New light on the prehistory of the theory of banking and the School of Salamanca

Review of Austrian Economics

Volumn 9, Issue 2, 1996, Pages 59-81

  De Soto, Jesús Huerta ^a  

^a UNIVERSIDAD COMPLUTENSE DE MADRID   (Spain)

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EID: 0038890124     PISSN: 08893047     EISSN: None     Source Type: Journal    
DOI: 10.1007/BF01103330     Document Type: Article

References (71)

1. See Murray N. Rothbard, "New Light on the Prehistory of the Austrian School," Edwin G. Dolan, ed., The Foundations of Modern Austrian Economics (Kansas City: Sheed and Ward, 1976), pp. 52-74.
2. I have a letter from F. A. Hayek dated January 7, 1979, in which he states that, apart from Raymond de Roover, the researchers to whom we owe the establishment of the link between the School of Salamanca and the Austrian School are, chronologically, H.M. Robertson, Aspects of the Rise of Economic Individualism (Cambridge: Cambridge at the University Press, 1933);
3. Marjorie Grice-Hutchinson, The School of Salamanca (Oxford: Clarendon Press, 1952); and, especially, Murray N. Rothbard in his above mentioned article.
4. Ramón Carande, Carlos V y sus Banqueros, 3 vols. (Barcelona and Madrid: Editorial Crítica, 1987).
5. Finally, with a great deal of effort, he managed to obtain two hundred thousand ducats but, as he wrote, "I am afraid of causing the bankruptcy of all the banks of Seville
6. See Ramón Carande, Carlos V y sus Banqueros, vol.1, pp. 299-23, and esp. pp. 315-16, which deals with Gresham's visit to Seville.
7. See Carlo M. Cipolla's important article "La moneda en Florencia en el Siglo XVI," published in El Gobierno y la Moneda: Ensayos de Historia Monetaria (Barcelona: Editorial Critica, 1994), pp. 11-142; esp. pp. 96 onwards.
8. This book is the Spanish edition of the work originally published in Italian with the title II Governo delta Moneta: La Moneta a Firenze nel Cinquecento (Bologna: Societá editrice II Mulino, 1990).
9. Cipolla tells us how the Ricci Bank, from the seventies onwards, was not able to meet the demand for payments in cash and, de facto, suspended payments, as it paid simply "with ink" or "with bank policies." The authorities of Florence, looking only at the symptoms and trying, with typical good intentions, to resolve this worrying situation merely by decrees, imposed on bankers the obligation to pay their creditors in cash without any delay, but did not attack the fundamental causes of the phenomenon (the undue appropriation of the deposits as loans and failure to hold a 100-percent-cash ratio). This meant that the successive decrees issued met with inevitable failure and the crisis became gradually more serious until it broke out with its full virulence in the mid-1570s. II Governo Delta Moneta: la Moneta A Firenze Nel Cinquecento II Governo Delta Moneta: la Moneta A Firenze Nel Cinquecento Ibid., pp. 102-3.
10. Among others, the following have recently studied the contribution of the Spanish scholastics to economic theory: Lucas Beltrán in "Sobre los orígenes hispanos de la economía de rnercado," Cuadernos del Pensamiento Liberal 10, no.1 (1989): 5-38;
11. Marjorie Grice-Hutchinson, Economie Thought in Spain: Selected Essays of Marjorie Grice-Hutchinson, Laurence S. Moss and Christopher K. Ryan, eds. (Aldershot, England: Edward Elgar, 1993);
12. Jesús Huerta de Soto, "Genesis, esencia y evolución de la Escuela Austriaca de Economía," Estudios de Economia Política (Madrid: Unión Editorial, 1994), pp. 17-55;
13. and esp. and most recently Murray N. Rothbard, Economic Thought before Adam Smith: An Austrian Perspective on the History of Economic Thought, vol. 1 (Aldershot, England: Edward Elgar, 1995), pp. 101-27.
14. The intellectual influence of the Spanish theorists of the School of Salamanca on the Austrian School is not, however, a pure coincidence or a mere whim of history. It originates from and exists because of the intimate historical, political and cultural relations which, as from the reigns of Carlos V and his brother Fernando I, arose between Spain and Austria and which were to continue for several centuries. In addition, Italy also played an important role in these relations, acting as an authentic cultural, economic and financial bridge over which the relations between the two furthest points of the Empire (Spain and Vienna) flowed. In this respect, Jean Berenguer's interesting book El Imperio de los Habsburgos (Barcelona: Editorial Critica, 1993), should be consulted, particularly pp. 133-35.
15. This book is the Spanish edition of the French original which was entitled Histoire de L'empire des Habsbourg 1273-1918 (Paris: Librairie Arthème, Fayard, 1990).
16. Luis Saravia de la Calle, Instructión de Mercaderes (Medina del Campo: Pedro de Castro, 1544);
17. republished in Colección de Joyas Bibliográficas (Madrid, 1949).
18. Colección de Joyas Bibliográfica Ibid., p. 180.
19. Colección de Joyas Bibliográfica Ibid., p. 181.
20. Colección de Joyas Bibliográfica Ibid., p. 195.
21. Colección de Joyas Bibliográfica Ibid., p. 196.
22. Colección de Joyas Bibliográfica Ibid., p. 197.
23. Colección de Joyas Bibliográfica Ibid. p. 197.
24. See Jesús Huerta de Soto, "A Critical Analysis of Central Banks and Fractional-Reserve Free Banking from the Austrian School Perspective," Review of Austrian Economics 8, no. 2 (1995): 25-38, esp. pp. 29-30 n. 6.
25. Saravia de la Galle, Instruction de Mercaderes, p. 186.
26. Saravia de la Galle, Instruction de Mercaderes, Ibid., p. 190; emphasis added.
27. Saravia de la Galle, Instruction de Mercaderes, Ibid., p. 198.
28. Martin de Azpilcueta, Comentario Resolutorio de Cambias (Madrid: Consejo Superior de Investigaciones Científicas, 1965), pp. 57-58. When studying the position of Doctor Navarro, I have worked with the first Spanish edition published by Andres de Portonarijs in Salamanca in 1556, and also with the first Portuguese edition published by loam de Barreyra in Coimbra in 1560 with the title Comentario Resolutorio de Onzenas. The quotes contained in the main text appear in the Portuguese edition on pp. 77-80, and on pp. 74-75 of the first Spanish edition.
29. Martin de Azpilcueta, Comentario Resolutorio de Cambias Ibid., pp. 60-61.
30. Martin de Azpilcueta, Comentario Resolutorio de Cambias Ibid., p. 61.
31. I quote the edition by the Institute de Estudios Fiscales published in Madrid in 1977, edited and introduction by Nicolás Sánchez Albornoz, vol. 2, chap. 16, p. 479. There is another edition, by Restituto Sierra Bravo, published by the Editera Nacional in 1975, which includes the quote given in the main text on p. 401. The original edition was published in Seville in 1571 "en casa de Hernando Díez Impresor de Libros, en la calle de la Sierpe
32. Tomás de Mercado, Suma de Tratos y Contratos, vol. 2, p. 480 of the edition of Institute de Estudios Fiscales and p. 401 of the edition of Restitute Sierra Bravo.
33. Tomás de Mercado, Suma de Tratos y Contratos Ibid., p. 480.
34. This is the quote from Mercado that Ramón Carande includes in Vol. 1 of Carlos V y sus Banqueros in the introduction to his analysis of the bankers of Seville and the crisis which led them all into bankruptcy. See Tomes de Mercado, Suma de Tratos y Contratos, vol. 2, pp. 381-82 of the 1977 edition by Instituto de Estudios Fiscales and p. 321 of the edition by Restituto Sierra Bravo.
35. According to Restituto Sierra Bravo, El Pensamiento Social y Económico de la Escolástica, vol. 1 (Madrid: Consejo Superior de Investigaciones Científicas, 1975), p. 215, this phrase of Domingo de Soto implies his acceptance of the banking business with a fractional-reserve ratio.
36. It is very significant that various authors, among them Marjorie Grice-Hutchinson, are in doubt as to whether Luis de Molina should be included among the theorists of the School of Salamanca: "The inclusion of Molina in the School seems to me now to be more dubious." Marjorie Grice-Hutchinson, "The Concept of the School of Salamanca: Its Origins and Development", Chapter 2 of Economic Thought in Spain: Selected Essays of Marjorie Grice-Hutchinson, p, 25.
37. Luis de Molina, Tratado sobre los Cambios, edition and introduction by Francisco Gómez Camacho (Madrid: Institute de Estudios Fiscales, 1990), pp. 137-40.
38. Luis de Molina, Tratado sobre los Cambios, Ibid., p. 13.
39. Luis de Molina, Tratado sobre los Cambios, Ibid., p. 137.
40. Luis de Molina, Tratado sobre los Cambios, Ibid., pp. 138-39; emphasis added.
41. R.P. Joannis de Lugo Hispalensis, S.L, Disputationum de Iustitia et lure, Tomus Secundus (Lugduni, 1642), Disp. 28, See. 5, pp. 406-7. I would like to thank the Jesuit Father Prof. Enrique M. Urena and the Dominican Father Rodrigo T. Hidalgo who provided me with different copies of de Lugo's original book.
42. See, above all, the doctoral thesis which Marjorie Grice-Hutchinson published under the direction of F.A. Hayek with the title of The School, of Salamanca: Readings in Spanish Monetary Theory, 1544-1605;
43. Murray N. Rothbard, "New Light on the Prehistory of the Austrian School," pp. 52-74;
44. Alejandro A. Chafuen, Christians for Freedom: Late-Scholastic Economics (San Francisco: Ignatius Press. 1986), pp. 74-86;
45. and Murray N. Rothbard, Economic Thought before Adam Smith: An Austrian, Perspective on the History of Economic Thought, vol. 1, pp. 101-27.
46. The edition which I have used is the Omnia Opera, published in Venice in 1604, which includes the treatise on money by Diego de Covarrubias in vol. 1, under the full title of Veterum Collatio Numismatum, cum his, qitae modo expenduntur, publica, et Regia authoritate perpensa, pp. 669-710. This work by Diego de Covarrubias is often quoted by Davanzati and, at least once, in chap. 2 of Galiani's famous Della Moneta, written in 1750.
47. Also, and most significantly, it is quoted by Carl Menger, Grundsätze der Volkswirtschaftslehre (Vienna: Wilhelm Braumüller, 1871), p. 257;
48. English edition, Principles of Economics (New York and London: New York University Press, 1981), p. 317.
49. Martín de Azpilcueta, Comentario Resolutorio de Cambios, pp. 74-75; emphasis added.
50. Not even in the most brilliant and recent work by Murray N. Rothbard, Economic Thought before Adam Smith, vol. 1, to which the present article should be considered a humble addendum.
51. Luis de Molina, Tratado sobre los Cambios, p. 145.
52. Luis de Molina, Tratado sobre los Cambios Ibid., p. 146.
53. See James Pennington's memo dated February 13, 1826 "On the Private Banking Establishments of the Metropolis," included as an Appendix in Thomas Tooke, A Letter to Lord Grenville; On the Effects Ascribed to the Resumption of Cash Payments on the Value of the Currency (London: John Murray, 1826);
54. Murray N. Rothbard, Classical Economics: An Austrian Perspective on the History of Economic Thought (Aldershot, England: Edward Elgar, 1995), vol. 2, pp. 230-33;
55. and F.A. Hayek, "The Dispute Between the Currency School and the Banking School, 1821-1848," Chap. 12 of The Trend of Economic Thinking: Essays on Political Economists and Economic History, W.W. Bartley, III, and Stephen Kresge, eds., vol. 3 of The Collected Works of F.A. Hayek (London: Routledge, 1991), p. 224.
56. Luis de Molina, Tratado sobre los Cambias, p. 147
57. Luis de Molina, Tratado sobre los Cambias, Ibid., p. 149.
58. De Cambiis," R. P. Joannis de Lugo Hispalensis, Societatis lesu' Disputationum de Iustitia et lure, Tomus Secundus, Lugduni 1642, p. 406, Section 5, No. 60.
59. Disputationum de Iustitia et lure, Tomus Secundus, Lugduni 1642 Ibid., pp. 406-7.
60. That is to say, in the terminology of Israel M. Kirzner, "Economics and Error," in Perception, Opportunity and Profit (Chicago: University of Chicago Press, 1979), pp. 120-36, committing sheer or pure entrepreneurial error (which cannot be insured by the law of large numbers) which causes serious entrepreneurial losses, regardless of the degree of prudence with which one has acted.
61. Published by the journal Pensamiento: revista trimestral de investigación e información filosófica publicada par las Facultades de Filosóa de las Compañías de Jesús en España 73, vol. 19 (January-March 1963): 64-89.
62. Pensamiento: revista trimestral de investigación e información filosófica publicada par las Facultades de Filosóa de las Compañías de Jesús en España 73 Ibid., pp. 63 and 69.
63. Pensamiento: revista trimestral de investigación e información filosófica publicada par las Facultades de Filosóa de las Compañías de Jesús en España 73 Ibid., p. 87.
64. The reference to Juan de Lugo corresponds to Disputationum de Iustitia et Iure, Tomus Secundus pp. 60-62.
65. Bernard W. Dempsey, Interest and Usury, published with an introduction by Joseph A. Schumpeter (Washington, D.C.: American Council of Public Affairs, 1943). Attention should be drawn to the fact that Father Belda's article arose as a criticism, from the Keynesian point of view, of the theses upheld by Dempsey in this book. I would like to thank Professor James Sadowsky of Fordham University, who provided me with a copy of Dempsey's book, which was not available in Spain.
66. The credit expansion results in the depreciation of whatever circulating medium the bank deals in. Prices rise; the asset appreciates. The bank absolves its debt by paying out on the deposit a currency of lesser value . . . No single person perhaps would be convinced by a Scholastic author of the sin of usury. But the process has operated usuriously; again we meet systematic or institutional usury . . . The modern situation to which theorists have applied the concepts of divergence of natural and money interest, divergences of saving an investment, divergences of income disposition from tenable patterns by involuntary displacements, all these have a sufficient common ground with late medieval analysis to warrant the expression 'institutional usury' for the movement heretofore described in the above expressions." Father Bernard W. Dempsey, Interest and Usury, pp. 225 and 227-28.
67. Ibid., p. 210. Incidentally, Father Dempsey points out that the theory of time preference may even date from Saint Thomas Aquinas, as it was expressly stated by one of the letter's most brilliant pupils, Giles Lessines, for whom "future goods are not valued so highly as the same goods available at an immediate moment of time, nor do they allow their owners to achieve the same utility. For this reason, it must be considered that they have a more reduced value in accordance with justice
68. See p. 426 of Opusculum LXVI, De usuris in communi et de usurarum contractibus, written by Aegidius Lessines in 1285 (quoted by Bernard Dempsey in Note 31 of p. 214).
69. Dempsey's discovery of Lessines exposition of time preference was not included in Murray N. Rothbard's Economic Thought before Adam Smith, in which Rothbard considers San Bernardino of Siena and Conrad Summenhart to have been in 1431 and 1499 the first expositors of time preference theory (pp. 85 and 92).
70. This is the same argument given by the great libertarian Jesuit Juan de Mariana in his book De monetae mutatione (On the Alteration of Money) published in 1609.
71. Mariana condemns as robbery any government debasement of coins whereas Dempsey follows the same reasoning in relation to the even more disturbing credit inflation created by banks. On Juan de Mariana see the most brilliant analysis of Murray N. Rothbard, Economic Thought before Adam Smith, p. 119.