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The Christian Origins of Free Market Thought

Early thinkers sought to turn religious self-interest into a counterbalance to earthly greed

Jacob Soll
October 24, 2022
The National Gallery, London
An altarpiece depicting Thomas Aquinas in Ascoli Piceno, Italy, by Carlo Crivelli, 15th century. With the rise of a wealthy merchant class in the 1100s, figures such as Saint Thomas of Aquinas looked for ways to make wealth moral.The National Gallery, London
The National Gallery, London
An altarpiece depicting Thomas Aquinas in Ascoli Piceno, Italy, by Carlo Crivelli, 15th century. With the rise of a wealthy merchant class in the 1100s, figures such as Saint Thomas of Aquinas looked for ways to make wealth moral.The National Gallery, London

Early Christianity sought converts by convincing them that real wealth lay in the “treasure” of heaven and salvation and not on earth. In the Gospels of Saint Luke, Jesus exhorted Christians to “Sell that ye have, and give alms; provide yourselves bags which wax not old, a treasure in the heavens that faileth not, where no thief approacheth, neither moth corrupteth.” In seeking to turn religious self-interest into a counterbalance to earthly greed, early Christian thinkers laid the foundations of market thought more the 1,600 years before Adam Smith wrote The Wealth of Nations—inspired not by the idea of creating wealth, but instead of seeking poverty.

Christianity provided a new, highly transactional vision of religion that had not existed in Judaism, based on the idea that Christ himself had made the ultimate exchange in trading his blood to pay the collective debt of humanity. Forgoing earthly goods was also about reining in the lasciviousness of pagan culture: The Christian Fathers believed that virginity and the renunciation of sexual pleasure were central to the commerce of salvation. Popular among early Christians of the first century CE, the Sentences of Sextus explained that “conquering the body” not only meant giving up physical pleasure, it also gave one the discipline to “give everything possible to the poor.” By “relinquishing the things of the flesh,” humans could acquire the things of the soul.” Here was an early market mechanism that traded desire for peace and salvation. The famous early Christian thinker Origen went so far as to castrate himself in the quest for self-denial that would help bring about heavenly peace.

Saint John of Chrysostom (347-407 CE) was most eloquent in his vision of a new spiritual marketplace. He claimed that earthly economics simply did not work. He questioned why people would go into debt for ephemeral earthly possessions when they could, instead, forgo money altogether to “gain the profit” of an “easy ascent to heaven.” “A woman who pays alms to the poor,” he claimed, “has her own bill of sale that she holds in her hands,” which could be exchanged for the treasures of heaven. “Give bread,” Chrysostom exclaimed, “and seize paradise.”

A rich and powerful Roman nobleman and Bishop of Milan in 371 CE, Saint Ambrose crystalized the late antique vision of an ideal Christian market. Nothing was useful, Ambrose insisted, except that which “will help us to the blessing of eternal life.” Good men and leaders, he insisted, should never desire “filthy lucre” like Syrian traders and Gilead merchants” (meaning Jews and Muslims). Above all, Christians should not hoard wealth which was earthly, and could “rot” and be eaten by “worms.” The best way to spur the divine marketplace was to put money into circulation by bestowing it on the poor. Indeed, Ambrose felt the same about sexual pleasure and promoted virginity. In return for renouncing wealth and passion, one would receive the “friendship of the saints and eternal habitations.”

Most importantly, Ambrose described Jesus’ self-sacrifice as a commercial, divine exchange by which, out of “divine liberality,” he gave his blood on the cross in exchange for human redemption. It was a remarkable insight: Desire could drive a market.

Of all the Church Fathers, Saint Augustine (354-430 CE) would have the strongest influence on economic thought. Augustine believed that God created a self-regulating order in the Christian universe through predestination. This meant that God not only chose which souls were to be saved in heaven, but also which of his flock would be rich on earth. This did not absolve good rich Christians of the responsibility to freely give their money to the Church. It meant that if they were rich it was by the will of God so that they could in turn give money to the Church. Thus, humans had to focus on never being “slaves of desire,” but in maintaining an almost Stoic discipline in earning wealth for holy means.

These ascetic attitudes, based on the scriptures, flourished in reaction to the inequities and depravities of Roman society. When Rome fell in the 400s, Europe entered a long period of economic stagnation, in which asceticism was an easy sell. But in the 1100s, the European population and economy began to expand, which led in turn to the rise of cities and material wealth, in particular in northern Italy. With the rise of a wealthy merchant class, figures such as Saint Thomas of Aquinas looked for ways to make wealth moral, while Saint Francis of Assisi looked to find a moral path within a world that visibly embraced material riches.

While early Christian thought did not provide the tools for capitalism, it still provided a market language and enduring skepticism that pure, amoral economic interest might not always turn out to be a public virtue. Medieval theologians of the Church—Scholastic thinkers—looked to calculate the just price of things, according to moral considerations. The challenge for Scholastic thinkers was to establish what was the fair and moral price for a product or service, and how to calculate the equal values in order to fit trade into a Christian moral framework.

In many ways, the story of medieval economic thought begins with the life of the founder of the Franciscan Order, Saint Francis of Assisi. He was born Giovanni di Pietro di Bernardone, in 1181 in Umbria, Italy, his father a silk merchant and his mother, a noblewoman from Provence. The family was part of a new class of wealthy merchants who inhabited the Latin Mediterranean, from Italy and southern France to Barcelona. It was a socioeconomic stratum to which he would turn his back.

In 1205, Francis had a mystical vision that led him to reject earthly wealth. He renounced his inheritance and, in a stunning display of his dedication to total poverty in the name of Christ, stripped his clothes off in public, driving his horrified father to disown him. From then on, he wore only coarse peasants’ garb, walking and dwelling among the poor as a mendicant monk, living only from donations. His followers, the Franciscans, took vows of total poverty, thereby posing a real threat to the religious institution that had become the center of wealth throughout Western Europe. The official renunciation of riches by a major order of the Church brought with it a profound philosophical examination not only of what wealth was, but of how prices were created.

The famed Dominican friar and Italian Scholastic thinker Saint Thomas Aquinas did not believe in Francis’ vow of absolute poverty. He argued that poverty should neither be a requirement nor rule, but rather a personal aspiration. Indeed, as he believed that total poverty was not possible because man always owned things, Aquinas felt the Franciscans risked mortal sin and damnation by taking such a vow. It was perhaps a convenient piece of argument, for the Dominican order was wealthy, with huge feudal landholdings, and Aquinas did not have qualms about what he considered morally acquired wealth; he felt that the Church needed to be rich. Yet Saint Thomas was not a market thinker. He hewed tightly to the concept of the just price.

The challenge facing Franciscans was indeed enormous. If they accidentally owned wealth or used it beyond their bare necessities—for example any piece of clothing that was beyond utilitarian—they would be damned for breaking their sacred vow. The rules of the Order denied Franciscans the right to live in monasteries, which were too rich. Nor could they own any sort of property, and they were not supposed to touch money. Friars could help the poor, sick, and the pious, laboring faithfully and devoutly, but they could never work directly for money. Increasingly, the Franciscan Order began studying pricing and valuation mechanisms to be sure their members adhered to their vows and remained in “total poverty.”

The Scottish Franciscan monk and Scholastic philosopher John Duns Scotus took a more nuanced view of pricing than Aquinas, proposing that prices came neither from balanced exchange nor from moral rules. Rather, he believed they came from a freely working secular market process. Private property was not the purview of the Church, which was ill-equipped to understand all the market activities that went into creating value. As Scotus saw it, prices came from quantity and the value of labor and expertise. To understand a price, one had to take into account “diligence, prudence, care, as well as the risk one accepts in doing such business.” Therefore, it was very difficult for churchmen to calculate market prices. And because this was the case, it was equally difficult for Franciscans to be sure that they were truly obeying their vow of poverty. To keep their vows, they needed to consult with merchants and those expert in secular market prices.

This meant that Franciscans began thinking about market mechanics in a theoretical way before even merchants. As it happened, Franciscans often came from well-educated, commercial backgrounds, which meant that some had a particular awareness of the workings of commerce and pricing.

Franciscan leaders and sympathizers came to believe that the way to manage the vow of poverty was to more carefully codify it. The Franciscan theologian Saint Bonaventure’s Constitutions of Narbonne (1260) was a detailed analysis of wealth and poverty meant to create strict rules to hold Franciscans to their vows. One of the most important areas of inquiry was clothing, a prominent sign of wealth in Italy where cloth production was at the center of its flourishing economy. Saint Francis himself considered clothing a material impediment to poverty, and a sign of riches. The rules of the Constitutions thus decreed that each brother own only one tunic, even going so far as to specify what a friar should do if a tunic fell apart, for instance, or if one had to use pieces of other cloth to repair it.

In 1286, the Franciscan Order began to examine how books—vellum manuscripts, which were very expensive—could be viewed not as valuables, but purely as tools of learning. The Franciscans calculated that an expensive book, if it was used for strictly utilitarian spiritual purposes, was not an object of wealth within the strict economy of the order. Thus, a layman could give books as gifts to individual monks or monasteries, but the institutional leader or custodian would have to decide who could actually use them, and to what ends.

Pope Nicholas III (tenure 1277-1280) defended the Franciscan vow, which he believed had been proved valid by the examples of so many pious members of the order. In his Exiit qui seminat (Confirmation of the Rules of the Friars Minor) of 1279, he came up with a revolutionary approach to realizing the vow of poverty. Franciscans could not break their vow, Pope Nicholas maintained, because the pope was the actual owner of all Franciscan property, meaning that the Franciscans themselves never actually “owned” anything. But Nicholas went further, using market valuation to explain that, even if the Franciscans had goods and property at their disposal, the value of these assets was not inherent, but dependent on where, why, and how friars used them. Each thing’s value changed according to its practical and spiritual utility. The abdication of property, Nicholas insisted, did “not seem to lead to a renunciation of the use of things in every case.” The value of objects, he explained, comes from “places and seasons,” and according to specific duties. “Science requires study,” he noted, and this exercise was impossible without the use of books. Nicholas thought that religious authorities could oversee this valuation process not only to make sure that Franciscans owned things only out of necessity, but also to lighten their fears of breaking their vows. With his decree, Pope Nicholas embraced a belief in market mechanisms in order to solve this conflict within the Church.

That same year, a French Franciscan, Peter John Olivi, wrote Usus pauper—a work on the restricted use of goods within the vow of poverty—in which he specifically addressed the question of how to keep the vow while owning worldly things. Olivi created some of the earliest, most innovative concepts of specific self-regulating market mechanisms. Olivi was originally from Montpellier, and spent time in both Florence, Italy, and Narbonne, a city of 30,000 people in Provence. This placed him in the center of the Mediterranean world of commerce where Franciscans often worked as confessors to merchants. Having served in Nicholas III’s papal administration, Olivi sought to defend the Franciscan vow and, to this end, created the first theory of the law of diminishing marginal utility, by which a good loses value as access to, and consumption of it, increases. Olivi said that if people used things “generally” or “conventionally” it would affect their value. The more available something is, the less it is worth. Commodities like oil and vegetables, produced in great quantity for a great number of people and obtained “with ease,” are worth less than rarer products.

Utility and value were based on the number of those who benefit from a product. If hundreds of people had access to something, it was not of great worth. Olivi claimed if something were so rare than only one person owned it—a rare manuscript, or a jewel—then its scarcity made it precious. Olivi noted that “durability,” too, affected price. With foodstuffs, for example, freshness was a key factor as recently harvested food was more valuable than older “corrupted” products which rapidly lost value. Longevity mattered too. Storable goods like grain were also worth more. Things like clothing, or houses, were more lasting, and their value had to be calculated according to their durability. What this meant is that no single authority could assign or fix a fair price to something.

Olivi’s concept that utility and not morality created value was a challenge to the Church and even to secular authorities that had for so long seen it as their role to judge such things. Add to this, Olivi had also critiqued Saint Augustine’s idea that human cognition relied on divine illumination, insisting instead that judgment in the human mind comes from free will. This idea took agency away from God and the Church and centered it more on the individual. This was too much for the leaders of the Church and especially for the powerful doctors of the University of Paris, who declared Olivi’s thought heretical. Authorities brought him before a tribunal of seven Franciscan judges in Paris, who condemned him, ruining his chances of teaching there.

Olivi eventually cleared his name, however, managing to win a teaching position in Narbonne, and in 1293 wrote what is arguably one of the most visionary works of economic theory of the Middle Ages, his Treatise on Contracts. In it, he insisted that churchmen could not understand pricing, and thus needed to rely on secular merchant “experts” to illuminate the workings of the market. One of his main concerns was that if people did not understand contracts, they could not understand their sins. This was also true for Franciscans who, in their administrative duties, inevitably had to sign contracts while keeping their vow of total poverty. Olivi was also worried his brethren could be damned if they could not effectively describe their failings to keep their vow in confession—without economic expertise they could not confess to sin. Thus, it was essential to understand contracts both in order to manage one’s vow, but also to confess to having broken it.

Olivi believed that only the “judgments” of the merchant “community” could fairly establish prices, for only they knew the relationship between “goods and services” and the demands of “the common good.” Olivi believed that honest and accurate business decisions were the causal spark of market mechanisms. Of course, merchants were not always honest and Olivi never explained if fraud could also drive markets. Still, he did have the insight to understand that businessmen knew the value of labor in a specific market, and that this value could be added into prices. He reminded his readers that traveling for business was dangerous, and required significant background knowledge. Merchants had to know their trade routes, not to mention the customs and currencies of the foreign countries they dealt with. Long-distance commerce also entailed serious capital investment and risk.

Nearly 900 years before Karl Marx, Olivi was the first thinker to discuss the market concept of capital. Money lacked intrinsic value, he observed, “because money alone, by itself, is not lucrative.” Value came, rather, “through the activity of merchants in their business dealings.” He saw money as capital for future investment, whose value could grow, but this value was uncertain and subject to the skill of merchants and their decision-making, along with the more diffuse dynamics of the market. A new age dawned that called for a theory of wealth creation for wealth creation’s sake.

Jacob Soll is professor of history and accounting at the University of Southern California. His newest book is Free Market: The History of an Idea.