to dislocation of trade and impoverishment. Thus Oresme anticipated Gresham’s Law about bad money when he stated that “despite all precautions they (gold and silver) are carried out to places where they are rated higher”.
The historians dubbed the medieval period as “Dark Ages”. However, this period is of great significance in the evolution of economic thought. According to Haney, it was “a period of adjustment and fusing” and “a period of transitions”.
It was in this period that individualism and materialism of Romans, the idealism of the Christians, the democratic individualism of Germans, restricted individualism of Aristotle—all were combined and fused by this school of men into “a consistent body of logical rules concerning the rights and duties of the classes of men, and the forms and functions of government”.
It was “a period of transition” because in this period domestic economy was replaced by natural economy, agriculture by manufacturers, and commerce and slavery by serfdom and free labour. The whole economic philosophy of the Middle ages might be summed in the doctrine of just price, which aimed to protect buyers from exploitation.