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Roger E. Backhouse: The Ordinary Business of LifeChapter 2 The Middle Ages
Udayan RoyECO54 History of Economic Thought
THE MIDDLE AGES
2
The Middle Ages (476 – 1453)
JudaismEarly ChristianityIslamFrom Charles Martel to the Black DeathThe Twelfth-Century RenaissanceNicole Oresme and the Theory of MoneyConclusions
THE MIDDLE AGES
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Judaism
Bible, Old TestamentOne should restrict one’s wants to cope with scarcity.Thecynicsin ancient Rome had similar ideasWealth was the reward for a hard workerBut the pursuit of wealth was badIt leads people away from GodIt leads to dishonesty and exploitationOpposed to commerce and usurySlavery was okay, but slaves should be freed after six yearsDebts would have to be cancelled after seven yearsLand would return to original owners after fifty years
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Quotations: Old Testament
Wealth gotten by vanity shall be diminished: but he that gathereth by labor shall increase.Proverbs 13:11
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Early Christianity
Bible, New TestamentJesuswanted his followers to give up their possessions and warned that the rich may not receive salvationReward for good work would be found in heaven, and not here on earthSt. PaulBelieved in the second coming of Christ and the end of the world. So, economic development was a non-issueSt. AugustineWealth, property, and commerce were not inherently good or bad. What matters is how these things are used and for what purpose
THE MIDDLE AGES
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Quotations: New Testament
The love of money is the root of all evil.Timothy 6:10It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.Matthew 19:24
THE MIDDLE AGES
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The Islamic World
KoranIncome and property should be taxed to help the poorInterest on loans prohibitedInherited wealth could not go to a single beneficiary, but had to be shared
THE MIDDLE AGES
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The Islamic World
Averroes (Ibn Rushd, 1126 – 1198)Added liquidity to Aristotle’s list of the functions of moneyUnlike Aristotle, he considered a ruler’s profits from debasement of money to be unjustifiableWanted the value of money to be kept constant
THE MIDDLE AGES
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The Islamic World
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 MIDDLE AGES
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The Twelfth-Century Renaissance
Increasing prosperity, demand for education, and recovery of some European territory from the Moors, led to the rediscovery of AristotleThe first universities were set up at Bologna, Paris, and Oxford, and then elsewhereScholastic School emergedInterests were still ethical,but economic analysis was often necessary
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The Twelfth-Century Renaissance
Thomas of Chobham (c. 1163 – 1235)Commerce could be beneficial.It could relieve acute scarcity in some regions.But merchants should not charge anything more than their costs.There arereasonswhy usury is a sin.Loaned money becomes the borrower’s property; all gains from the money should therefore go to the borrowerTime belongs to God, not to the lenderThe lender does not share in the borrower’s costs and losses; so why should he take part of the borrower’s profits?
THE MIDDLE AGES
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The Twelfth-Century Renaissance
William of Auxerre (c. 1140 – 1231)He based his ethics on natural law, a set of self-evident rational ideasPrivate property was okay, as long as those who had it shared it with those who had noneInterest could not be justified on the ground that voluntary exchanges are necessarily just; one is under duress when one asks for a loan
THE MIDDLE AGES
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The Twelfth-Century Renaissance
Albert the Great (Albertus Magnus, c. 1200 – 1280)The price of GoodArelative to the price of GoodBdepends 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 demandThe 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
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The Twelfth-Century Renaissance
Thomas Aquinas (c. 1225 – 74)Competition between sellers, as occurs in public markets, protects buyers from exploitationThe questions are about ethics; the answers use economic analysis
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Nicole Oresme and the Theory of Money
In the 14thcentury, rulers often debased the currencies in use by reducing the metal contentOresme opposed debasement.Money is a standard of measurement and should be kept constant so as to not create confusionThe ruler manages money as a public trust. Debasement may be done only if it is in the public interest.
THE MIDDLE AGES
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Conclusions
The questions remained ethicalBut the Scholastics tried to find rational arguments for their moral argumentsTo do this they had to develop and analyze economic concepts such as value, competition in markets, money, profit and loss, opportunity cost, and interest.

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Roger E. Backhouse_ The Ordinary Business of Life Chapter ...