But while the economic sociology of the scholastic doctors of this period was, in substance, not more than thirteenth-century doctrine worked out more fully, the ‘pure’ economics which they also handed down to those laical successors was, practically in its entirety, their own creation. It is within their systems of moral theology and law that economics gained definite if not separate existence, and it is they who come nearer than does any other group to having been the ‘founders’ of scientific economics. And not only that: it will appear, even, that the bases they laid for a serviceable and well-integrated body of analytic tools and propositions were sounder than was much subsequent work, in the sense that a considerable part of the economics of the later nineteenth century might have been developed from those bases more quickly and with less trouble than it actually cost to develop it, and that some of that subsequent work was therefore in the nature of a time- and labor-consuming detour. (Schumpeter 1954: 97)
The welfare economics of the scholastic doctors linked up with their ‘pure’ economics through the pivotal concept of the latter, Value, which also was based upon ‘wants and their satisfaction.’ Of course, there was nothing new in this starting point itself. But the Aristotelian distinction between value in use and value in exchange was deepened and developed into a fragmentary but genuine subjective or utility theory of exchange value or price in a manner for which there was no analogue in either Aristotle or St. Thomas, though there was in both what we may describe as a pointer. First, by way of criticizing Duns Scotus and his followers, the late scholastics, particularly Molina, made it quite clear that cost, though a factor in the determination of exchange value (or price), was not its logical source or ‘cause.’ Second, they adumbrated with unmistakable clearness the theory of the utility which they considered as the source or cause of value. Molina and Lugo, for instance, were as careful as C.Menger was to be to point out that this utility was not a property of the goods themselves or identical with any of their inherent qualities, but was the reflex of the uses the individuals under observation proposed to make of these goods and of the importance they attached to these uses. But a century before that, St. Antonine, evidently motivated by the wish to divest the relevant concept of undesirable ‘objective’ meanings, had employed the unclassical but excellent term complacibilitas—the exact equivalent of Professor Irving Fisher’s ‘desiredness,’ which also is used to express the fact that a thing is actually being desired and nothing else. Third, the late scholastics, though they did not explicitly resolve the ‘paradox of value’— that water though useful has normally no exchange value—obviated the difficulty by making their utility concept, from the first, relative to abundance or scarcity; their utility was not utility of goods in the abstract, but utility of the quantities of goods available or producible in the individual’s particular situations. Finally, fourth, they listed all the price-determining factors, though they failed to integrate them into a full-fledged theory of demand and supply. But the elements for such a theory were all there and the technical apparatus of schedules and of marginal concepts that developed during the nineteenth century is really all that had to be added to them
There are two more aspects of this theory of exchange value that deserve to be noticed. On the one hand, the late scholastics identified their just price not, as Aristotle and also Duns Scotus seem to have done, with normal competitive price but with any competitive price (communis estimatio fori or pretium currens). Wherever such a price existed, it was ‘just’ to pay and to accept it, whatever the consequences might be for the trading parties: if mer-chants, paying and accepting market prices, made gains, this was all right, and if they suffered losses, this was bad luck or else a penalty for incompetence so long as gain or loss resulted from the unhampered working of the market mechanism though not if it resulted, for example, from price fixing by public authority or monopolistic concerns. Molina’s disapproval of price fixing, though qualified, and his approval of gains arising from high competitive prices in times of scarcity are no doubt ethical judgments. But they reveal a perception of the organic functions of commercial gains and of the price fluctuations that are responsible for them, a fact that marks a considerable step in analysis. This should be borne in mind, for we are not as a rule in the habit of looking to the scholastics for the origin of the theories that are associated with nineteenth-century laissez-faire liberalism. (Schumpeter 1954: 98-99)
1. Schumpeter, Joseph A. History of Economic Analysis. New York: Oxford UP, 1954. Print. 97-99.