The first victory in the struggle over property right concepts was won by the Franciscans, whose theory was upheld by their protector, Pope Nicholas III, in his bull Exiit, issued in 1279. This dominant theory was elaborated by the first great critic of Thomism, the British Franciscan scholastic John Duns Scotus (1265–1308), professor of theology at Oxford and later at Paris. Aquinas had maintained that neither private nor communal property was a necessary feature of the state of nature, so that one condition was no more natural than the other. Scotus, on the contrary, boldly maintained that in a state of natural innocence both natural and divine law decree that all resources be held in common, so that no private property or dominion may exist. In this supposedly idyllic primitive communism, each person may take what he needs from the common store.
Rights theory was scarcely the only Franciscan deviation from mainline Thomism. As fideists, the Franciscans harked back to earlier Christian tradition before it had been superseded by the rationalism of St Thomas. They began, therefore, to deprecate the idea of a rational ethics and hence of natural law.
In the matter of rights theory, at least, the Franciscans were soon smashed. Reacting against the Franciscans, Pope John XXII issued his famous bull Quia vir reprobus (1329). Quia asserted trenchantly that God's dominion over the earth was reflected in man's dominion or property over his material possessions. Property rights, therefore, were not, as even Aquinas had believed, a product of positive law or social convention; they were rooted in man's nature, as created by divine law. Property rights were therefore natural and coextensive with man's actions in the material world. The Franciscans were effectively routed on this point; it was now established, as Richard Tuck puts it, that property ‘was a basic fact about human beings, on which their social and political concepts had to be posited’.5
In more strictly economic matters, Franciscans could either adhere to or deviate from the mainline Thomist concept of the just price. Scotus himself set forth a deviationist view. In his commentary on Peter Lombard's Sentences, Scotus elaborated a minority view that many historians have wrongly attributed to scholasticism as a whole: that the just price was the merchant's cost of production plus compensation for the industry, labour and risk involved in bringing his product to market. The compensation, furthermore, was supposed to provide adequate support for the family of the merchant. In this way, labour plus expenses plus risk, previously employed to justify whatever profits the merchant might obtain, was now transformed into the determinant of the just price. Scotus made this cost-of-production a theory of just price, in contrast to the long-standing mainstream scholastic view that the just price was the common price on the market.
Although a Franciscan, the British scholastic at the University of Paris, Richard of Middleton (c. 1249–1306), followed the economic doctrine of Aquinas and stressed need and utility as the determinants of economic value. The just price, following the main scholastic line, was equivalent to the common market price determined by these needs. Middleton also underlined Aquinas's vitally important concept that both parties to an exchange benefit. Becoming more precise than Aquinas, Middleton pointed out that, say, when a horse is sold for money, both the buyer and the seller gain from the transaction, since the buyer demonstrates that he needs the horse more than the money while the seller prefers the money to the horse.
In addition to developing this crucial concept of mutual benefit, Richard of Middleton was the first to apply that concept to international trade. International trade, as well as individual exchange, brings mutual benefits. Middleton illustrated this idea by postulating two countries: country A which has a superabundance of grain but a dearth of wine, and country B which has an abundance of wine but little grain. Both countries will then benefit by exchanging their respective surpluses. The merchants will also profit by transporting grain from country A, where it is abundant and its price is therefore cheap, to country B, where it is scarce and commands a high price. Merchants will also profit by the reverse traffic: shipping wine from country B, where its price is low, to A, where its price is high. By buying and selling at current market prices, the merchants are trading at the just price, and make a profit yet exploit no one. The merchants are justly compensated for performing a useful service and for taking trouble and risks. The only point missed by Middleton in this sophisticated analysis is that the actions of the various merchants will move toward equalizing prices in the two countries.
An even more dazzling contribution to economic thought was made by a Provençal Franciscan friar, for many years lector at Florence. Pierre de Jean Olivi (1248–98), in two treatises on contracts, one on usury and the other on purchases and sales, pointed out that economic value was determined by three factors: scarcity (raritas); usefulness (virtuositas); and desirability or desiredness (complacibilitas). The effect of scarcity, or what we would now call ‘supply’, is clear: the scarcer a product the more valuable it is, and therefore the higher the price. The more abundant the product (the greater the supply), on the other hand, the lower the value and the price.
Olivi's remarkable contribution was to investigate the previously vague concept of need or utility. Aquinas's student and disciple, the Dominican Giles of Lessines, teaching at the University of Paris, had taken the utility concept a step further by stating that goods are more or less valuable on the market according to the degree of their utility. But now Olivi separated utility into two parts. One was virtuositas, or the objective utility of a good, the objective power it has to satisfy human wants. But, as Olivi explains, the important factor in determining price is complacibilitas, or subjective utility, the subjective desirability of a product to the individual consumers.
Furthermore, Olivi squarely confronted the ‘paradox of value’ which would later confound Adam Smith and the classical economists, and did far better than they at solving it. The ‘value paradox’ is that a good such as water or bread, essential to life and therefore, according to the classical economists, having a high ‘use-value’, should be very cheap and have a low value on the market. At the same time, in contrast, gold or diamonds, non-essential luxuries and therefore of far lower use-value, have far higher exchange value on the market. The classical economists of the eighteenth and nineteenth centuries simply threw up their hands at this paradox and unsatisfactorily posed a sharp dichotomy between use- and exchange-value. Olivi, on the other hand, pointed to the solution: water, though necessary to human life, is so highly abundant and easily available that it commands a very low price on the market, while gold is far more scarce and therefore more valuable. Utility, in the determination of price, is relative to supply and not absolute. The complete solution to the value paradox had to wait for the Austrian School of the late nineteenth century: the ‘marginal utility’ – the value of each unit of a good – diminishes as its supply increases. Thus a superabundant good such as bread or water will have a low marginal utility, while a rare good such as gold will have a high one. The value of a good on the market, and therefore its price, is determined by its marginal utility, not the philosophical utility of the good as a whole or in the abstract. But, of course, before the Austrians, the marginal concept was lacking.
The marketplace for Olivi, then, was an arena in which prices for goods are formed out of the interaction of individuals with differing subjective utilities and valuations of the good. Just market prices, then, are not determined by referring to the objective qualities of the good, but by the interaction of subjective preferences on the market.
In addition to his monumental achievement in being the first to discover subjective utility theory, Olivi was the first to bring into economic thought the concept of capital (capitale) as a fund of money invested in a business venture. The term ‘capital’ had appeared in numerous business records since the mid-twelfth century, but this is the first time it was conceptualized. The concept of capital was used by Olivi to show that it was possible to use money in a fruitful way, to gain a profit. Olivi retained the usury ban where capital was invested without being altered in some way by the labour and industry of the investor. However, Olivi was one of the minority of scholastics to adopt the Hostiensis allowance of lucrum cessans – permitting an interest charge on a loan wherever the profit on an investment was foregone in the process. Unfortunately, Olivi continued Hostiensis’ careful limitation of confining lucrum cessans to loans granted out of charity, so that the activities of a professional money-lender could still in no way be justified.
It is a notable irony in the history of economic thought that the discoverer of the subjective utility theory, a highly sophisticated analyst of how the market economy worked, a believer in the just price as the common market price, the initiator of the concept of capital, and a defender of at least the partial use of lucrum cessans as a way of justifying interest: that this great market thinker should have been the leader of the rigourist wing of the Franciscan order that believed in living in extreme poverty. Perhaps one explanation is that Olivi was born in the highly important market town of Narbonne. He was the main intellectual leader of the Spiritual Franciscans, who believed devoutly in following faithfully the rule of total poverty laid down by the founder of the order, St Francis of Assisi (1182–1226). It is a further irony that Olivi's opponents, the Conventual Franciscans, who believed in a far laxer interpretation of the rule, hurled anathemas at Olivi and other Spirituals and managed to destroy many physical as well as intellectual traces of Olivi's work. In 1304, six years after his death, a chapter general of the Franciscan Order commanded the destruction of all Olivi's works, and 14 years later, the unfortunate Olivi's body was disinterred and his bones scattered.
Not only were many physical copies of Olivi's writings destroyed, but it became unhealthy for Franciscans, at least, to refer to his works. As a result, when, nearly a century and a half later, Olivi's forgotten work was rediscovered by the great Franciscan saint San Bernardino (St Bernardine) of Siena, Bernardino thought it prudent not even to refer to the heretic Olivi, even though he used the latter's theory of utility virtually word for word in his own work. This reticence was necessary because Bernardino belonged to the strict Observant wing of the Franciscans, in a way descendants of Olivi's Spirituals. Indeed, it has only been since the 1950s that the illuminating economic writings of Olivi, and their appropriation by San Bernardino, have come to light.
Perhaps another reason for the hysteria with which the mainstream Franciscans greeted the religious views of Pierre Olivi was his continuing dalliance with the Joachimite heresy. One of the founders of mystical Christian messianism was the Calabrian hermit and Abbot Joachim of Fiore (1145–1202). In the early 1190s Joachim adopted the thesis that there had been in history not just two ages (pre-Christian and post-Christian), but a third age, of which he himself was the prophet. The pre-Christian epoch was the age of the Father, of the Old Testament; the Christian era the age of the Son, of the New Testament. And now was coming the fulfilment, the new third age, the apocalyptic age of the Holy Spirit, in which history was soon to come to an end. The third age, which for Joachim was to be ushered in during the next half-century, in the early or mid-thirteenth century, was to be an age of pure love and freedom. The knowledge of God would be revealed directly to all men, and there would be no work or property, because human beings would possess only spiritual bodies, their material bodies having disappeared. There would be no Church or Bible or state, but only a free community of perfect spiritual beings who would spend all their time in mystical ecstasy praising God until this millennial Kingdom of the Saints would usher in the Last Days, the days of the Last Judgement.
Seemingly tiny divergences in premisses often have grave social and political consequences, and such was true of disagreements among Christians on the apparently recondite question of eschatology, the science or discipline of the Last Days. Since St Augustine, the orthodox Christian view has been amillennialist, that is, that there is no special millennium or Kingdom of God in human history except the life of Jesus and the establishment of the Christian Church. This is the view of Catholics, of Lutherans, and probably of Calvin himself. The ideological or social conclusion is that Jesus will return to usher in the Last Judgement and the end of history in His own time, so that there is nothing that human beings can do to speed the Last Days. One variant of this doctrine is that after Jesus's return He will launch a thousand years of the Kingdom of God on earth before the Last Judgement; in practical terms, however, there is little of a significant difference here, since Christianity remains in place, and there is still nothing man can do to usher in the millennium.
The crucial difference comes with chiliastic ideas such as those of Joachim of Fiore, where not only was the world coming to the end soon, but man must do certain things to usher in the Last Days, to prepare the way for the Last Judgement. These are all post-millennial doctrines, that is, that man must first set up a Kingdom of God on earth as a necessary condition either for Jesus's return or for the Last Judgement. Generally, as we shall see further in the Protestant Reformation, post-millennial views lead to some form of theocratic coercion of society to pave the way for the culmination of history.
For Joachim of Fiore the path to the Last Days would be blazed by a new order of highly spiritual monks, from whom would come 12 patriarchs headed by a supreme teacher, who would convert the Jews to Christianity, as foretold in Revelation, and would lead all mankind away from the material and towards the love of things of the spirit. Then, for a brief blazing, three-and-a-half years, a secular king, the Antichrist, would chastise and destroy the corrupt Christian Church. The swift overthrow of the Antichrist would then usher in the total age of the Spirit.
In view of the radical and potentially explosive nature of Joachim's heresy, it is remarkable that no less than three contemporary popes expressed great interest in his doctrine. By the middle of the thirteenth century, however, Joachimism was neglected and little known. It is small wonder that the Joachimite heresy was revived by the Spiritual Franciscans, who were tempted to see in their own flourishing new order, and in their devotion to poverty, the very monastic order that had been foretold by Joachim to bring about the Last Days.