The Birthplace of Economic Theory: A Trip to Salamanca, Spain

Cobden Centre Chairman, Toby Baxendale, and Corporate Affairs Director, Steve Baker, are this week in Salamanca, Spain for the joint Ludwig von Mises Institute and Instituto Juan de Mariana Supporters Summit 2009:

One of the great discoveries of the 20th century concerns the origins of economic science in the late middle ages in Spain and Italy. Long before Adam Smith wrote, many scholastics from the 14th through the 17th centuries were writing systematic economic theory.

We heard this morning how the Salamancan friars were liberals, believers in freedom, who advocated:

  • Free markets and free enterprise
  • Low taxes and a small state
  • Free movement of people and products
  • The rule of law and the equality of all before the law
  • Individual liberty
  • Separation of the powers of the state
  • Democracy within limits set to protect minorities and individual rights
  • Justice: the defence of life, liberty and property

The Salamancans promoted subjective value and argued that an abundance of money makes it worthless. As early as 1544, they argued from legal principle for 100% reserves on demand deposits with depositors paying for safekeeping services.

In other lectures, we learned:

  • How recent Nobel Laureate Oliver E. Williamson has opened the way to a capital theory in neoclassical economics which could converge on Austrian-School theory through his “asset specificity”.
  • How timely is Adam Smith’s Wealth of Nations, a systematic treatise which, despite its limitations, could still refute today’s flawed policies.
  • Some lessons from a career in modern banking: how bank failures occur and what history has to teach us.
  • What Federal Reserve Chairman Ben Bernanke could learn from Juan de Mariana’s 17th century treatise De Monetae Mutatione: stop inflating the money supply.

Toby speaks tomorrow, presenting “An Entrepreneur’s Tale: The Meltdown of 2008”.