[Footnote 5: _Op. cit._, p. 172.]

Although the contract of partnership was fully recognised by the scholastics, it was not very scientifically treated, nor were the different species of the contract systematically cla.s.sified. The only cla.s.sification adopted was to divide contracts of partnership into two kinds--those where both parties contributed labour to a joint enterprise, and those where one party contributed labour and the other party money. The former gave no difficulty, because the justice of the remuneration of labour was admitted; but, while the latter was no less fully recognised, cases of it were subjected to careful scrutiny, because it was feared that usurious contracts might be concealed under the appearance of a partnership.[1] The question which occupied the greatest s.p.a.ce in the treatises on the subject was the share in which the profits should be divided between the parties. The only rule which could be laid down, in the absence of an express contract, was that the parties should be remunerated in proportion to the services which they contributed--a rule the application of which must have been attended with enormous difficulties. Laurentius de Rodulphis insists that equality must be observed;[2] and Angelus de Periglis de Perusio, the first monographist on the subject, does not throw much more light on the question. The rule as stated by this last writer is that in the first place the person contributing money must be repaid a sum equal to what he put in, and the person contributing labour must be paid a sum equal to the value of his labour, and that whatever surplus remains must be divided between the two parties equally.[3] The question of the shares in which the profits should be distributed was not one, however, that frequently arose in practice, because it was the almost universal custom for the partners to make this a term of their original contract. Within fairly wide limits it was possible to arrange for the division of the profits in unequal shares--say two-thirds and one-third. The shares of gain and loss must, however, be the same; one party could not reap two-thirds of the profit and bear only one-third of the loss; but it might be contracted that, when the loss was deducted from the gain, one party might have two-thirds of the balance, and the other one-third.[4] In no case, of course, could the party contributing the money stipulate that his princ.i.p.al should in all cases be returned, because that was a _mutuum_. The party contributing the labour might validly contract that he should be paid for his labour in any case, but, if this was so, the contract ceased to be a _societas_ and became a _locatio operarum_, or ordinary contract of work for wages. In all cases, common partic.i.p.ation in the gains and losses of the enterprise was an essential feature of the contract of partnership.[5]

[Footnote 1: _Summa Astesana_, iii. 12.]

[Footnote 2: _De Usuris_, i. 19.]

[Footnote 3: _De Societatibus_, i. 130.]

[Footnote 4: _De Societatibus_, i. 130.]

[Footnote 5: _Ibid._]

Before concluding the subject of partnership, we must make reference to the _trinus contractus_, which caused much discussion and great difficulty. As we have seen, a contract of partnership was good so long as the person contributing money did not contract that he should receive his original money back in all circ.u.mstances. A contract of insurance was equally justifiable. There was no doubt that A might enter into partnership with B; he could further insure himself with C against the loss of his capital, and with D against damage caused by fluctuations in the rate of profits. Why, then, should he not simultaneously enter into all three contracts with B? If he did so, he was still B's partner, but at the same time he was protected against the loss of his princ.i.p.al and a fair return upon it--in other words, he was a partner, protected against the risks of the enterprise. The legitimacy of such a contract--the _trinus contractus_, as it was called--was maintained by Carletus in the _Summa Angelica_, which was published about 1476, and by Biel.[1] Early in the sixteenth century Eck, a young professor at Ingolstadt, brought the question of the legitimacy of this contract before the University of Bologna, but no formal decision was p.r.o.nounced, and, had it not been for the reaction following the Reformation, the _trinus contractus_ would probably have gained general acceptance. As it was, it was condemned by a provincial synod at Milan in 1565, and by Sixtus V. in 1585.[2]

[Footnote 1: _Op. cit._, IV. xv. 11. Lecky attributed the invention of the _trinus contractus_ to the Jesuits--who were only founded in 1534 (_History of Rationalism_, vol. ii. p. 267).]

[Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. pp. 439 _et seqq._; Cleary, _op. cit._, pp. 126 _et seqq._]

We should also refer to the contract of bottomry, which consisted of a loan made to the owner--or in some cases the master--of a ship, on the security of the ship, to be repaid with interest upon the safe conclusion of a voyage. This contract could not be considered a partnership, inasmuch as the property in the money pa.s.sed to the borrower; but it probably escaped condemnation as usurious on the ground that the lender shared in the risk of the enterprise. The payment of some additional sum over and above the money lent might thus be justified on the ground of _periculum sortis_. The contract, moreover, was really one of insurance for the shipowner, and contracts of insurance were clearly legitimate. In any event the legitimacy of loans on bottomry was not questioned before the sixteenth century.[1]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. pp. 421-3; Palgrave, _Dictionary of Political Economy_, art. 'Bottomry'; Cunningham, _Growth of English Industry and Commerce_, vol i. p. 257.]

-- 10. _Concluding Remarks on Usury_.

It is to be hoped that the above exposition of the mediaeval doctrine on usury will dispel the idea that the doctrine was founded upon the injustice of unearned income. Far from the receipt of an unearned income from money or other capital being in all cases condemned, it was unanimously recognised, provided that the income accrued to the owner of the capital, and not to somebody else, and that the rate of remuneration was just. The teaching on partnership rested on the fundamental a.s.sumption that a man might trade with his money, either by using it himself, or by allowing other people to use it on his behalf. In the latter case, the person making use of the money might be either a.s.sured of being paid a fixed remuneration for his services, in which case the contract was one of _locatio operarum_, or he might be willing to let his remuneration depend upon the result of the enterprise, in which case the contract was one of _societas_. In either case the right of the owner of the money to reap a profit from the operation was unquestioned, provided only that he was willing to share the risks of loss. But if, instead of making use of his money for trading either by his own exertions or by those of his partner or agent, he chose to sell his money, he was not permitted to receive more for it than its just price--which was, in fact, the repayment of the same amount. This was what happened in the case of a _mutuum_. In that case the ownership of the money was transferred to the borrower, who was perfectly at liberty to trade with it, if he so desired, and to reap whatever gain that trade produced. The prohibition of usury, far from being proof of the injustice of an income from capital, is proof of quite the contrary, because it was designed to insure that the income from capital should belong to the owner of that capital and to no other person.[1] Although, therefore, no price could be paid for a loan, the lender must be prevented from suffering any damage from making the loan, and he might make good his loss by virtue of the implied collateral contract of indemnity, which we discussed above when treating of extrinsic t.i.tles. If the lender, through making the loan, had been prevented from making a profit in trade, he might be indemnified for that loss. All through the discussions on usury we find express recognition of the justice of the owner of money deriving an income from its employment; all that the teaching of usury was at pains to define was who the person was to whom money, which was the subject matter of a _mutuum_, belonged. It is quite impossible to comprehend how modern writers can see in the usury teaching of the scholastics a fatal discouragement to the enterprise of traders and capitalists; and it is equally impossible to understand how socialists can find in that doctrine any suggestion of support for the proposition that all unearned income is immoral and unjust.

[Footnote 1: See Rambaud, _op. cit._, p. 59.]

SECTION 3.--THE MACHINERY OF EXCHANGE

We have already drawn attention to the fact that there was no branch of economics about which such profound ignorance ruled in the earlier Middle Ages as that of money. As we stated above, even as late as the twelfth century, the theologians were quite content to quote the ill-founded and erroneous opinions of Isidore of Seville as final on the subject. It will be remembered that we also remarked that the question of money was the first economic question to receive systematic scientific treatment from the writers of the later Middle Ages. This remarkable development of opinion on this subject is practically the work of one man, Nicholas Oresme, Bishop of Lisieux, whose treatise, _De Origine, Natura, Jure et Mutationibus Monetarum_, is the earliest example of a pure economic monograph in the modern sense. 'The scholastics,' says Roscher, 'extended their inquiries from the economic point of view further than one is generally disposed to believe; although it is true that they often did so under a singular form.... We can, however, single out Oresme as the greatest scholastic economist for two reasons: on account of the exact.i.tude and clarity of his ideas, and because he succeeded in freeing himself from the pseudo-theological systematisation of things in general, and from the pseudo-philosophical deduction in details.'[1]

[Footnote 1: Quoted in the Introduction to Wolowski's edition of Oresme's _Tractatus_ (Paris, 1864).]

Even in the thirteenth century natural economy had not been replaced to any large extent by money economy. The great majority of transactions between man and man were carried on without the intervention of money payments; and the amount of coin in circulation was consequently small.[1] The question of currency was not therefore one to engage the serious attention of the writers of the time.

Aquinas does not deal with money in the _Summa_, except incidentally, and his references to the subject in the _De Regimine Principum_--which occur in the chapters of that work of which the authorship is disputed--simply go to the length of approving Aristotle's opinions on money, and advising the prince to exercise moderation in the exercise of his power of coining _sive in mutando sive in diminuendo pondus_.[2]

[Footnote 1: Brants, _op. cit._, p. 179; Rambaud, _op. cit._, p. 73.]

[Footnote 2: _De Reg. Prin._, ii. 13.]

As is often the case, the discussion of the rights and duties of the sovereign in connection with the currency only arose when it became necessary for the public to protest against abuses. Philip the Fair of France made it part of his policy to increase the revenue by tampering with the coinage, a policy which was continued by his successors, until it became an intolerable grievance to his subjects. In vain did the Pope thunder against Philip;[1] in vain did the greatest poet of the age denounce

'him that doth work With his adulterate money on the Seine.'[2]

[Footnote 1: Le Blant, _Traite historique des Monnaies de France_, p.

184.]

[Footnote 2: Dante, _Paradiso_, xix.]

Matters continued to grow steadily worse until the middle of the fourteenth century. During the year 1348 there were no less than eleven variations in the value of money in France; in 1349 there were nine, in 1351 eighteen, in 1353 thirteen, and in 1355 eighteen again.

In the course of a single year the value of the silver mark sprang from four to seventeen livres, and fell back again to four.[1] The practice of fixing the price of many necessary commodities must have aggravated the natural evil consequences of such fluctuations.[2]

[Footnote 1: Wolowski's Introduction to Oresme's _Tractatus_, p.

xxvii.]

[Footnote 2: See Endemann, _Studien_, vol. ii. p. 34.]

This grievance had the good result of fixing the attention of scholars on the money question. 'Under the stress of facts and of necessity,'

says Brants, 'thinkers applied their minds to the details of the theory of money, which was the department of economics which, thanks to events, received the earliest illumination. Lawyers, bankers, money-changers, doctors of theology, and publicists of every kind, attached a thoroughly justifiable importance to the question of money.

We are no doubt far from knowing all the treatises which saw the light in the fourteenth century upon this weighty question; but we know enough to affirm that the monetary doctrine was very developed and very far-seeing.'[1] Buridan a.n.a.lysed the different functions and utilities of money, and explained the different ways in which its value might be changed.[2] He did not, however, proceed to discuss the much more important question as to when the sovereign was ent.i.tled to make these alterations. This was reserved for Nicholas Oresme, who published his famous treatise about the year 1373. The merits of this work have excited the unanimous admiration of all who have studied it.

Roscher says that it contains 'a theory of money, elaborated in the fourteenth century, which remains perfectly correct to-day, under the test of the principles applied in the nineteenth century, and that with a brevity, a precision, a clarity, and a simplicity of language which is a striking proof of the superior genius of its author.'[3]

According to Brants, 'the treatise of Oresme is one of the first to be devoted _ex professo_ to an economic subject, and it expresses many ideas which are very just, more just than those which held the field for a long period after him, under the name of mercantilism, and more just than those which allowed of the reduction of money as if it were nothing more than a counter of exchange.'[4] 'Oresme's treatise on money,' says Macleod, 'may be justly said to stand at the head of modern economic literature. This treatise laid the foundations of monetary science, which are now accepted by all sound economists.'[5]

'Oresme's completely secular and naturalistic method of treating one of the most important problems of political economy,' says Espinas, 'is a signal of the approaching end of the Middle Ages and the dawn of the Renaissance.'[6] Dr. Cunningham adds his tribute of praise: 'The conceptions of national wealth and national power were ruling ideas in economic matters for several centuries, and Oresme appears to be the earliest of the economic writers by whom they were explicitly adopted as the very basis of his argument.... A large number of points of economic doctrine in regard to coinage are discussed with much judgment and clearness.'[7] Endemann alone is[8] inclined to quarrel with the pre-eminence of Oresme; but on this question, he is in a minority of one.[9]

[Footnote 1: _Op. cit._, p. 186.]

[Footnote 2: _Quaest. super Lib. Eth._, v. 17; _Quaest. super Lib.

Pol._, i. 11.]

[Footnote 3: Quoted in Wolowski, _op. cit._, and see Roscher, _Geschichte_, p. 25.]

[Footnote 4: _Op. cit._, p. 190.]

[Footnote 5: _History of Economics_, p. 37.]

[Footnote 6: _Op. cit._, p. 110.]

[Footnote 7: _Growth of English Industry and Commerce_, vol. i. p.

359.]

[Footnote 8: _Grundsatze_, p. 75.]

[Footnote 9: See an interesting note in Brants, _op. cit._, p. 187.]

The princ.i.p.al question which Oresme sets out to answer, according to the first chapter of this treatise, is whether the sovereign has the right to alter the value of the money in circulation at his pleasure, and for his own benefit. He begins the discussion by going over the same ground as Aristotle in demonstrating the origin and utility of money, and then proceeds to discuss the most suitable materials which can be made to serve as money. He decides in favour of gold and silver, and shows himself an unquestioning bimetallist. He further admits the necessity of some token money of small denominations, to be composed of the baser metals. Having drawn attention to the transition from the circulation of money, the value of which is recognised solely by weight, to the circulation of that which is accepted for its imprint or superscription, the author insists that the production of such an imprinted coinage is essentially a matter for the sovereign authority in the State. Oresme now comes to the central point of his thesis. Although, he says, the prince has undoubtedly the power to manufacture and control the coinage, he is by no means the owner of it after it has pa.s.sed into circulation, because money is a thing which in its essence was invented and introduced in the interests of society as a whole.

Oresme then proceeds to apply this central principle to the solution of the question which he sets himself to answer, and concludes that, as money is essentially a thing which exists for the public benefit, it must not be tampered with, nor varied in value, except in cases of absolute necessity, and in the presence of an uncontroverted general utility. He bases his opposition to unnecessary monetary variation on the perfectly sound ground that such variation is productive of loss either to those who are bound to make or bound to receive fixed sums in payment of obligations. The author then goes on to a.n.a.lyse the various kinds of variation, which he says are five--_figurae_, _proportionis_, _appellationis_, _ponderis_, and _materiae_. Changes of form (_figurae_) are only justified when it is found that the existing form is liable to increase the damage which the coins suffer from the wear and tear of usage, or when the existing currency has been degraded by widespread illegal coining; changes _proportionis_ are only allowable when the relative value of the different metals const.i.tuting the coinage have themselves changed; simple changes of name (_appellationis_), such as calling a mark a pound, are never allowed. Changes of the weight of the coins (_ponderis_) are p.r.o.nounced by Oresme to be just as gross a fraud as the arbitrary alteration of the weights or measures by which corn or wine are sold; and changes of matter (_materiae_) are only to be tolerated when the supply of the old metal has become insufficient. The debas.e.m.e.nt of the coinage by the introduction of a cheaper alloy is condemned.

In conclusion, Oresme insists that no alteration of any of the above kinds can be justified at the mere injunction of the prince; it must be accomplished _per ipsam communitatem_. The prince exercises the functions of the community in the matter of coinage not as _princ.i.p.alis actor_, but as _ordinationis publicae executor_. It is pointed out that arbitrary changes in the value of money are really equivalent to a particularly noxious form of taxation; that they seriously disorganise commerce and impoverish many merchants; and that the bad coinage drives the good out of circulation. This last observation is of special interest in a fourteenth-century writer, as it shows that Gresham's Law, which is usually credited to a sixteenth-century English economist, was perfectly well understood in the Middle Ages.[1]

[Footnote 1: The best edition of Oresme's _Tractatus_ is that by Wolowski, published at Paris in 1864, which includes both the Latin and French texts.]