Transcript Diapositiva 1

I. From antiquity to XVIIth century
1. Greece and Rome: Philosophy and Law
2. Scholastic tradition: The visión of a
Christian Economy
Foreword
The “economic problem” has been with humankind
since its very first origins, as well as the reflections
on it.
To big topics of Economics:
How the market Works?  Value analysis, distribution
problem, output, prices…
Are there alternatives to the market?
Streams
Main or orthodoxy; focus on the working of market.
Heterodox.- focus of the makerts failures and the
eventual alternatives.
The diversity enrich the debate and the general knowledge.
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Economy derives from the Jenofonte’s title book and
Greek Word «oeconomicus” [oikos (house) and
nomos (rule)] which deal about the efficient
administration (private and public) and leadership.
Context: rural economy, handcraft industry, nonsystematic markets, war economy and slavery,
individual under de rule of the State (common good)
but patriarchs of their own families and estates
(private interest)  Greek thinkers were more worried
about the management (private and public) tan about
the Economics as a discipline.
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Xenophon (427-355 a.c)
The treatise «oeconomicus» focus on the
efficiency of private and public
management  He envisaged that it is
possible to increase the economic surplus
trough organization (leadership),
specialized skills and division of labor.
Populated areas led to specialization.
The economic process should be devoted to satisfy
human needs and avoid the pain (hedonism); not to just
accumulation (contra natura)
Subjective utility is the true source of value of a single
commodity, not the commodity itself. Moreover, utility is
decreasing with the increase in consumption.
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Plato (427-347 a.c)
Human beings are not self-sufficient life
in common  cities specialization and
division of labor  commodities to be
exchange in the market.
The government should be only of wise
men (and soldiers) with no possession
(common property) to avoid corruption.
Money and trade are necessary evils.
Market requires administrative control to ensure justice
and an equitable distribution as well as control over
profit and usury.
[Historical experiences shows that this “authoritarian”
scheme usually lead to despotism more than harmony.]
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Protagoras (480-411 a.c)
«Man is the measure of all things»
(Subjetivism)
You can not know the ultimate truth of
things, but knowing the utility is at hand.
Society must decide on their true welfare
and how to get it. (Hedonism)
Leaders and politicias should advise how to manage the
situation (means), but not rule about the ultimate ends.
Administration as the informed choice of means to
achieve given ends.
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Aristotle (I) (384 - 322 a.c)
Philosophical and political system built from
an ethical perspective  central role of
justice (equity) and virtue
Justice
Distributive.- People rewarded in society
according to their merits.
Commutative.- Equivalence in Exchange.
Economic ethics
Economic activity must satisfy (limited) needs, but not
desires (unlimited).
The accumulation of wealth per se is pernicious for the
republic (enrichment of the minority at the expense of the
mayority) and the individual (not virtuous)
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Aristotle (II)
Make a distinction between acquisitive arts
Economy.- Management of the home/community/city.
It is a productive activity (grazing, agriculture, piracy,
fishing and hunting) for satisfying needs. Not
unlimited.
Chrematistics.- Barter and sale. It is a non-productive
art (Trade, usury and wage labor). It is not harmful
when it is a complement to the previous
“management”, but it is contra natura when looking
for simple accumulation.
Support of private property.- Social stability, economic
efficiency, owner rewarding and allows liberality.
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Aristotle (III)
Exchange and commerce.- Isolated vs market exchange
Analysis of single and bilateral transactions (not
systematized markets) and ruled by reciprocity which
made both parties better off.
Ethical and legal perspective (enforced justice and
equivalence) rather than economic.
Model.- How many shoes must deliver the shoemaker
carpenter to build the house?
Exchange value determined by the scarcity and distinct
from use value.
He alluded to the famous value paradox (water-diamond)
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Aristotle (IV)
Money
Acknowledges the “standard” functions of money:
unit of account, medium of exchange and store of
value.
The natural use of money is spend (satisfying needs)
and does not accumulate. It is a means not an end.
Interest
Condemns interest, because money (just a means of
exchange) could not yield any fruit while using it.
1. Greece and Rome: Philosophy and Law
1.1. The Greek thought
Summary and Legacy
The framework of analysis was anthropocentric and
administrative, paying special attention to ethics (virtues)
Orderly pursuit of happiness (satisfaction of needs) and
virtuous behavior (equivalence in exchange and not
irrational behaviors to hoard wealth)
There is a strict condemn of the use of money contra
natura and the interest in moneylending.
Rational approach to the social sciences.
Trade allowed to exchange the surplus; given that there
are different subjective utilities, it would be mutually
beneficial. The conflicts should be resolved by authorities.
Exchange value determined by subjective utility. Exchange
and use value are different.
1. Greece and Rome: Philosophy and Law
1.2. Roman Law
Rome  No substantial advances in economic
analysis
Main contribution Roman Law
Regulation of property and contracts, which shapes
the Western legal system.
The economic activity takes place under the Roman
law.
Clarify concepts such as price, purchase, loan
types ...
2. Scholastics: Christian Economy
2.1. Timeline
Prevailing paradigm since the early thirteenth
century until the late seventeenth century.
Influence of St. Thomas Aquinas Summa Theologica
First Scholastic (XIII-XIV)  Direct Influence St.
Thomas. Synthesis Aristotelian between Ethics and
Christian morality. Commercial activities and business
are necessary but dangerous, when became an “end”
in itself.
Second scholasticism (XV-XVII)  Spanish
scholastics ("School of Salamanca"). More dynamic
commercial and financial environment which leads to
less rigorists approaches.
2. Scholastics: Christian Economy
2.2. “Ethics of fraternity”
Market relations are personal and morally driven by
the virtues of charity and justice
Relevance of intention  the moral agent can not
elude themselves of responsibility by referring to the
impersonal market forces
Sense of duty of the merchants to other merchants
and to the community as a whole.
Economic thought driven by the “Anthropology based on
charity" or the "ethics of fraternity"
2. Scholastics: Christian Economy
2.3. Epistemology
Analysis lied not just on the authority or revelation,
but in the reason  It is moral what is rational
Analysis of cases.- Natural Law * is not changing, but
should be interpreted according to the historical
circumstances. "Right reason" is devoted to apply
the general principles to the nature of the case.
It allowed the adaptation of the scholastic paradigm to
changing historical circumstances and, subsequently, their
survival for more than four centuries
2. Scholastics: Christian Economy
2.4. the scholastic “vision” of economic reality
a) Private property.Scholastics hold the licitness of private property by
reasons of economic efficiency and social stability (Not
by Natural or Divine law), but …
… it was not absolute, because the primary and
fundamental purpose of everything in Creation is to
satisfy human needs. Therefore…
Social bearings of the private owners.
It is licit to stole in case of urgent necessity.*
b) Wealth.It is not evil in itself (necessary to provide); but it is
pernicious when it becomes an end in itself.
2. Scholastics: Christian Economy
2.4. the scholastic “vision” of economic reality
c) Economy and Justice.State whether the contracts met commutative justice.
Economic reasoning is an analytical tool to rule on the
validity and morality of economic dairy dealings.
Reality challenges the ideal of Christian Life.- Scholastic
Economics is a pragmatic ethical commitment
(economic behaviour morally acceptable).
Justice as a balance between personal incentive and
moral responsibility (sin of greed and help the needy) 
Christian ideal of mutual benefit derived from free and
fair trade
2. Scholastics: Christian Economy
2.4. the scholastic “vision” of economic reality
d) Voluntariness.Roman Law.- “A thing is worth as much as it can be
sold for”…
… in the absence of force, fraud and deceit by which
voluntariness is removed in the buyer.
Necessity is a form of compulsion not to be exploited.
e) Organicism.Man as an agent of creation with the mission of
contributing to the common good and the perfection of
Nature.
2. Scholastics: Christian Economy
2.5. Theory of value
Labour-value theory.- The value depends on the cost of
production (labour). Albertus Magnus; Aquinas?
Value-utility theory (*) .- The value depends on the relative
utility attributed to the relevant item. Aquinas?; It will be
predominant in the second scholasticism (**).
Not contradictory in the prescriptive ethical framework
of commutative justice in which the market price
should both prevent the disproportionate economic
profit (abuse of power) and to ensure the livelihood of
producers.
the paradox of value (Why the diamond is worth more than
water?) and the difference between use and exchange
values.
2. Scholastics: Christian Economy
2.6. The Just Price
Living in society requires the exchange and buyingand-selling dealings. Men are social animals (not
self-sufficient)
Just price has to respect the equality (*) in the
transaction (commutative justice). Two classes:
Legal.- Settled by the authority (special
circumstances)
Natural.- Fixed by common estimation (judgment
of the wise men or not fixed in an irrational way)
in a particular place and time; ie, the usual in a
particular marketplace.
2. Scholastics: Christian Economy
2.6. The Just Price
Are the market and the just price similar concepts?
 Just price is a market price but not competitive, if
not cooperative.
“Common estimation” highlights the "common"
dimension over the "usual"
Freedom and voluntariness are required in a fair
exchange
"Responsibility" of private owners. Social dimension
of human beings (agents of Creation) that pushed
them to "morally“ act for the common good.
Maximization vs Moderation.
Vanishing of moral "responsibility" in a free market
economy.
2. Scholastics: Christian Economy
2.7. Coin and money
Spanish scholastics were aware of the relationship
between rising prices and an increasing amount of
currency in circulation. (Quantitative theory of money)
They firmly stood against the adulteration of the coin
(copper coin)
Altering the coin is comparable to illicitly take part of
the value of goods of citizens without their consent
It leads to prices increments and business downfalls.
2. Scholastics: Christian Economy
2.8. Interest and usury
Money is a tool for Exchange but not itself productive  it is
illegal to charge something more above the principal in a
money loan.
Borrowed money can give returns if invested, but that
benefits are the out coming fruits of borrower’s arts and
industry; so the lender has no right to share those fruits.
Extrinsic titles (lucrum cessans and damnum emergens)
legitimize some sort of interest and were spreading through
centuries as a way to keep the core of the “ethics of
fraternity” legacy up to date with the evolving mercantile
praxis
In short, lawfulness lied on intention.
Note.- Keynes assesses the scholastic intellectual effort to
separate the marginal efficiency of capital interest rate.
2. Scholastics: Christian Economy
2.9. Main authors: First Scholastics
Saint Albertus Magnus.Theory of value based on the cost of
production (labor and expenses)
Saint Thomas Aquinas.Economy at the service of justice. Equivalence
in contracts and morality in behaviours
Theory of value based on both the Cost of
production and the utility  moral framework
where market price should prevent from
outrageous benefits as well as did not lead to
producer’s losses.
2. Scholastics: Christian Economy
2.9. Main authors: First Scholastics
Pierre Jean Olivi.Value depends on utilitas (objective utility), raritas y
complacibilitas (subjective utility).
Jean Buridan.Prices depends on necessity satisfaction and effective
demand.
Gerald Odonis.Salary theory based on the workers’ scarcity and quality of
dexterities and the costs of their acquisitions.
Thomas de Vio. Cardinal Cajetan.Money could yield fruit as the businessman's tool
Just price comes from the market forces.
2. Scholastics: Christian Economy
2.10. Main authors: Spanish Scholastics XVI-XVII
Keep the core of the legacy of first scholastics (morality,
justice, harmonious living in society, money as a mean and
not an end), but less rigorist opinions about the financial
and mercantile practices.
Francisco de Vitoria
Martín de Azpilcueta
Domingo de Soto
Tomás de Mercado
Melchor de Soria
Luis de Molina
Juan de Lugo
2. Scholastics: Christian Economy
2.11. Conclusions
Economic doctrines (just price and usury) as mechanisms
of protection against economic compulsion.
bilateral relations, handicraft production and local
monopolies empower the merchant.
common estimation and just prices are intended to
protect the weaker party.
People are governed by their moral dimension and are
political and social beings who compete while cooperate.
commercial and financial  depersonalization of
economic relations  loss of moral responsibility  just
price is the unintentional outcome of competitive markets;
which exclude the virtuous-behaviour requirement and the
morality of agents.
2. Scholastics: Christian Economy
2.12. Questions for reflecting.
“Objectivation” or “Depersonalization”  when
justice lied on the fulfilment of contracts more than its
terms, or even motivation. (Langholm, 1998)
It is a tragedy of moral history that the expansion of
the area of the moral community has ordinarily been
gained through the sacrifice of the intensity of the
moral bond. (Nelson, 1969)
Classic culture rejects the external wealth (in
opposition to the true inner one) as a result of an
stationary economy. It is surprising, that this anticonsumption ethics prevails today in an age of
capitalist economic growth. (Perrotta, 2003)