It has been seventy years since historian Richard Henry Tawney concluded in his Religion and the Rise of Capitalism that, “the true descendant of the doctrines of Aquinas is the labor theory of value.” By this, he appears to mean that Saint Thomas Aquinas’ writings in value theory entail the proposition that the basis of value of an economic good is the amount of human labor expended in producing it. Thus, Tawney adds, “the last of the Schoolmen was Karl Marx.” Tawney was, of course, mistaken.

From Aquinas to Marx

Economics, as understood in the modern sense, occupied a subordinate place in relation to ethics and law in Catholic medieval doctrine. Within this framework, economic value was not regarded as an intrinsic quality but, rather, as the physical, mental, and moral significance given to an object by the evaluating subject’s assessment of the object’s desirability, utility, and scarcity.

According to Schumpeter in his History of Economic Analysis, value theory analysis by the Scholastic Doctors “lacked nothing but the marginal apparatus.” Schumpeter alludes to the marginal utility theory–the economic breakthrough of the nineteenth century that demonstrates that the value of a good diminishes with each unit increment of the good. The learned work of many scholars of Scholastic economic thought, such as that of Emil Kauder, Raymond de Roover, Bernard Dempsey, Murray Rothbard, Alejandro Chafuen and Jesús Huerta de Soto, among others, confirms Schumpeter’s appraisal.

However glaring Tawney’s mistake in his characterization of Scholastic value theory, we have ample reason to judge him more leniently when we consider that his was a time of Anglo-Protestant hegemony in post World War I markets. While Weber’s thesis linked the Protestant ethic with the spirit of capitalism, the economic legacy of the Schoolmen to Catholicism was thought to be a foolish notion of just price and an obsession with usury. This image of the economic essence of Catholicism is antiquated and erroneous. Although this narrow image of Catholic economic thought became entrenched in the twentieth century even within the Church, in the Catholic academic enclaves prior to the twentieth century, however, the development of economic thought progressed mainly from the contributions by the Scholastics.

Italian and French economists of the seventeenth and eighteenth centuries who made significant advances to the development of marginal utility theory were schooled in Aristotelian value theory as interpreted and presented in Scholastic texts. Thomistic economic thought, in particular, is grounded on private property and voluntary exchange as the principle for determining licit contracts. With few exceptions (such as the nominalists Jean de Gerson and Henry of Langenstein) the medieval Doctors agreed that the just price is discovered in mon estimation by market participants.

The just price is not, then, what many generalizations of the Scholastic view wrongly depict it to be: (1) a function of cost, (2) a determination to be rightfully entrusted to lawmakers, or (3) the product of divine predetermination. It is true that Duns Scotus and a few of his followers argued that the just price is a function of cost, but this view was not held by any other of the Doctors. Additionally, the Doctors did not dispute price setting by lawmakers as a rightful activity, but they generally agreed that this should only occur in emergency situations. The only advocates of legislated price setting as a rule, rather than as an exception, were Jean de Gerson and Henry of Langenstein. None of the Doctors held, however, that the just price is predetermined and, hence, that buyers must consider the asking price as the just price.

A fortiori, the notions of market petition, risk, and contract were well within the considerations of the medieval Doctors. Although Saint Thomas does not offer a definition of just price, he employs examples (borrowed from Roman texts) to suggest that a just price reflects variations in supply.

In order for Tawney’s connection between Scholasticism and the labor theory of value to be defensible, the account must provide a rigorous analysis of Scholastic economic thought that theoretically supports such a connection. Unfortunately, Tawney’s exposition of Scholastic economic thought leading to his dubious conclusion is too rushed, too anecdotal, too hermeneutical and, even, too poetic to allow the reader clearly to distinguish fact from speculation.

Despite all this, Tawney’s position offers one valid consideration. If Schumpeter is correct in his History of Economic Analysis, Adam Smith was influenced by Scholasticism more than by mercantilism and physiocracy. We know, for instance, that at Glasgow College economics was studied as part of moral philosophy. The courses in political economy given by Adam Smith’s teacher, Francis Hutcheson, described the subject matter of political economy according to Saint Thomas’ Comments on Aristotle’s achean Ethics and Politics. Moreover, Scholasticism influenced Adam Smith indirectly via Grotius and Pufendorf, whose works were used as textbooks for courses in moral philosophy. It is feasible to suppose, then, that Adam Smith’s thought might prove to be a crucial link in demonstrating the viability of Tawney’s conclusion.

The Adam Smith Connection

What influence of Scholastic value theory can we find in Adam Smith’s writings? In The Wealth of Nations we find a formulation of exchange that has been linked to that of Saint Thomas. More precisely, Adam Smith suggested that there is an ultimate value in measuring exchange. So, for example, for the hunter of two beavers who exchanges his catch for one deer, the value of the deer is measurable in terms of the labor expended in hunting the beavers.

Compare this to Saint Thomas’ Comments to Aristotle’s achean Ethics. In the latter, Saint Thomas writes that barter exchange is just if the labor and expense of the goods exchanged are equal. In isolation from his other relevant material, and if Adam Smith’s exchange value passage is also thrown in to establish a linear causal connection between Saint Thomas and Marx, this passage does give Tawney’s conclusion some fertile ground. Nevertheless, there is an alternative interpretation of Saint Thomas’ exchange value passage that squares more adequately with the rest of his ideas on economic value theory.

Thomistic Value Theory

Medieval Catholic doctrine emerged from three sources: the Bible, Roman law, and Greek philosophy, especially that of Aristotle. The latter two sources were the most influential in the development of Scholastic economic thought. The classification of contracts in Roman law, for instance, provided the legal framework for the Thomistic notion of price as an element of an equitable exchange. Roman contract law required equity in the valuation of things exchanged according to the rule of just price in the Brachylogous, a textbook on Roman law from the early twelfth century.

This concept of just price appears to have been first applied in canon law in the twelfth century by a decretal of Pope Alexander III. The canon Placuit became one of the fundamental texts of the just-price doctrine. This canon portrays just price not as fixed but as fluctuating according to diversity of time, place, and circumstances.

Albertus Magnus, independently of canon law, arrived at the conclusion that just price is obtained by the estimation of the participants in the market at the time of the sale. The work of his pupil Saint Thomas, patible, is less precise on this subject. Namely, Saint Thomas employs examples that imply that the just price is the market price, but what he had in mind about just price is perhaps less intelligible in his Comments to Aristotle’s Ethics concerning exchange. As we mentioned earlier, Saint Thomas writes about exchange value in a way that resembles Smith’s own discussion on exchange value. This passage is clearly the Achilles heel of Thomistic economic thought. If Tawney’s conclusion is valid, then Saint Thomas’ exchange value discussion might tender one of the needed premises. But can we attribute the classical interpretation of Smith’s value theory to Saint Thomas? To answer this, we need to dig a little deeper.

Following Aristotle, Saint Thomas refers mutative justice in the Summa Theologica as the rules of justice concerning exchange of goods or services among individuals. Saint Thomas mutative justice as the principle of absolute equality in any exchanges among individuals. The pecuniary valuation of goods does not appear to hinge on any intrinsic property of the goods themselves. The equality to which Saint Thomas refers, then, cannot mean that the goods exchanged are intrinsically equal in value.

The best explanation of what Saint Thomas means by absolute equality is the mutual satisfaction obtained by each contracting party in an exchange. The mon acceptance of just price as the market price also reinforces the thesis of the central role of subjective (economic) valuation in Saint Thomas’ account of exchange value. But if the nature of pecuniary exchange is not based on any objective measure, why would just barter exchange require equality based on labor and expenses? One feasible answer is that–in the absence of price as an indicator of market phenomena such as risk, scarcity, and changes in production costs–something else had to be employed.

Price is a value that reflects the significance attached to the good desired in relation to all other uses of the money in the buyer’s assessment. In short, price makes possible the articulation of the ineffable subjective evaluations in tangible terms. Hence, price makes subjective evaluations publicly accessible. But barter exchange does not have the price mechanism to make subjective evaluations publicly accessible. The latter was an important consideration for Saint Thomas since he had to observe mutative justice rule.

The only way for a market valuation of goods to be publicly accessible is by employing some other measure of value. The cost of inputs or tools employed in acquiring or producing a good plus the labor invested in that activity is perhaps a good substitute for price in barter situations. For example, Saint Thomas writes that if a cobbler wants corn for his meal, he must assess how many pairs of shoes he will have to offer for a bushel of corn in order for the farmer to accept the exchange. Owing to the nature of barter exchange, such an assessment is plicated and many things must be considered. But the main consideration is a subjective evaluation based on the needs of each of the parties. How does Saint Thomas describe the economic valuation of goods? Saint Thomas writes, “This one thing which measures all other things is, in truth, the need which embraces all exchangeable goods insofar as all things are referred to human needs.” It seems clear, then, that Saint Thomas not only did not but, more important, could not have reduced the value of a good to labor alone if he was to remain consistent.

In considering expenses, in addition to labor, Saint Thomas incorporates a notion that embraces very subjective factors such as risk and other costs that are borne by the valuing party. Thus, at least tacitly, Saint Thomas anticipated the modern concept of opportunity cost–i.e., the value of the sacrificed alternative–an idea formulated by the Austrian economists in the late nineteenth and early twentieth centuries. If this analysis is correct, then, despite his imprecise and scattered passages on exchange value, Saint Thomas was quite consistent with the subjectivism portrayed in monly accepted just-price doctrine and the notion mutative justice of the Scholastics.

Adam Smith’s Value Theory

If it is true that Thomistic thought had a significant influence on the reasoning behind Smith’s exchange value passage at issue here, then we can observe in Smith a retreat in sophistication from the notion of exchange value already attained by Saint Thomas.

In effect, Adam Smith characterized labor itself as a good deemed to have value for its own sake. Accordingly, the gains of any exchange can be measured only by the labor expended in obtaining the good that was given up in exchange. With this narrow framework, Adam Smith is forced to characterize the value of the exchange in terms of the labor investment embodied in the goods.

The influence Smith’s magnum opus had on the development of the classical school of economics hindered any advance in the direction of marginal utility value calculation within the Anglo-Protestant academy. Ricardo and other classicists, for example, misinterpreted Adam Smith’s ambiguous notion of exchange value, and this provided ample room for Karl Marx to transform it into the thesis that the labor embodied in the final product is the ultimate and objective measure of value.

Concluding Remarks

In order for the similarity in Saint Thomas’ exchange-value passage with that of Adam Smith to fit into Marx’s labor theory scheme, Saint Thomas must explicitly equate the economic value of modity to its cost of production measured in labor input. As we have seen from our analysis of Thomistic thought in its original context, Tawney’s conclusion is not corroborated.

Moreover, the views of the School-men on just price reflect the significance of things exchanged in relation to need (desirability and utility) as well as fluctuations in supply (scarcity). The legacy of Saint Thomas is the utilization of tangible measures, such as labor and expenses, within a framework of subjective economic value in order to mutative justice perspicuous in the absence of prices. Adam Smith either misunderstood this or his ambiguous formulation of the right idea betrayed him. What is certain is that the labor theory of value is not a descendant of Saint Thomas.

What, then, led Adam Smith to focus on the idea of labor as the only tangible and absolute measure of value in a barter exchange? This is a difficult question to answer, and I will not attempt to tackle it here. But Emil Kauder did offer one intriguing hypothesis more than forty years ago. Kauder maintains that the Protestant glorification of labor influenced Adam Smith to place labor at the center of his economic value theory. If Tawney had lived long enough to consider this view, would he have concluded that Karl Marx was the last of the true Calvinists?