Markets and taxation: modern taxation principles and the School of Salamanca/Mercado y fiscalidad: los principios tributarios modernos y la Escuela de Salamanca.

Author:de Blas, Luis Perdices
  1. Introduction

    This article stems from the convergence of two notable issues that have occupied historians and economists independently: on the one hand, the guiding principles of modern systems of taxation, and on the other, the School of Salamanca. Regarding the first question, no economist can ignore the importance, past and present, that tax systems have for agents, both private and public, their decisions and the effects they produce in the market. Throughout history, all Treasuries have needed revenues to meet their needs. The way to extract these resources from private agents has been a key factor in the development of an economy that can favour the development of a country or, on the contrary, its decline, thereby affecting the decisions of companies and of households. Hence any historical reflection on this matter will help to correct deficiencies in current systems (2).

    As for the School of Salamanca, there is an extensive historiography which has not always been taken into account by economists. They may not be aware of the contributions made by the members of the School of Salamanca, but instead, they become familiar with some of their ideas, which ended up becoming an integral part of the knowledge base of various schools of thought to the present day. Although since the nineteen-fifties many studies have acknowledged the contributions to economics of Francisco de Vitoria, Domingo de Soto, Martin de Azpilcueta and Juan de Mariana, among others, there are historians who maintain that the School of Salamanca did not exist or, having done so, that its work can never be considered to be within the field of economics. Precisely, one of the purposes of this study will be to contribute another grain of sand towards the recognition of the role of the School of Salamanca in the creation of economics, and in the analysis of markets, which developed more fully from the eighteenth century. In addition, we will do this looking at their fiscal doctrine, which is one of the least studied areas of the School.

    Therefore, if we pool both issues we will be able to answer the question that motivates this research: was a significant contribution made by the School of Salamanca, in its time and to the present day, in the field of taxation and its relationship with the market? We hope that after reading this paper this can be answered affirmatively, as the following pages will present the fiscal doctrine of these late scholastics, remembering the historical and institutional context in which they lived, very different from today, and seeking to make comparisons with taxation principles that support current tax systems.

    This paper has two main sections, in addition to this introduction and the conclusions. In the second section we provide an overview of the School of Salamanca and in the third we undertake a comparative analysis between modern taxation principles and doctrine of the School of Salamanca. Finally, in the conclusions, seeking to respond to the question that motivates this article, we present the main contributions of the School.

    We would not want to end this introduction without recognizing the pioneering work in the study of ideas on taxation of the School of Salamanca, and their impact on the economic decisions of agents, carried out by Gonzalo Higuera in 1963, and in more depth, by Javier Gorosquieta in 1971. Their research has helped us to see a little further like dwarfs astride the shoulders of a giant.

  2. A general overview of the School of Salamanca

    2.1. The roots of the School of Salamanca

    The late Spanish scholastics grouped around University of Salamanca and their central figure Francisco de Vitoria were inspired by various sources (3): the ancient Greek philosophers, Roman law and canon law, and finally the three major monotheistic religions, in particular Christianity.

    The Greek philosophers who influenced the thinking of the School of Salamanca include Xenophon, Plato and, above all, Aristotle. The reflections of these great Greek philosopher reached Vitoria through Islam (4), to be picked up by Thomas Aquinas (5). The main contribution of Plato to late scholastic thought was the definition of fair price. However Aristotle was more influential, conveying the distinction between the concepts of economy and chrematistic (6), defining the legal price and natural price (7), considering need as the result of the exchange (making a subjective approach to value (8)), as well as the ownership of the goods separating their domain and tenure, and finally defining the origin and functions of money.

    With regards to the Law, canonic or Roman, it is likely to have influenced the thinking of the School of Salamanca, since its members, or those who came under its influence, had devoted themselves to the study of theology and law. This line of thought is also found in St. Thomas, undoubtedly the main influence on Vitoria, and his followers. But it would be unfair to forget other scholastics, such as Raimundo de Penafort, who contributed to increase the influence of law in the minds of the Salamanca Doctors.

    As already noted, the three main monotheistic religions played a vital role in the development of economic ideas of the late Spanish scholastics. They were theologians. The Bible, the Talmud and the Koran (this last book may have had less influence) acted as guides to thought, reinforced by the writings of the philosophical and ecclesiastical authorities.

    It is easy to see that all the sources so far mentioned are interrelated. We cannot understand the School of Salamanca by isolating them and trying to identify the weight to attribute to each. The evolution of ideas over time was an amalgamation of all that came before through the scholastic tradition inherited by Spanish theologians. At this point, it is necessary to point out that the scholastics did not present a unified point of view. On the contrary, while on many ideas they agree, which is perfectly logical, since they use the same sources and have the same goal, in many other cases they present opposing views, as we will go on to see.

    Before Thomas Aquinas other scholastics had taken up these sources of thought (this is the case of Peter Lombard, Raimundo de Penafort, Albertus Magnus and Henry of Ghent (9), among others), but it was the Summa Theologica, the foundation of Thomism (10), the synthesis that made the most of these sources and exerted the most influence on medieval scholasticism and the Modern Age and, therefore, also on the School of Salamanca. Through this work, St. Thomas established the distinction between use and exchange value in goods, that is to say, subjective value, the concept of fair price, and the condemnation of usury (11). After him, many other scholastic thinkers left their mark on the School of Salamanca; Jean Buridan, Bernardino of Siena, Juan Fenario, Peter Crockaert, Juan de Celaya and Tomas de Vio all deserve special mention.

    2.2. The Salamanca School of Economics

    The scholastic approach was focused on "should be", not on "be" (12). This is logical if one takes into account that it was implemented by theologians whose main role was to advise confessors. Therefore, they were not economists but moralists (13) interested in whether the actions of individuals were permissible or not. Although the goal was common to all, we cannot expect a uniform doctrine; on the contrary, over time they added new points of view creating different streams of thought that struggled for supremacy. An example of this struggle is to be found in the confrontation between Thomism and Nominalism. In the sixteenth century in Spain the former dominated in the University of Salamanca, as we will see later, while the latter held sway in Alcala de Henares. Precisely in that century, at the height of late scholasticism, Spain became the centre of the scholastic thought (14). There are other streams of thought, as we have seen, that do not belong to Salamanca; therefore, we should not make the mistake of completely identifying Spanish late scholastics with the School of Salamanca (15), because the latter is only part of the former.

    Focusing on the School of Salamanca, Marjorie Grice-Hutchinson notes that its modern discoverer is Wilhelm Endemann. However, she stresses that was Jose Larraz who made it known to a wider audience (16). For his part, Pedro Schwartz states that Alberto Ullastres anticipated Larraz (17). In any case, more important than who rediscovered the School for the modern world, is the controversy over the School. There seem to be two doubts with respect to this. Did it really exist as such? And can we say that it was a school of economics? With the first, there seems to be consensus on a positive response, despite opinions such as those of Blaug, who practically denied its existence (18). But this view is a minority one, and today it is considered that the beginning of the school can be traced to when Francisco de Vitoria became established in Salamanca. The more controversial point is the answer to the second question. Schwartz, Luciano Perena, and Francisco Gomez Camacho deny that it is a school of economics. The first is more moderate in his statements, despite believing that we should speak of a school of law, not economics, concludes in favour of calling it Salamanca School of Economics (19). For his part, Perena denies that the different disciplinary components of the School must be separated (20). The views of Gomez Camacho run along the same critical lines. For him, to ignore the philosophical environment in which they developed their economic ideas is a mistake (21). As a counterweight, the main defender of the School of Salamanca is Grice-Hutchinson. In our opinion, also, it is possible to think of it as a real school of economics. However, that assertion must be qualified. The economic ideas of the scholastics of the School of Salamanca should be analyzed by themselves, keeping in mind in what context these...

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