Monday, September 6, 2010

Maurice Hinchey Is So 14th Century

About two years ago Congressman Maurice Hinchey proposed to affix price controls to gasoline.  This recent example of economic illiteracy is hardly surprising. Polls have consistently found that social democrats have virtually no understanding of economics, which is probably why they are social democrats in the first place.  Sadly, this level of ignorance is shared by both parties, both of which supported the "bailout".

The popular image of the Middle Ages is that there was little knowledge about markets and that all of society lived happily on a feudal estate where there was no money and no economy in the modern sense. This claim has been turned into Tönnies's sociological constructs of "gemeinschaft" and "geselleschaft".  The gemeinschaft economy supposedly characteristic of the Middle Ages was one governed by organic unity, common beliefs and the like, whereas the geselleschaft economy is more or less the market economy.

It turns out that the vision of the Medieval economy on which Tönnies's constructs were based is wrong.  Also, it appears that by the 14th century European monarchs already had better economic understanding than today's Democrats.  In other words, there was a practical but likely not a theoretical understanding of how markets work.  Fourteenth century monks knew more about economics than my economically illiterate congressman, Maurice Hinchey.

Allow me to quote a passage concerning English history from Joel Kaye's essay "Monetary and Market Consciousness in Thirteenth and Fourteenth Century Europe" which appears on pages 379-80 of Lowry and Gordon's "Ancient and Medieval Economic Ideas and Concepts of Social Justice":

 "The clearest witness to this perception among English chroniclers is the author of the Via Edwardi Secundi. Though this chronicle was intended to record the reign of Edward II and his struggles, thoughts about money and prices continually crop up, as if they, in themselves, had historical significance to the writer and his audience.

"In 1315 after the military disaster at Bannockburn and in reaction to a terrible harvest and steeply rising prices, the chronicler records that Parliament, 'looking to the welfare of the state, appointed a remedy for this malady'. Prices on common foodstuffs such as oxen, pigs, sheep and chickens were fixed by law. The next year, 1316, Parliament was forced to reverse itself and cancel the maximum price edicts it had imposed even though the country was still in the grip of a disastrous harvest and rising prices.  Here is how the chronicler explains it:

"'The regulations formerly made about food were completely abolished...For as a result of that statute little or nothing was exposed for sale in the markets, whereas formerly there had been an abundant market in goods, though they seemed dear to travelers.  But it is better to buy dear than to find in the case of need that there is nothing to be had.  For although scarcity of corn raises the price, subsequent plenty will improve the situation.'

"Not only does the author choose to include this particular act of Parliament in his chronicle (when up to this point he mentioned Parliament only briefly and then only when it concerned King Edward), but he sees fit to add his own thoughts on the subject.  He notes that goods disappear as the result of price fixing and that high price is preferable to scarcity....

"There is no doubt that  a systematic conception of the market as a dynamic, self-regulating system constructed around the instrument of money had long been held among traders and those whose livelihood centered on trade. A glance at the journals of fourteenth-century merchants reveals how sophisticated their understanding of the market had become, and how central this understanding was to every aspect of their activity."

In fact, fourteenth century merchants had greater economic sophistication than social democratic congressmen of 21st century America.

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