• "Commercial Revolution" of 1100s-1200s

• International merchants can't depend on weak and biased States to enforce international contracts!

• Merchants adopted their own "laws" and best practices to minimize transaction costs

• For-profit merchant courts emerge to settle disputes and enforce international contracts

  • More efficient, cheaper, and less partisan than Royal courts
  • Legal and jurisdictional competition

• Developed contract law and advanced legal instruments - debt, credit, loans, equity contracts

• This is a major basis of international commercial law today!

“The power of the individual human being is not sufficient for him to obtain (the food) he needs, and does not provide him with as much food as he requires to live. Even if we assume an absolute minimum of food – that is, food enough for one day, (a little) wheat, for instance – that amount of food could be obtained only after much preparation such as grinding, kneading, and baking. Each of these three operations requires utensils and tools that can be provided only with the help of several crafts, such as the crafts of the blacksmith, the carpenter, and the potter. Assuming that a man could eat unprepared grain, an even greater number of operations would be necessary in order to obtain the grain: sowing and reaping, and threshing to separate it from the husks of the ear. Each of these operations requires a number of tools and many more crafts than those just mentioned,” (Introduction, Ch.1 First Prefatory Discussion)

“The common people who hear them think that the prosperity of these peoples is the result of the greater amount of property owned by them, or of the existence of gold and silver mines in their country in larger number (than elsewhere)… A large civilization yields large profits because of the large amount of (available) labor, which is the cause of (profit),” (4:280-281).

“(Man) obtains (some profits) through no efforts of his own, as, for instance, through rain that makes the fields thrive, and similar things. However, these things are only contributory. His own efforts must be combined with them, as will be mentioned. (His) profits will constitute his livelihood, if they correspond to his necessities and needs. They will be capital accumulation it they are greater than (his needs),” (2:311-12).

“At the beginning of the dynasty taxation yields large revenues from small assessments. At the end of the dynasty taxation yields small revenue from large assessments….This is why we had to have the tax program as well as the budget cuts, because budget cuts, yes, would reduce government spending,” (2:89-90).

“When tax assessments and imposts upon the subjects are low, the latter have the energy and desire to do things. Cultural enterprises grow and increase, because the low taxes bring satisfaction. When cultural enterprises grow, the number of individual imposts and assessments mount. In consequence, the tax revenue, which is the sum total of the individual assessments, increases,” (2:90).

• Writes on economic issues of main interest to us:

• Focuses not on analysis of what determines prices

• Focuses instead on ethical issues of pricing, e.g.:

  • raise the price?
  • lie or cheat in business?
  • pursuit of profits?
  • usury (interest on loans)?

• Main focus: “just prices and wages”

"[B]uying and selling seem to be established for the common advantage of both parties, one of whom requires that which belongs to the other, and vice versa, as the Philosopher states...[and] should not be more of a burden to one party than to another, and consequently all contracts between them should observe equality of thing and thing...Therefore if either the price exceed the quantity of the thing’s worth, or, conversely, the thing exceed the price, there is no longer the equality of justice: and consequently, to sell a thing for more than its worth, or to buy it for less than its worth, is in itself unjust and unlawful," (p. 19 in Reader).

"According to the Philosopher, exchange of things is twofold; one, natural as it were, and necessary, whereby one commodity is exchanged for another, or money taken in exchange for a commodity, in order to satisfy the needs of life...[The first] belongs rather to housekeepers or civil servants who have to provide the household or the state with the necessaries of life. The other kind of exchange is either that of money for money, or of any commodity for money, not on account of the necessities of life, but for profit...The former kind of exchange is commendable because it supplies a natural need: but the latter is justly deserving of blame, because, considered in itself, it satisfies the greed for gain, which knows no limit and tends to infinity..." (p. 23 in Reader).

"I answer that, to take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inquality which is contrary to justice...If a man wanted to sell wine separately from the use of the wine, he would be selling the same thing twice, or he would be selling what does not exist, wherefore he would evidently commit a sin of injustice...[by] ask[ing] for double payment, namely one, the return of the thing in equal measure, the other, the price of the use, which is called usury." (pp. 24-25 in Reader).