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Scholasticism and Austrian Economics

Murray Rothbard

• Polytechnic Institute of New York

“New Light on the Prehistory of the Austrian School.” In The Foundations of Modern Austrian Economics. Edited by Edwin G. Dolan. Kansas City: Sheed & Ward, 1976, pp. 52–74.

Professor Rothbard focuses on the post World War II literature reinterpreting the development of subjectivist-marginalist economics, particularly the Austrian School. The Scholastics played a key role in this development according to the new interpretation. Joseph Schumpeter, Marjorie Grice-Hutchinson, and Raymond de Roover have demolished the view that the Scholastics believed in the labor theory of value, the doctrine of the just price, and the immorality of trade. Instead these revisionists demonstrated that the most important Scholastic thinkers were precursors of the Austrian School of economics, which began in the 1870s.

The Scholastic thinkers specifically denied that labor or other costs determine price, but rather spoke of the scarcity or abundance of goods, and how this supply was valued by the community. In other words, they had discovered the role of utility and scarcity in value determination, lacking only the concept of the margin. They scorned the notion that embodied-labor could or should determine price. On the question of the just price, a number of the Scholastics, including Thomas Aquinas, asserted that the market price is the just price. The Scholastics' view of trade evolved from a position of suspicion to one of support. Trade came to be viewed as mutually beneficial.

The Scholastic views survived the Reformation, influencing even some of the new Protestant thinkers, such as Grotius. Grotius even cited two of the Spanish Scholastics, evidence of the penetrating nature of their analysis. Pufendorf adopted Grotius's economic doctrines, along with his legal ones, but he dropped all references to Catholic Scholastics. When Pufendorf was translated into English, the Scholastic origins of his doctrines were lost. Francis Hutcheson weakened the utility doctrine by introducing cost of production analysis; this was absorbed by Adam Smith. This analysis partially vindicates the view that Smith and Ricardo shunted economics onto the wrong track.

On the continent, the older utility doctrine lasted longer. In France, Condillac, Turgot, Quesnay, the Physiocrats, and J. B. Say preserved the doctrine. But British cost doctrines were to sweep the continent too. Rothbard leaves open the question whether Emil Kauder's analysis of eighteenth-century developments is correct. Noting that the utility doctrine persisted on the continent, especially among Catholic writers, while the cost doctrines gained the allegiance of British Calvinist-Protestants, Kauder hypothesized that the Catholic Church's Aristotelian-Thomistic tradition approved of moderate pleasure-seeking, focusing attention on utility as the motive of economic action. Calvinism, on the other hand, glorified labor and denigrated pleasure.

Rothbard notes that the Austrians can now be seen, not as erecting a new theoretical edifice upon British classical political economy, but as reviving and developing an older tradition shunted aside by classical political economy.