17/08/2017 Economic Ideas of St.

Thomas Aquinas and Nicole Oresme

Economics Discussion

Economic Ideas of St.

Thomas Aquinas and
Nicole Oresme
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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.
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17/08/2017 Economic Ideas of St. Thomas Aquinas and Nicole Oresme

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.

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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.

(ii) Usury:
Lending money for earning more wealth was
considered as the worst form of earning money.
Like the Hebrews the Medieval church of
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17/08/2017 Economic Ideas of St. Thomas Aquinas and Nicole Oresme

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 Aristotles 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.

(iii) Property:
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17/08/2017 Economic Ideas of St. Thomas Aquinas and Nicole Oresme

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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.

(iv) Trade:

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.

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17/08/2017 Economic Ideas of St. Thomas Aquinas and Nicole Oresme

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
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17/08/2017 Economic Ideas of St. Thomas Aquinas and Nicole Oresme

and many laws were passed to prevent

counterfeiting and clipping. The circulation of
foreign coins were forbidden.

Conclusion:
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.

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17/08/2017 Economic Ideas of St. Thomas Aquinas and Nicole Oresme

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
Greshams 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.

Conclusion:
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.

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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.
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