The value of money: conventionalist versus metalist view

At first sight, the medieval conception of money, typically seen as running from Thomas Aquinas to John Buridan and Nicholas Oresme (at the beginning and in the middle of the fourteenth century), draws on the same sources: Aristotle’s Politics book I and, to a lesser degree, Ethics book V (see Langholm 1983).

At first sight, the conceptions share a similar starting point. Thomas Aquinas considered that the rise of money was “ordered by nature” out of a barter situation, as a means of exchange and of measure (Politicorum, I, 7). Something similar can be read in Buridan’s comments on book V of the Ethics, when he impressively argued that money is an appropriate solution to the scattering of sellers and buyers, to the non-simultaneity of needs, to the gap between possessions and needs, and to the indivisibility of goods (Ethicorum, V, q. 17, a. 1, proofs 1, 2, 3, and 4). Though based on a reflection on the destiny of Adam’s posterity after the Fall, the same analysis could be found in the first chapter of Oresme’s influential book on monetary matters, Treatise on Money.

However, on closer examination it becomes clear that the paths followed by Thomas Aquinas, on the one hand, and by Buridan and Oresme, on the other, depart from one another.

According to Thomas Aquinas, money, as the highest form of exchange, though ordered by nature, is separated from it: “[I]t is convenient that there be a single thing which could measure everything, and this thing does not measure according to its nature, but because men decided for it to be” (Ethicorum, V, 9).

As a measure, Thomas Aquinas explained, money does not depend on the nature of things but on the will of men. This gives rise to the recurrent etymological observation that “specie is called numisma, which comes from nomos, the law, because specie is not measured by nature, but by law. It is our power to transform it or to make it useless” (Ethicorum, V, 9). Or, in the words of the commentaries on the Politics, it “will be of price nil if the King or the community decides that it is worthless” (Politicorum, I, 7).

On the contrary, for Buridan, as for Oresme, the link between the natural origin of money, the metal it is made of, and its value, cannot be broken. For instance, when commenting on the Ethics, Buridan clearly aimed at challenging the Thomistic inter­pretation of Aristotle’s conception of money as valor impositus: “Some people [like Thomas Aquinas; I.C. and A.L.] say that the prince imposes the quantity of value of the money, and that, according to the imposed value, it measures the exchanges: this is why Aristotle said that money is not by nature, but by name, and it is up to us to make it useless” (Ethicorum, V, q. 17, a. 2). However, Buridan continued, this only means that whereas the prince can impose the name of the money (call it, for instance, “denier” or “obole”), he may not commit the injustice of imposing its value. This is because the property of money to be a measure of value depends on its being constituted by a mate­rial which is, itself, the object of human needs and, therefore, measured by them. In Buridan’s words, this amounts to saying that money is not an immediate but an interme­diary measure of values (Ethicorum, V, q. 17, a. 2). Buridan echoes Thomas Aquinas’s idea of a double measure, natural (need) and artificial (money). See also Oresme (Traduction et Glose de l’Ethique d’Aristote, V, ch. 11) who used a Thomistic vocabulary for a Buridan-like purpose. As a measure of value, money therefore remains anchored in the metal from which it is made.

Oresme’s writings especially took into account the effects of the link between money and metal. Again reading the Politics, he transposed to money the Aristotelian dif­ference between the “principal use” and the “secondary use” of a good, namely con­sumption and exchange (Traduction et Glose de la Politique d’Aristote, I, 10), claiming that the specificity of money is an inversion of content between its principal and its secondary use. As a result, the same precious metal could be viewed alternatively as a good properly speaking, whose principal use is consumption, and as money, whose principal use is from now on exchange. Interestingly, Oresme hierarchized these two uses: employing metal for monetary purpose takes for granted that it is available in a quantity sufficient to guarantee that the satisfaction of its use as a good leaves a large enough surplus. Such a sequential mechanism was suggested when, for instance, Oresme claimed:

[T]here must be enough of such material. That is why, if there is not enough gold, money is also made of silver; but if one does not have these two metals or not in sufficient quantity, it is necessary to make an alloy or a simple money in another pure metal: thus it was formerly made of copper [A] large quantity of these metals must not be allowed to be put to other use, to

the extent that there is not enough left for money. (Treatise on Money: ch. 2)

An important consequence of this sequential mechanism is that money cannot draw its value from its use in exchange, but that it is inherited from the secondary use, as a good, of the metal it is made of. Again in the Treatise, when discussing the genealogy of monetary transactions, Oresme argued: “[W]hen men first began to trade, or to compare wealth through the use of money, there was not yet any stamp or image on money; but a certain amount of silver or copper was given for a drink or food” (Treatise on Money: ch. 4).

Oresme’s conception of money, whose value is determined by that of the metal as a commodity, and whose quantity depends on the importance of the transactions, should be regarded with circumspection.

- suggests some kind of prefiguration of a quantity theory of money (see, for instance, Arena 1987). However, here again, Oresme seems to have been more interested in struc­tural adjustments between various kinds of money (gold, silver or black -that is, copper

- money) which are imperfectly substitutable, and the corresponding types of commerce, than on simple quantitative relations between the overall stock of money and the overall volume of trade (Lapidus 1997: 32-4).

It is obvious that such a nuanced monetary analysis is worth considering directly through the contrast between a conventionalist and a metalist conception. It is also obvious that it is worth considering through its various policy implications, whether money does not constitute a limit to the power of the prince (Thomas Aquinas), or does constitute such a limit (Buridan and Oresme) - typically in the case of the debasement of money (see Lapidus 1997: 34-52). Nonetheless, where money was viewed as the pos­sible object of a loan, the question of knowing whether its value is the consequence of a convention established by the prince or of the value of the metal it is made with, fades in favour of other issues concerning its ability to give birth to a specific income, and the possibility to separate its use from its ownership.