IV. And Some Successors

THE work of the Spanish School in the second half of the sixteenth century marked the St. Martin’s summer of scholasticism. Henceforth the medieval conception of learning as a small group of arts and sciences with theology at their head was to be discarded for ever. Knowledge branched out into innumerable disciplines which came to be more and more clearly separated and defined. The process was a slow one, and for a long time there was confusion and overlapping. From the beginning of the seventeenth century onwards we have to hunt down our monetary theory through many different branches of literature—in books on theology, law, and political and moral philosophy, as well as in the mass of books and pamphlets on practical questions that express the spirit of mercantilism. Economic thought thus came to be more widely dispersed than at any period since classical times. Not until far into the eighteenth century would these scattered fragments again unite to provide a foundation for the science of economics as we know it today. Yet, though the discussion of economic problems was diffused over so wide a field, there was never any fundamental breach in the continuity of economic theory. Where commercial morality was concerned, even the religious schism hardly troubled the general unity of doctrine. As Professor Tawney remarks, ‘differences of social theory did not coincide with differences of religious opinion, and the mark of nearly all this body of teaching, alike in Germany and in England, is its conservatism. Where questions of social morality were involved, men whose names are a symbol of religious revolution stood, with hardly an exception, on the ancient ways, appealed to medieval authorities, and reproduced in popular language the doctrines of the Schoolmen.’¹ This continuity was preserved not only in Germany and England, but also in France, Spain, and Italy. It is most clearly apparent in the various branches of learned literature, since each generation of professional men was especially well grounded in the teaching of its predecessors. But the ideas of jurists, theologians, and philosophers are reflected also in the practical literature of mercantilism, which was written largely by state officials and by business men.

Our discussion of Spanish monetary theory was confined to four branches of doctrine: ideas about the origin and functions of money, the quantity theory, theory of value applied to both goods and money, and the purchasing-power parity theory of exchange. We now have to consider to what extent this body of doctrine was preserved and developed in the seventeenth and eighteenth centuries.

To begin with the group of ideas about the origin and functions of money, it has already been shown that the classic ‘historical’ account of the transition of society from a barter to a monetary economy, together with the concept of money as a medium of exchange, and as a measure and store of value, were derived from Aristotle and were universally accepted throughout the Middle Ages and Renaissance. The School of Salamanca merely helped to hand on these ideas, which may be found reproduced with little modification in many monetary treatises of the seventeenth, eighteenth, nineteenth, and indeed twentieth centuries. We need not labour the antiquity of these doctrines but only draw attention in passing to their persistent defiance of the passage of time.

Of greater historical importance is the Spanish contribution to the quantity theory of money. So far as is known, Azpilcueta Navarro was the first writer to note the effect on prices of the influx of treasure from America and thus to give a practical interpretation to a doctrine that had been glimpsed by earlier authors. The relevant passage in Azpilcueta’s manual continued to be read and cited for many years after its original publication. But Azpilcueta did not long remain the sole exponent of the quantity theory. The French scholar, Jean Bodin, re-stated the theory independently twelve years after his Spanish predecessor, and his work inspired a number of important economists. In any case the basic principles of the theory spread so quickly that by the beginning of the seventeenth century they were a commonplace of economic literature in many countries.¹ As the quantity theory so soon ceased to be characteristic of Spanish writers alone, and as its later history has frequently been studied, we need not here attempt to trace its development further.

We now come to a more interesting and difficult problem. Is there any historical connexion between the modern emphasis on utility and rarity as the principal determinants of value and the subjective approach of our Spanish writers? Again, was the old Spanish purchasing-power parity theory handed on continuously until the early nineteenth century, when it reappears in the Bullion Report of 1810, or was it re-stated independently by the English authors of the Report, and yet again towards the end of the First World War by the late Professor Cassel?

Perhaps the most convenient way to deal with these questions will be to work backwards from modern times towards the sixteenth century. Until fairly recently it has been customary to regard the fundamental cleavage in the evolution of nineteenth-century economic thought as having taken place in the 1870s. The English classical economists, it was said, stressed production, supply, and cost: modern theory is mainly concerned with consumption, demand, and utility. But it is now coming to be recognized that a subjectivist theory of value was developed by a number of authors before the concept of marginal utility was formulated by Jevons, Walras, and Menger. While in England the labour theory of value was predominant in the earlier decades of the nineteenth century, on the Continent there was already a tendency to emphasize utility.¹ The leading exponent of this subjective or utility theory of value was the French economist, J. B. Say, but some analysis of wants and desires is to be found in the majority of Continental treatises of the period. The subjectivist tradition may be traced back a step farther to the writings of Condillac,¹ Turgot,² and Galiani,³ of whom the latter seems to have been the first eighteenth-century writer to formulate a really consistent and well-developed utility theory.

Condillac and Turgot agree in minimizing the effects of cost-of-production on price, and hold that value is determined primarily by the need felt for the article in question, and by its utility and rarity. The medieval concept of ‘common estimation’ is echoed in Turgot’s doctrine that price is the expression of ‘valeur appréciative’, which is the ‘Valeur estimative moyenne’ arrived at by comparing the subjective value of the article in the minds of the various individuals that make up the market. Both goods and money are treated from the same subjective standpoint, the foreign exchanges being held to reflect the relative utility of money in the different countries. All this is strongly reminiscent of the teaching of the School of Salamanca.

Condillac and Turgot, like Jevons a century later, seem to have regarded their own emphasis on utility as a novelty. The only predecessor they acknowledge is Galiani, whose brilliant analysis of utility seems at first sight to have sprung fully mature into life: at any rate, Galiani himself gives us no clue to any earlier source. Value, according to Galiani, depends on two factors: utility and rarity. ‘It is evident’, he says, ‘that air and water, which are the elements most useful to human life, have no value because they are not rare. On the other hand, a bag of sand from the shores of Japan might well be rare but would be of no value, since it would have no particular utility.’ The whole of Galiani’s general theory of value, as it is developed in the second chapter of his great treatise, is simply a witty and elegant elaboration of this fundamental statement.

Now, the overwhelming importance which these eighteenth-century economists attributed to utility and rarity in the determination of value may perhaps have been something of a novelty in their day. But we have seen that the concepts of utility and rarity were placed high in the traditional list of factors determining value which accompanied scholastic discussions of the ‘just price’. And we have also seen that our Spanish writers regarded utility and rarity as the primary, though not the sole, determinants of value. We shall have little difficulty in closing the gap of about a hundred and fifty years which separates the last members of the School of Salamanca, Bañez and Molina, from Galiani. It appears, in fact, that both the labour theory of value adopted by the English classical economists and the utility theory that prevailed at the same period on the Continent stemmed from the conventional scholastic list of factors that go to determine price.

The economic theory of the School of Salamanca was developed in treatises on ethics and on jurisprudence, and in manuals of practical theology for the use of confessors. It is in this type of literature, not in monetary treatises as the term is understood today, that the legacy of the Spanish School was most carefully preserved.

The Spanish treatises de justitia et jure were closely followed by both Protestant and Catholic writers. We will first deal with the Protestant line of descent. Our Spanish writers had included a chapter on commercial contracts in their writings on the Law of Nations because of the universal character of international trade, which was held to transcend the jurisdiction of particular princes.¹ Many of their Protestant successors followed the same practice and included some discussion of value in their treatises on international law.

A section on contracts was included by Grotius in his most important work on the Law of Nations,² which owes much to the writings of the Spanish jurists. In dealing with the problems of commercial justice Grotius continually refers to Azpilcueta Navarro, Covarrubias, Vasquez, and the Belgian theologian Lessius, who, as we shall see, was one of the principal continuators of the Spanish School. Grotius follows Aristotle in holding that want is the natural measure of value. Like many of his Spanish predecessors, Grotius refers to St. Augustine’s famous comparison of the ‘natural’ scale of values with the price-scale,¹ the latter depending on utility. But utility, adds Grotius, is not the only measure of value, since the most necessary things are often the cheapest because of their abundance. The common estimation in which an article is held, the labour and expenses of merchants, and the abundance or scarcity of buyers, all affect prices. The value of money similarly varies according to its abundance or scarcity.²

This doctrine was taken over and presented in a much more elaborate form by the Lutheran jurist, Samuel Pufendorf (1632–94), whose writings were translated into the principal European languages soon after their publication and remained the standard text-books on natural law until the end of the eighteenth century. Pufendorf’s thought closely follows that of Grotius. Pufendorf shows some knowledge of Spanish literature and often draws his illustrations of the conditions of natural law from the writings of the Spanish historians of the Indies. He occasionally mentions Suarez but does not specifically refer to the other Spanish jurists. A precursor of the Enlightenment, Pufendorf was hostile to the spirit of scholasticism. But in considering his aloof attitude towards his Catholic predecessors, we should remember that his work was published in Sweden, a strongly Lutheran country with a strict censorship. Pufendorf was a man of vast learning. It is unlikely that in taking over Grotius’s teaching he failed to consult the Spanish authorities to whom Grotius repeatedly refers.

Pufendorf quotes Grotius to the effect that want is the natural measure of value.¹ Things are valuable in so far as they help to preserve human life or to render it more pleasurable, but a thing cannot possess value unless it is rare as well as useful. This is why jewels are dearer than the things that are indispensable to human life, of which nature pours forth a bountiful supply. A thing is commonly estimated at whatever price it will fetch, and this price may justifiably fluctuate within reasonable limits, unless it is fixed by law. In determining the ‘common’ or uncontrolled price of a thing, we should also consider the labour and expenditure of the merchant, the cost of transport, the mode of sale (whether wholesale, retail, by auction, &c.), and the abundance or scarcity of purchasers, money, and goods. The value of money is derived both from its metal content and from its tale, but ‘that increase or decrease which other things undergo because of scarcity or abundance, money itself does not entirely escape, as a coin made of the same material and with the same weight is worth now more and now less, although that variation is not as sudden or as frequent as the variations of value among other things’. All this is very familiar to students of the earlier Spanish treatises.

The work of Grotius and Pufendorf was continued in England by Francis Hutcheson, whose Introduction to Moral Philosophy (1747) preserves to a surprisingly large extent the contents and arrangement of the old treatises de justitia et jure. In the customary chapter on value, Hutcheson says that ‘the ground of all price must be some fitness in the things to yield some use or pleasure in life; without this, they can be of no value. But this being presupposed, the prices of things will be in a compound proportion of the demand for them, and the difficulty in acquiring them’. This ‘difficulty’, according to Hutcheson, may be occasioned in many ways: if the things are rare, if much labour is required in their production, ‘or a more elegant genius in the artist’, or if those employed in their manufacture are ‘men in high account’, accustomed to live ‘in a more splendid manner, for the expense of this must be defrayed by the higher profits of their labours’. Some things of the highest utility, such as air and light, yet have no price, or a very small one. This is because nature has provided them in plenty, and we may have them almost without labour.¹

Hutcheson thus agrees with our Spanish writers, and with Grotius and Pufendorf, in regarding utility as the basis of value, but he lays more emphasis than his predecessors had done on the importance of cost-of-production. In doing so he gave a novel twist to the traditional doctrine of value. Adam Smith follows his teacher Hutcheson in this respect. Indeed, in some parts of his work he seems to regard labour as the sole source of value. Yet in his famous distinction between ‘value-in-use’ and ‘value-in-exchange’ he also took account of utility, and stated a paradox that was to provide a starting-point for the discussions of later economists. To many historians, Smith’s theory of value appears inexplicably wavering and confused. But if we consider his ideas against the background of the theory of value taught in the earlier literature of natural law, a body of doctrine with which he was thoroughly familiar¹ and whence I believe he drew many of his ideas on value, we shall understand why he saw nothing illogical in holding that both subjective and objective factors play their part in the determination of value. In this he was simply following an established tradition which dated back to medieval times.

If the thought of the School of Salamanca was reflected in the writings of the Protestant jurists, and perhaps in the Wealth of Nations itself, its influence on Catholic writers was even deeper and more enduring. Here, the subjective theory of value was preserved side by side with the Spanish purchasing-power parity theory of exchange.

Leonardus Lessius (1554–1623), professor of theology at Louvain, was a Flemish Jesuit who had studied under Suarez and was a friend of Molina and Vasquez. He was the author of a treatise de justitia et jure (1605) which ran through nearly forty editions published in Antwerp, Louvain, Lyons, Paris, and Venice. Lessius was especially celebrated for his expert knowledge of commercial practice, and he was often consulted by the merchants of Antwerp on problems of business morality, just as their forefathers had appealed to Vitoria and the doctors of Paris some eighty years earlier.¹ Throughout his treatise Lessius continually refers to our Spanish writers and adheres closely to their teaching. On the foreign exchanges he follows Medina, Navarro, and Soto, and applies their doctrine to conditions in Belgium. Money, according to Lessius, has a dual value: the legal or ‘intrinsic’ value, depending on the metal content and on the tale, which is fixed by law or custom in terms of the other moneys that are current in the same area of circulation, and the fortuitous or ‘extrinsic’ value, which fluctuates both in terms of goods and in terms of foreign currency. The extrinsic value of money is derived from four things. Firstly, from its abundance or scarcity. Wherever money is more abundant, there will it be less useful for the purpose of buying goods or foreign currency. Secondly, from the demand that exists for bills of exchange. ‘Just as many buyers cause the price of goods to rise, so does a heavy demand for bills of exchange raise the price of money in the hands of the brokers, whether the money be present or absent.’ Thirdly, from the supply of bills of exchange. Where they are in short supply, their price will tend to rise. Fourthly, from the need that is felt for money. ‘For example, if great princes are in urgent need of money for war or other public purposes, or if a large quantity of goods come on to the market; for whenever money is urgently needed for matters of great moment, so is it more highly esteemed in terms of goods.’²

Similar views are propounded by Juan de Salas, professor of theology at Salamanca, whose treatise on contracts appeared in 1617.¹ In his general discussion of value, Salas remarks that the natural or uncontrolled price of goods depends, as Augustine said, on their utility. The natural price will vary according to the abundance or scarcity of both goods and money, the newness or antiquity of the goods, ‘the common utility of the article and the need felt for it’, and the manner of sale (whether wholesale, retail, in bulk, by auction, &c.). Salas adds that ‘goods sold in the warehouse are cheap, because this mode of sale indicates abundance of goods and scarcity of buyers and money, and suggests that the articles possess only slight utility for the vendor’. Turning to the value of money and the problems of the exchanges, Salas repeats the doctrine of Lessius and his Spanish predecessors more or less word for word.

A very celebrated treatise de justitia et jure was that of the Spanish Jesuit, Juan de Lugo, who, after studying law and theology at Salamanca, was called to Rome to teach at the Jesuit College there, and was later created Cardinal.² The author of a work on psychology and another on physics, as well as of many theological treatises, Lugo was regarded by St. Alphonsus of Liguori as ‘easily the leader after St. Thomas’, and has been called by a modern Jesuit scholar³ ‘probably the greatest and most representative of [Jesuit] theologians’. Lugo’s fame chiefly rests on his treatise de justitia et jure, the fruit of his studies at Salamanca and a work of astonishing complexity, which was published in 1642 and reprinted several times during the seventeenth and eighteenth centuries. The last edition appeared as recently as 1893.

In his general remarks on value, Lugo says that earlier authorities, such as Scotus and Major, regarded the just price as derived from labour, expenses, and risk, but that the more recent writers, such as Soto, Medina, Covarrubias, Conrad, and Molina, disagree with this view and hold that price fluctuates not because of the intrinsic and substantial perfection of the articles—since mice are more perfect than corn, and yet are worth less—but on account of their utility in respect of human need, and then only on account of estimation ; for jewels are much less useful than corn in the house, and yet their price is much higher. And we must take into account not only the estimation of prudent men, but also that of the imprudent, if they are sufficiently numerous in a place. This is why our glass trinkets are in Ethiopia justly exchanged for gold, because they are commonly more esteemed there. And among the Japanese, objects made of old tiles and ironwork, which are worth nothing to us, are sold at a high price because of their antiquity. Communal estimation, even if foolish, raises the natural price of goods, since the latter is derived from estimation. The natural price is raised by abundance of buyers and money, and lowered by the contrary factors.¹

Discussing the value of money, Lugo repeats the venerable doctrine that money has a legal and a natural value. The natural price of money (called by Lessius the ‘extrinsic price’) is derived from ‘the excellence of the metal content,¹ the antiquity of the coins, their degree of utility for commercial purposes, and the readiness of foreigners to accept them’. The old purchasing-power parity theory of exchange appears very clearly in Juan de Lugo’s work.²

Another influential follower of the Spanish School was the Genoese philosopher and jurisconsult, Sigismundo Scaccia, whose Tractatus de Commerciis et Cambiis was published in 1618 and frequently reprinted in Italy, France, and Germany, up to about the middle of the eighteenth century. Scaccia’s teaching is based largely on that of the School of Salamanca and on Lessius, although he also often refers to the medieval schoolmen. On the value of goods he quotes Covarrubias and Azpilcueta to the effect that things are worth less when they are abundant and more when they are scarce, an article being ‘abundant’ when many people offer it for sale, and ‘scarce’ when more buyers than sellers come forward. In his chapter on the foreign exchanges, Scaccia refers his readers to the explanation given by Soto of the premium charged on bills of exchange drawn in Antwerp on Spain, and he applies Soto’s doctrine in a very lucid manner to the exchanges between France and Italy.¹

Thus it is clear that the monetary theory of the School of Salamanca spread through many countries during the earlier decades of the seventeenth century, and that it continued to be developed and freshly applied in a number of the leading treatises on theology and jurisprudence. Although most of the original members of the School were Dominicans, it will be noticed that among the seventeenth-century writers who continued its teaching there were many Jesuits. As practical moralists, the Jesuits were very much to the fore at this time, since a great part of their work lay in the confessional. They produced a vast number of manuals for the use of confessors, in which they often discuss knotty problems of commercial ethics on the lines laid down by the School of Salamanca.² It may be assumed that their doctrines filtered through to the laity. I do not suggest that these tedious works constituted the favourite reading of the average honnête homme, but we have only to turn to Pascal’s Provincial Letters to realize how great an influence the Jesuit theologians exerted on ordinary life and thought in France at this period. Pascal employs all his accustomed verve and irony in attacking many of the writers whose work we have been considering (he devotes the Eighth Letter to impugning their doctrine of usury), and it is evident that, writing in 1656, he looked upon our Spanish writers and all their works as a force both living and dangerous.

It would seem, then, that a markedly subjectivist theory of value, emphasizing the effect on price of utility, rarity, and the forces of supply and demand, was widely current among theologians and jurists throughout the seventeenth century, and that this theory was largely built up on the work of the School of Salamanca. In Protestant countries this subjective theory was expounded in the literature of natural law, and in Catholic countries in that of theology as well as of jurisprudence. We have here a possible explanation of the isolated references to utility and rarity which are scattered through the practical handbooks of the mercantilists.¹Such utterances are sometimes hailed as isolated flashes of genius, brilliant anticipations of the truths of modern economics. In fact, they are only reflections of a well-established body of doctrine. If in a sense they ‘anticipate’ modern theory, this is because modern theory has been built up on earlier work of the kind we are here considering.

The most serious objection to the version of events just put forward is the fact that Condillac, Turgot, and Galiani all asserted that their own emphasis on utility and rarity was a novelty. All three writers were noted for their learning, especially in theology and jurisprudence. It is hard to believe that they had not read any of the books referred to above. As eighteenth-century philosophes they might perhaps have felt reluctant to acknowledge their debt to the casuists. But any such reluctance could not have extended to Grotius, Pufendorf, or Hutcheson. I can only suppose that Galiani came across the essential elements of his theory of value in the work of some earlier author, and that the wit and grace with which he expressed these old truths made them seem like innovations to his contemporaries. However this may be, the existence of a subjective theory of value in the work of our Spanish writers and their successors may well have paved the way for the favourable reception that was at once accorded to Galiani’s great masterpiece.

As regards the later history of the purchasing-power parity theory, we have seen that it was understood and newly applied until about the middle of the seventeenth century. The last traces of the medieval objection to exchange transactions (though not, of course, the dislike of usury itself) seem to have died away towards the end of the seventeenth century. In France, for example, the rule that ‘the place where a bill is drawn must be so far distant from the place where it is payable that there may be a possible rate of exchange between the two’—in other words, that a bill must represent a genuine commercial transaction and not merely a loan—began to disappear at about this time.¹ And with the disappearance of this rule, the old purchasing-power parity theory, which had been framed to show that the premium on a bill of exchange was not necessarily a disguised form of interest on a loan, lost its raison d’être and presumably died a natural death after performing a useful function for close on 150 years. Another century was to elapse before the theory was re-stated quite independently by the English classical economists, who probably arrived at it through the interesting series of discussions on the mechanics of international trade initiated by Malynes and Mun. Cassel, whose version of the theory is still current, had probably never heard of either of the two earlier forms of purchasing-power parity theory.

It was, then, in their analysis of value that our Spanish writers appear to have made their most enduring contribution to economic theory. But their pioneer work on the quantity theory and the purchasing-power parity theory of exchange is also of great interest. These achievements should surely entitle our writers to an honourable place in the history of economic science.

Are there any general conclusions to be drawn from our study of the monetary theory of the School of Salamanca? Only, perhaps, that some of the leading ideas of modern theory have a longer history than is often supposed. And I think that no student who has spent a little time in turning over these old treatises can fail to be impressed by the large measure of agreement on the fundamental problems of economic theory that has united men of all countries and periods, living under the most varied religious, social, and economic systems. If we began our study with a quotation from Cervantes, we may well end with one from Marshall. ‘The new doctrines’, he says, ‘have supplemented the old, have extended, developed, and sometimes corrected them, and have often given them a different tone by a new distribution of emphasis, but very seldom have subverted them.’

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¹Religion and the Rise of Capitalism, 1926, p. 82.

¹ E. F. Heckscher, op. cit., vol. ii, pp. 224–31, and J. Viner, op. cit., p. 41, give numerous quotations from writers of the earlier seventeenth century which present some form of quantity theory.

¹ For a study of the nineteenth-century forerunners of the modern subjective school see M. Bowley, Nassau Senior and Classical Economics, London, 1937. Also E. Roll, op. cit., pp. 320–44. The subjective theory of value in the seventeenth and eighteenth centuries is discussed by R. Zuckerkandl, Zur Theorie des Preises, 1899, and by E. Morand, Theorie psychologique de la valeur jusqu’en 1776, Bordeaux, 1912.

¹Commerce et gouvernement, 1776, pp. 9–30.

²Valeurs et monnaies, in Œeuvres, 1808, vol. iii, pp. 256–93.

³Della Moneta, 1750, reprinted in Scrittori classici italiani di economia politica, 1803, vols. iii and iv.

¹ As Malynes puts it, ‘the Law Merchant is a customary law approved by the authoritie of all Kingdomes and Commonweales, and not a Law established by the Soveraigntie of any Prince, either in the first formation or by continuance of time’.

²De jure belli et pacis, 1625 (English translation, Oxford, 1925). Grotius’s debt to the Spanish jurists is discussed in the Introduction to the English translation, pp. xiii–xiv.

¹De jure belli et pacis, Bk. 2, ch. XII, par. xiv.

² Ibid., Bk. 2, ch. XII, par. xvii.

¹ Pufendorf’s most brilliant and comprehensive analysis of value is included in his De jure naturae et gentium, 1672 (English translation, Oxford, 1934), Bk. 5, ch. I. But interesting discussions are also to be found in his Elementorum jurisprudentiae universalis libri 2,1660 (English translation, Oxford, 1931 ), Bk. 2, Def. X, and De officio hominis et civis juxta legem naturalem, 1673 (English translation, Oxford, 1927), ch. XIV.

¹Introduction to Moral Philosophy, 1747, pp. 209–10.

¹ Smith’s debt to the seventeenth-century writers on natural law is discussed by W. Hasbach, Untersuchungen über Adam Smith, Leipzig, 1891, and by G. Morrow, The Ethical and Economic Theories of Adam Smith, New York, 1923.

¹ See article ‘Lessius’ in the Catholic Encyclopaedia.

²De justitia et Jure, Louvain, 1605, Lib. 2, ch. 23, Dub. 4.

¹Comentarii in Secundam Secundae D. Thomae de contractibus, Lyons, 1617, see especially pp. 9, 11, 32–34, 357, 573–8.

² See article ‘Lugo’ in the Catholic Encyclopaedia.

³ J. Brodrick, The Economic Morals of the Jesuits, London, 1934, p. 89.

¹De Justitia et Jure, Lyons, 1642, Disp. XXVI, sec. iv, par. 41–44.

¹Sic. This factor is included by mistake among those that determine the natural or extrinsic price of money. See the Note that follows.

² ‘It is to be noted with Lessius, Molina, and Salas, that the excess of this unequal value which money has in different places is not derived only from the higher intrinsic value of money, proceeding from its superior metal content or higher legal tale, but may also be caused by a diversity in its extrinsic value. Thus, in the place to which the money is sent there may be a general scarcity of money, or more people may require it, or there may be better opportunities for doing business with it and making a profit. And, since money will there be more useful for satisfying human needs, more goods will be bought than elsewhere with the same sum of money, and therefore money will rightly be regarded as more valuable in that place.’ Op. cit., Disp. XXVIII, sect, vi, par. 40.

¹ ‘The fact that, by reason of the greater scarcity or abundance of money in different places, a larger or smaller sum may be given or accepted appears in the transactions commonly effected between Italy and France. For when money is scarce in France on account of the civil wars there, and plentiful in Italy, whoever delivers money in France for repayment in Italy will receive more than he gave. On the other hand, a merchant who delivers money in Italy for repayment in France will receive less. Yet this is no usury, for one sum is equal to the other, on account of the relative abundance and scarcity of money.’ Tractatus de Commerciis et Cambiis, 1618, Bk. 1, Quaest. 7, par. 1, 48.

² A typical and popular example was the Theologiae Moralis of Antonio de Escobar. This manual, which was published in 1652, was a compendium of twenty-four earlier works on moral theology, mostly by Spanish authors such as Molina, Suarez, and Lugo. Escobar says that the natural price of an article depends on the estimation of men, taking into account the scarcity or plenty of goods, buyers, sellers, and money, the manner of sale, the utility of the article in question, and the labour and expenses of merchants. Escobar was attacked with particular virulence by Pascal, and his name now figures in French dictionaries as the very symbol of prevarication.

¹ Examples are given in most histories of economic theory. The sort of statement I have in mind is the following by John Law: ‘Goods have a value from the Uses they are apply’d to; and their Value is Greater or Lesser, not so much from their more or less valuable, or necessary Uses; as from the greater or lesser Quantity of them in proportion to the Demand for them. Example. Water is of great use, yet of little Value; because the Quantity of Water is much greater than the Demand for it. Diamonds are of little use, yet of great Value, because the Demand for Diamonds is much greater than the Quantity of them.’ Money and Trade consider’d, 1705, ch. I.

¹ Holdsworth, op. cit., vol. viii, p. 169.