The sixteenth and seventeenth centuries

Spanish and Portuguese scholastics in the sixteenth and seventeenth centuries lived through a period when substantial change occurred in Western Europe — the emergence and consolidation of nation-states, the opening up of new routes for European-Asian trade, the discovery of America, and the colonization of new territories — when the Spanish Empire became the leading power in the world.

The School was particularly influential in Portugal, in the universities of Evora and especially Coimbra, where a significant role was played by Azpilcueta, Mercado, Molina, and a few Portuguese such as Fernao Rebelo and Pedro de Santarem. Throughout this period the Salamanca School had a significant number of disciples and has influenced many theologians and jurists. Their works were highly quoted and were subject to several editions in Spain as well as in other European countries. For example De iustitiaetiure (1553) by Soto ran to twenty- six editions in the sixteenth century, seventeen of them outside Spain.

Scholastic contributions to economic theory were some of the side effects of their musings on the spiritual salvation of human beings in all their activities, especially those related with dangerous trading activities completely divorced from the honorable, virtuous life in the countryside.

If we limit ourselves strictly to economic issues, they studied currency exchange, the work­ing of Castilian fairs — which in those times rather than interchanging goods, were the focus of the activity of international financiers — and the functioning of banks and lending. Precisely in dealing with fair pricing, usury, and taxes, they had the opportunity to develop their approaches on the theory of value and prices, the morphology of the market, property rights, monetary theory, and taxation. It is important to underline the fact that, although the scholastics were determined to condemn the illegality of all acts leading to the acquisition of “excessive” or superfluous wealth, these authors provided arguments for the legitimacy of new economic practices which, under a rigorous canon law could be condemned as sinful and usurious. In this sense, the verification of situations where lucrum cessans et damnum emergens (loss of profit and emerging damage) could occur represented a basic criterion for legitimizing certain economic activities. The substantial increase of mercantile operations — a result of maritime and commercial expansion on a worldwide scale — gave rise to a new ethical attitude which decriminalized and legitimized practices involving money exchange and other banking and insurance activities.

Among all these contributions, special emphasis should be given to the presentation of the quantity theory of money and the idea of purchasing power parity, already clearly explained by Martin Azpilcueta in his Comentario Resolutivo de Cambios (Commentary and Solution on Exchange) in 1556, a decade before Jean Bodin.

Similarly, Azpilcueta’s theory of value, which impinged on the concepts of utility and scarcity, had an influence on European economists as diverse as Davanzati, Galiani, and Beccaria in Italy, Condillac, Turgot, and Quesnay in France, Grotius and Lessiusin in Holland and Belgium, Pufendorf in Germany and the Scandinavian countries, and Locke, Law, Hutcheson, and Adam Smith in Great Britain. Thus, some present-day economists from the Austrian School consider their subjective theory of value as stemming from Spanish scholastics.

The arbitristas were contemporaries of the scholastics and busied themselves with practical matters, leaving moral concerns out of their considerations. In the eighteenth century, the definition of the term arbitristas did not only refer to consultants and practical men offering suggestions on how to improve the fiscal and tax systems. The term meant also to include all those who proposed solutions to the increasingly severe economic problems in Spain and Portugal. They were writers with a clear political aim who, on some occasions, were parodied by literary figures of the time, such as Miguel de Cervantes, for offering chimerical solutions to deal with economic difficulties. Among the Spanish arbitristas with the most coherent views we may mention Luis de Ortiz, Martin Gonzalez de Cellorigo, Lope de Deza, Sancho de Moncada, Miguel Caxa de Lereuela, Francisco Martinez de Mata, and Alvarez Osorio y Redin.

The arbitristas dealt with several particular matters such as the alleged depopulation problem, the malfunctioning of the monetary system, low levels of agricultural productivity, the uncompetitive nature of some manufacturing sectors, and the inadequate trade policy which should have moved towards protectionism and even the banning of imports. Moncada for example argued that the Spanish Empire had sufficient raw materials and population allowing for self­sufficiency. Nevertheless, the main subject covered by them was that of the decline of both Iberian countries, which had been prosperous in the sixteenth century and were being left behind. They came to the conclusion that “barren countries” (bereft of natural resources, such as Holland) were prosperous through being “hard-working,” whereas Castile and Portugal, with raw materials and precious metals in abundance but being “not very industrious,” were poverty stricken. On the back of a large population and given that riches were not associated with precious metals, although they criticized the despoiling of such metals and their transfer to Europe, they proposed the promotion of productive activities. Where differences appeared was in the relevance assigned to each of the productive sectors.

In Spain, authors such as Ortiz and Gonzalez de Cellorigo referred to productive activities in general, whilst others opted for agriculture (Deza) or cattle breeding (Caxa de Leruela). Finally, the “Toledo group,” headed by Moncada, faithfully believed in the capacity of manufactures to definitively recoup the wealth of Castile and Spain. A similar position was adopted in Portugal by Macedo. Contrary to the main currents of thought, Faria chose the importance of internal colonization processes to establish the population in agriculture, while Vieira valued the importance of merchant capital raised from the Jews expelled from Spain and Portugal by the Inquisition.