Acton’s own Alejandro Chafuen appeared in Forbes to discuss monetary theories from the ancient Greeks to today’s crytocurrencies. The following is an excerpt from Chafuen’s essay, titled Moralists and Money: From Gold to Bitcoin. For the full article, readers may click here.

Monetary topics are some of the first economic issues to be studied with some rigor. Since the first writings by the Greek philosophers, such as Plato, Aristotle, Hesiod and Xenophon, and until the 16th century, the moral questions, “what is good, what is bad?” dominated the approach of those who studied human action. To be able to judge if a certain monetary issue is good or bad, moral philosophers first had to answer questions that went beyond morality, such as:

1. What is money?

2. What determines its value?

3. What are the impacts of changes in its value?

4. What factors influence supply and demand?

In doing so, they were acting as pure economists.

Scholars of the late Middle Ages developed their theory of money in accordance with Aristotelian teachings. They believed that the inconveniences of barter gave rise to the need for money. The essential function of money is to serve as a medium of exchange. St. Thomas Aquinas (1225-1274) reminded his readers that “money . . . according to Aristotle, was invented chiefly for exchanges to be made, so that the prime and proper use of money is its use and disbursement in the way of ordinary transactions.” Money could also be used as a store of value and as a measure for exchanges. These two functions, however, depended on the essence of money (i.e., money as the monly used medium of exchange).

After Aquinas, one of the first to write about money was Nicole Oresme (c. 1320-1382), the great multifaceted scientist, who later in his life became Bishop of Lisieux, a city mune in Normandy, France. His book on money, De origine, natura, jure et mutationibus monetarum, Traité de la Première Invention des Monnoies, (usually translated as A Treatise on the Origin, Nature, Law, and Alteration of Money) has valuable lessons even for today. It was one of the first works focusing solely on an economic topic.

He first wrote about Creation and the diverse resources around the globe: “When the most high and sovereign God Almighty divided the nations and separated the sons of Adam, he set boundaries for the people, according to the number of the children of Israel; thence in the course of time men multiplied over the earth, and their possessions were divided and shared among them, as was expedient. Thus it came about that one man had more of one thing in his possession than his needs required while another little or none of the same thing, but on the contrary had a plenty of something else, of which the first was in need.”

Oresme gave the example of a man who: “had a surplus of sheep and other cattle but needed grain and bread, while the neighbor, on the other hand, had bread enough but lacked cattle … [O]ne region abounded in a thing which another was greatly in need. For this reason, therefore, men began to traffic and exchange their riches with one another, without money, one giving a sheep for some grain, another his labor for bread or wool, and similarly for everything else. And this practice was long the custom in several cities and countries, as Justinus, the historian, and other ancient authors recount.”

The stability of the monetary unit was seen as essential to have just contracts and to avoid moral hazards such as damaging creditors who are paid back with debased coins. Oresme wrote that it is “disgraceful and everywhere foreign to the nobility of a prince to prohibit the circulation of good money in his country, and, for the sake of gain, to order and pel his subjects to use his own which is poorer, as if to say that good is bad and his bad is good.”

He was flexible in case of emergencies, such as during periods of war, or to pay ransoms with “bad” or debased money, or to help liberate a kidnapped king. But the bishop added, “If munity should in any way make such an alteration, the money ought to be restored to its proper basis as soon as possible, and the making of gain in that way should cease.”

Another late medieval scholar, Copernicus (1473-1543), a Polish luminary more noted for his contributions to astronomy than to economics and moral philosophy, also wrote about money. Copernicus studied science at the University of Padova and Canon Law at the University of Bologna. He started his book on money by noting:

Although there are countless scourges which in general debilitate kingdoms, principalities, and republics, the four most important (in my judgment) are dissension, [abnormal] mortality, barren soil, and debasement of the currency. The first three are so obvious that nobody is unaware of their existence. But the fourth, which concerns money, is taken into account by few persons and only the most perspicacious. For it undermines states, not by a single attack all at once, but gradually and in a certain covert manner.

Most followers of Aquinas had similar views on money. Money was developed or “invented” to replace barter and to serve as the monly used means of exchange. Its stability was essential for determining justice in contracts. The best book written about monetary economics before Adam Smith was the Treatise on Money, written by the Jesuit Juan de Mariana (1536-1624). pared the transfer of wealth through currency debasement to the action of someone who goes into private barns and steals a portion of the crops stored there: “The king has no domain over the goods of the people, and he cannot take them in whole or in part. We can see then: would it be licit for the king to go into a private barn taking for himself half of the wheat and trying to satisfy the owner by saying that he can sell the rest at twice the price? I do not think we can find a person with such depraved judgment as to approve this, yet the same is done with copper coins.”

St. Thomas Aquinas, following Aristotle, was suspicious of exchanges of money for money because they were “not concerned with the needs for life but with making money.” Whenever they address money, he and his followers focus on its stability, condemning its debasement, and on the justice of the contracts established in money. The knowledge of parties and the willingness to assume risks are also relevant. Metallic money had existed for at least 17 centuries, so moralists had enough knowledge to judge. Cryptocurrencies, on the other hand, are so new, and the issues so diverse, that I only have room to summarize what I think Aquinas’s answer would be, and leave for a future article a more elaborate “Thomistic” analysis. And I will do it in two words: Aquinas would not have condemned Bitcoin but would have said, “Buyer beware”—caveat emptor!