Spanish Free-Market Pioneers

Marjorie Grice-Hutchinson (1908-2003) played an important role in bringing attention to the contributions to economics of late medieval Spanish scholars, particularly the “School of Salamanca.” In Early Economic Thought in Spain, 1177-1740, first published in 1978 and out in a handsome new edition from the Liberty Fund, she delves also into the ideas and the writers that preceded and succeeded the Salamancan scholars.

Grice-Hutchinson studied in London at King’s College, at Birkbeck College, and then at the London School of Economics, where she conducted research under F.A. Hayek, one of her most influential teachers. She moved to Málaga in 1951 after marrying Baron Ulrich von Schlippenbach, her German husband. This was for her a return to Spain, for she had lived there with her parents in her youth.

Due to her work in helping highlight Spanish economists, she received special recognitions in that country, such as honorary doctorates from the University of Málaga and the Complutense in Madrid. The Mont Pelerin Society, which Hayek founded in 1947, paid homage to her work on two occasions: in 1979, during a meeting in Madrid, which included a session in Salamanca, and in 1997, during the Mont Pelerin Society meeting in Barcelona.

Her first book about Spanish economists, The School of Salamanca: Readings in Spanish Monetary Theory 1544-1605, appeared in 1952 and covered the monetary theories of several of the school’s authors. Joseph Schumpeter’s History of Economic Analysis was published two years later, in 1954, and the renowned Schumpeter valued the contributions of Spanish “economists.” In his seminal work, Schumpeter devoted almost 70 pages to analyzing the “Scholastic Doctors and Natural Law Philosophers.” The Spanish late scholastics deserved the praise they got from Schumpeter; however, Grice-Hutchinson obtained her own insights elsewhere.

Some credit Grice-Hutchinson (and specifically, the title of her first book) for the popularization of the term “School of Salamanca” as it relates to economics. Francisco de Vitoria (c. 1483-1546), regarded as founder of the school, was already recognized for his contributions to international law. León Gómez Rivas, a Spanish professor of history of thought, is one of the most knowledgeable people regarding how these Salamanca theologians began to be considered by Hayek. In a handwritten note to Gómez Rivas, Marjorie Grice-Hutchinson said that Hayek

had never heard of the ‘Salamancan’ authors before I introduced him to them around 1949, or possibly 1950. So, it was not at his suggestion that I began to study them, but as a result of reading Larráz. I was, however studying Campomanes at that time, under Hayek’s direction. We “changed horses in mid-stream”!

José Larráz wrote an influential book about mercantilism in Spain entitled La época del mercantilismo en Castilla (1943), which awakened Grice-Hutchinson’s academic curiosity.

Hayek mentioned some of the authors of the School of Salamanca in several of his works, including Luis de Molina (1535-1601), Juan de Lugo (1583-1660), Juan de Salas (1553-1612), and Leonardus Lessius (1554-1623). The latter was Belgian, not Spanish, but they were all Jesuits, which may have given rise to assumptions that they were the driving force of economic thinking at Salamanca. Vitoria, the founder, was of the Dominican Order, of equal excellence and perhaps even more fame than the Jesuits, and so were Domingo de Soto (1495-1560), Tomás de Mercado (c. 1530-c. 1575), and Domingo de Báñez (1527-1604). Martín de Azpilcueta (1493-1586), the celebrated Dr. Navarro, was of the Regular Canon Order of Saint Augustine.

In Grice-Hutchinson’s own estimation, her main achievement in studying all of these authors was in making their contributions to economics known to the English-speaking world. In another note to Gómez Rivas, she wrote:

My 1952 book includes eight pages on quantity theory and the p.p.p [purchasing power parity] theory of foreign exchange. Yet my excellent friend, Father Gómez Camacho, in his recent book, Economía y Filosofía Moral (Ed. Síntesis) pp. 311-312, says I follow P. Vilar (1969) and W. Weber (1959) in attributing the “paternity” of the p.p.p. theory to the School of Salamanca. He is thus in error by some 17 and 7 years respectively.

“As a matter of fact,” she added, “the origin of these investigations goes back far beyond Larraz. I only claim to have drawn the attention of the English-speaking historians to the economic thought of the School of Salamanca.”

Grice-Hutchinson’s bringing these writings to Hayek’s attention is no insignificant feat, especially given the latter’s central role in the development of the “free-market movement.” Murray N. Rothbard, another author with an important following, published an essay, “New Light in the Prehistory of the Austrian School,” that analyzed Grice-Hutchinson’s book on the Salamanca school.

This book, however, goes beyond the School of Salamanca and other writings that are favorable to the free society. Hayek deserves credit for her interest in the authors she profiled, as he advised her to study Spanish economists such as Jerónimo de Uztáriz (1670-c.1732) and Bernardo de Ulloa (1682-1740). Hayek also encouraged her to get in touch with Earl J. Hamilton (1899-1989), then at the University of Chicago. Hamilton’s writings about the Spanish economy and prices, such as his 1934 book American Treasure and the Price Revolution in Spain, 1501-1650, also provided direction to her work.[1]

Hamilton mentioned some of Spanish economists later studied by Grice-Hutchinson in his own writings, such as Luís Saravia de la Calle and Tomás de Mercado, but he did not give them much praise. Through Hamilton, Grice-Hutchinson also learned about Pedro Rodríguez, Count of Campomanes, who, in his Discurso sobre la educación popular (1775), lists even more 16th and 17th century authors who have written on economics. Professor Gómez Rivas writes that, “Here would lie, surely, the source of a first approach to the Spanish Arbitristas, which later reoriented her towards the late scholastics of Salamanca.” About Campomanes, Schumpeter concluded, “it is not without interest to observe how little, if anything, he stood to learn from the Wealth of Nations.”[2]

In his introduction[3] to Business, Banking, and Economic Thought in Late Medieval and Early Modern Europe by Raymond De Roover (1904-1972), another scholar who studied the late scholastics, editor Julius Kirshner observed:

The linkages of Scholastic doctrines and modern economic theory were boldly and brilliantly etched by Joseph Schumpeter in his monumental History of Economic Analysis, where he sought to rescue the Schoolmen from intellectual exile.

According to Kirshner, “Schumpeter’s work on the Scholastics towers over all others.” He credited De Roover for having “the unique ability of being able to furnish a concrete historical context for this fascinating chapter in intellectual history.” I credit Early Economic Thought in Spain by Marjorie Grice-Hutchinson for doing something similar to what De Roover’s work did, but in the field of the history of economic thought.

The book is divided into four long chapters. The first begins with a thorough analysis of economic topics discussed by scholars and which were later also addressed by the Spanish late scholastics, especially usury. Grice-Hutchinson correctly states that usury was defined as “any interest, however small, that is charged on a loan.” She describes how the adherents of the three major religions saw usury and some of the allowed exceptions. Also relevant is her analysis of the origins of rule of law in Spain, especially the Fuero Juzgo, the code of law that developed from the Visigothic times, from the liber iudiciorum, and lasted until the 13th century.

The second chapter is devoted to the ideas of Aristotle and Plato, and finishes with Averroes. The topics addressed are important in understanding the writings of the Spanish economists. There is nothing special, however, about her writings on the Greeks.

The third chapter, devoted to the School of Salamanca, begins with an analysis of the economic writings of precursors including St. Albert (c. 1200-1280), St. Thomas Aquinas (1225-1274), Duns Scotus (c. 1266-1308), St. Antonine of Florence (1389-1459), St. Bernardine of Siena (1380-1444), as well as Sylvester of Priero (c. 1456-1523) and Cardinal Thomas de Vio (1469-1523), better known as Cajetan.

Although the school of thought that emanated from the University of Salamanca some four centuries after its founding in 1130 addressed many topics, including private property, international trade, taxation, and wages, Grice-Hutchinson concentrates on subjects such as value, prices, money, and exchanges. She describes the Spanish scholars’ theory of value, and its subjective elements. She shows how although these thinkers recognized the right of the authorities to fix a price, for most transactions, they viewed the just price as the market price as determined by supply and demand, through common estimation, without fraud, monopoly, or violence.

A price could be just if arrived at through common estimation, or if determined by authorities. When fixed through common estimation, in fluid markets on widely-needed goods, the market, within certain bounds, should rule. On non-fluid markets, or when the authorities fixed a price, labor and costs could influence the process to determine justice in prices. The price of luxury goods, however, could be whatever the parties agreed on.

Grice-Hutchinson writes:

The more deeply the student immerses himself in scholastic discussions of the “Just price,” the stronger will be his impression not only that the Doctors believed the free play of market forces to be the principal determinant of price but that they were anxious, on moral grounds, to protect this doctrine from all danger of attack.

She concludes that, “in their doctrine of the Just Price they consolidated and popularized the advances made by their predecessors, tested accepted theory against contemporary events, and transmitted to later economists a more complete and better elaborated theory of value.”

The third chapter also includes an accurate analysis of the Salamanca scholars’ view that the increase in price levels was largely a monetary phenomenon. She mentions several authors as contributing to the development of the quantity theory of money, though she gives special credit to Azpilcueta. After her analysis of the key economic writings of the Spanish theologians and jurists, she concludes with a description of how the views of these authors influenced economic thinking in Belgium, Italy, France, Germany, England, Scotland, and other countries. Especially relevant are the couple of pages devoted to the influence that Salamanca had on the Ulster-Scots philosopher Frances Hutcheson (1694-1746).

The final chapter devoted to the “political economists” includes descriptions of books by authors connected to Salamanca, such as Domingo de Soto’s book on how to help the poor, and Juan de Mariana’s book against monetary debasement. The latter, published in 1609, describes the many damaging effects of reducing the value of money by adding too much copper to coins. Mariana regarded such actions as violations of property rights and found that large governmental expenditures led authorities to such negative practices.

Several of the Spaniards analyzed toward the end of the book fit the “mercantilist” label—that is to say, authors who regarded self-sufficiency as a goal and saw imports as a drain on the economy. Grice-Hutchinson also provides many examples of policy proposals offering diverse interventionist schemes to promote economic goals. These could range from subsidies to redistribution.

She devotes five pages to Miguel Alvarez Osorio, who dedicated himself to compiling commercial data and reaching conclusions extrapolating from that data. Osorio did not spend much time developing theories. As Osorio focuses on data, his material can be refuted, so following Karl Popper (1902-1994), Grice-Hutchinson concludes that “in this respect Osorio’s work is thoroughly scientific.” For Popper, a statement that can’t be falsifiable is unscientific. Of all the authors she describes, Osorio is the one who advocates a higher degree of central planning.

Another author who receives similar attention is Jerónimo de Ustáriz (1670-1732), the leading “mercantilist” writer of his time. From his perspective, the internal market and production should be subject to low taxation and freedom to trade; but when it came to the external market, he advocated restricting imports. Grice-Hutchinson posits that some of the arguments used by Ustáriz and the mercantilists to analyze the internal market, such as the harm of restrictive regulations and barriers, would pave the road to economic liberalization.

Ustáríz, like Osorio, also focused more on data than on theoretical speculation. As he traveled extensively through the great commercial and trade centers of the time, he acquired considerable knowledge of commercial practices and became one of the better-known Spaniards in the history of economic thought. Miguel de Zavala, another of the authors mentioned in the book, accurately describes the negative impact of fixed prices, but as others in the period, he looked at imports with suspicion.

This new edition of Early Economic Thought in Spain is dedicated to the memory of a trustee of the Liberty Fund, Leonard P. Liggio (1933-2014). Liggio studied and admired the Hispanic legacy. He believed that while a Hispanic tradition of liberty existed, in some regions, like Latin America, it was abandoned. This tradition is more consistent with the views of the School of Salamanca than with the later, more mercantilist tradition. Judged by today’s understanding of free-market processes, most of the authors, even those from Salamanca, committed theoretical mistakes, but so did Adam Smith and later authors. Those who have neglected the study of economic thinking prior to Smith can catch up fast by reading this brief but outstanding (and, as usual, beautifully printed) tome by the Liberty Fund.


[1] Earl J. Hamilton, “American Treasure and the Price Revolution in Spain, 1501-1650,” Harvard Economic Studies, 43 (Harvard University Press, 1934).

[2] Joseph Schumpeter, History of Economic Analysis, 1954, p. 173.

[3] Raymond De Roover, Business, Banking, and Economic Thought in Late Medieval and Early Modern Europe, edited by Julius Kirshner (University of Chicago Press, 1974).


Alejandro A. Chafuen

Dr. Alejandro A. Chafuen is president of the Atlas Economic Research Foundation.

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  1. jkl says

    Two important absences: Francisco Suárez, the King killer,the first to claim a contract as origin of society . And Luis Vives a critic of what is today known as the welfare state who had a famous argument with De Soto about charity. His defense of private property was closely followed in Moro´s Utopia

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