applet-magic.com

Thayer Watkins

Silicon Valley

& Tornado Alley

USA

The Roots of Austrian Economics

in the Analysis of the Spanish Scholastics

of the Sixteenth and Seventeenth Centuries

The common perception is that the set of ideas known as the Austrian School of Economic emerged in the late nineteenth century with Carl Menger and came to full fruition in the early twentieth century with Ludwig von Mises and Friedrich von Hayek. When economists of the Austrian persuasion read the writings of the Spanish scholastics of the sixteenth and seventeenth centuries they recognized the ideas that were developed centuries later by members of the Austrian school. Here are some of the Spanish scholastics and the ideas they articulated:

Scholastic Concept or Principle Afiliation and/or Location Father Juan de Mariana The moral superiority

of natural law Jesuit at the University of Salamanca Bishop Diego de Covarrubias y Leyva Subjectivist doctrine of value Jesuit in Segovia Luis Saravia de la Calle Notion of economic rent determined by price Cardinal Juan de Lugo No humans can deduce what prices should be Jesuit Juan de Salas The complexity of the market Jesuit Jerónimo Castillo Nature of competition as rivalry Luis de Molina Dangers of fractional reserve banking Francisco de Vitoria The moral superiority

of natural law Dominican Martin Azpilcueta Navarro Quantity theory of money

Time-preference principle

One can admire the strength of character of latter day Austrians such as Hayek, Mises and Rothbard for defending their principles in a world so unsympathetic to them. But one can only be awestruck at the courage of the Spanish scholastics in articulating and defending ideas that could easily have led to their execution. For example, Juan de Mariana wrote a defense of tyrannicide in which he argued that anyone could justly assassinate a tyrant who imposes taxes without the consent of the people, who confiscates property of the people and who prevents the meeting of a democratic parliament. Mariana wrote this description of a tyrant:

He seizes the property of individuals and squanders it, impelled as he is by the unkingly vices of lust, avarice, cruelty and fraud....Tyrants, indeed, try to injure and ruin everybody, but they direct their attack especially against rich and upright men throughout the realm. They consider the good more suspect than the evil; the virtue which they themselves lack is most formidable to them....They expel the better men from the commonwealth on the principle that whatever is exalted in the kingdom should be laid low...They exhaust all the rest so they cannot unite by demanding new tributes from them daily...Thus the pyramids of Egypt were born...The tyrant necessarily fears that those whom he terrizes and holds as slaves will attempt to overthrow him...Hence he forbids the citizens to congregate together, to meet in assemblies, and to discuss the commonwealth altogether, taking from them by secret-police methods the opportunity of free speaking and freely listening so they are not even allowed to complain freely.

Father Mariana's ideas were held responsible by the Parliament of Paris for the assassinations of two kings of France, Henry III and Henry IV. Father Mariana's book De rege et regis institutione (On the king and the institution of monarchy) was then condemned to death and ceremonally executed by being burnt by the royal executioner.

Father Mariana was extremely courageous in following his principles through to their logical conclusions. From the primacy of natural law he concluded that taxation without the consent of the governed is tyrannical. He then concluded that the debasement of the currency was simply a form of taxation and therefore was unjust. Likewise Father Mariana deduced that the royal granting of monopolies was merely another form of taxation and unjust without the consent of the governed.

The Spanish scholastics, Juan de Lugo and Juan de Salas, clearly understood that there was no way for government to determine what the price of commodity should be, much less be able to justly control prices. In effect, they were saying that the establishment of prices had to be left to the market.

It was probably no accident that these ideas were formulated in the Golden Age of Spain. That was a time when the people of Hispanic culture were self-confident in most aspects of life, including in their reliance upon reason and analysis. It was also a time when the members of the ruling class felt secure in their role in Spanish society so they did not find it necessary to persecute intellectuals propounding new and challenging ideas. In other words, the rulers probably felt they were just leaders and therefore Father Mariana's writing concerning tyrants did not apply to them.